Enrolled Agents are enrolled to practice before the Internal Revenue Service under 31 Code of Federal Regulations, Part 10 (Treausry Department Circular No. 230).
What is practice? It sure as heck isn't preparing tax returns.
It is representing taxpayers who are in dispute with the IRS.
Many savvy CPAs also make a living representing taxpayers who are in dispute with the IRS.
What is representation?
1) It's preventing assessments - as in representing clients at audits and appeals.
2) It is reducing or eliminating assessments by either getting the original assessment reconsidered in some fashion - or arranging for offers in compromise or payment deferral programs.
Most of the clients needing representation are desperate when they come to us. They will do anything we ask and pay our fees - while they miserable and afraid. Anyone with any experience knows that once the problem is resolved, one way or another, it is difficult to get paid.
After all, if they end up with a balance due and feel they owe too much, the client is angry and resentful and sees no reason to pay.
If they end up with a brilliantly successful resolution, even one beyond their wildest dreams, they are happy, euphoric, even. But no longer fearful or concerned - and there is no rush to pay us, since there is no longer any urgency.
Naturally, some people are either sufficiently grateful or ethical to pay us diligently, even if it takes them years. They are just good folks and honor their word, and their obligations. Period. They exist. And I'm proud to have known many such loyal and wonderful folks.
Why do I tell you all this, since you already know it?
Well, earlier this week, a friend sent me a copy of a letter from an enterprising fellow, Mark Guimond, at http://nationalpolicygroup.com/ telling us that those of doing helping clients reduce tax debt are covered by the FINAL RULE of the FTC "Prohibiting Debt Relief Companies From Collecting Advance Fees". Basically, this rules prevents companies who are scamming consumers about helping them reduce their debt.
This fellow's letter said the FTC's FINAL RULE included the following wording:
"The definition of "debt relief service" covers all types of unsecured debt. If the debts you settle are unsecured - for example, medical debts or tax debts owed to the government - you're covered by the new Rule."
Well, there it is! He turns out to be correct. FTC issued a new brochure that we will all have to read very carefully. Although it is written for telemarketers, those of us engaged in any kind of advertising, including having a website, may fall under those rules.
three key principles of the new Rule: None of us have problems with rule two or three. It's the first rule that's a huge concern. Before people sign up, you must disclose fundamental aspects of your services, including how long it will take for them to get results, how much it will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts, if you use them.
You can't misrepresent your services. The new Rule prohibits you from making false or unsubstantiated claims about your services.
Must we remove all mention of such services from our websites? Would that suffice?
Do we have to remove collections representation from our business cards and brochures?
Can we collect as we settle each year separately?
Are we now meant to drag out each client's case to settle only one year at a time so we can get paid before we help them for the second year?
I understand the government's concern about the many rip-off artists who spend millions of dollars each year on national television and radio advertisements. After spending all that money on advertising, they certainly do have to recoup a lot in billable fees.
But I'd hate to see taxpayers not get the help they need from solid, capable tax representatives.
What are you going to do about this?
What are NAEA, NATP, AICPA, AccountingWeb and other tax organizations going to do to protect our rights to help our clients?
Spread the word on this one, my friends!
Respectfully submitted,
Eva Rosenberg, EA
- 3299 reads
FTC
From the San Francisco Chronicle on 8/1/2010: "The rules do not apply to secured debt such as mortgages, although the FTC is working separately on rules to curb foreclosure-rescue scams. The new rules do apply to unsecured tax debts, but not if they have been secured by a tax lien, says Allison Brown, an FTC senior attorney."
Seems pretty clear to me unless she was mis-quoted. Here is the link:
http://articles.sfgate.com/2010-08-01/business/22006448_1_free-e-editions-print-sign
NAEA Does Respond
Bob Kerr is diligently working on this issue and will be releasing reports this week and in the coming weeks and keeping us posted.
I really appreciate the help that NAEA is putting into this.
Since information does need to be clarified.
unsecured 'taxes owed'
In the new Rule, “debt relief service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a person and one or more unsecured creditors or debt collectors, including, but not limited to, a reduction in the balance, interest rate, or fees owed by a person to an unsecured creditor or debt collector. FTC Guide for Debt Relief Services added:The definition of “debt relief service” covers all types of unsecured debts. If the other debts you settle are unsecured– for example, medical debts or tax debts owed to the government – you’re covered by the new Rule. It says what it says. If you focus on tax debts owed to the government you would have read past and ignored: If the other debts you settle are unsecured.” Under IRS Code Section 6321, a "statutory tax lien" arises automatically upon the assessment of federal tax. If any person liable to pay a tax neglects or refuses to pay after demand, the amount shall be a Lien in favor of the United States upon all property rights. Once a statutory tax lien exists, the government becomes the taxpayer's secured creditor. Internal Revenue Code Sec. 6321. LIEN FOR TAXES. If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belong to such person. Sec. 6322. PERIOD OF LIEN. Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed is satisfied or becomes unenforceable by reason of lapse of time. The term "assessment" refers to the statutory assessment made by the Internal Revenue Service under § 6201 (that is, the formal recording of the tax in the official books and records at the U.S. Department of the Treasury). Generally, the "person liable to pay any tax" described in section 6321 must pay the tax within ten days of the written notice and demand. If the taxpayer fails to pay the tax within the ten day period, the tax lien arises automatically (i.e., by operation of law), and is effective retroactively to (i.e., arises at) the date of the assessment, even though the ten day period necessarily expires after the assessment date. IRS Legal Reference Guide for Revenue Officers (12-14-2007) 5.17.2.2.1 When and How the Tax Lien Arises The federal tax lien arises when any "person" liable to pay any federal tax fails to pay the tax after a demand by the Government for payment. IRC § 6321. For federal tax law purposes, a "person" is defined to include individuals, trusts, estates, partnerships, associations, companies, and corporations. The lien is effective from the date the Government assesses the tax, even though the notice and demand for payment ordinarily gives the taxpayer an additional 10 days after assessment to pay the tax. Thus, if the taxpayer neglects or refuses to pay the assessed tax, then the lien is deemed to relate back to the assessment date.
Speaking to NAEA
Good question - who did I tell (remembering that I am super busy with all kinds of deadlines...)
I sent the ifnormation to NAEA about three Fridays ago.
They said they could not post the warning to get informated in that Friday's E@lert because it was already written. They didn't run it in last Friday's E@lert or send any notices or warnings to anyone in the past two weeks - nor have I heard from our legislative director (whom I copied on my note weeks ago).
I sent the information to my chapter president at CSEA this week. We discussed it at the breakfast meeting last week. She will try to spread the word.
I have not notified NATP, NSA or OPR. However, Mark has sent notices to every organization affected. He's told me that I was the only person (at the time, two weeks ago) who responded to him. Perhaps he has had more response by now - especially with the webinar coming up. I certainly hope so.
RE: statutory lien
US Code 6321 sure sounds like the definition of a secured lien. http://codes.lp.findlaw.com/uscode/26/F/64/C/II/6321
The bankruptcy argument is interesting but that may only mean secured creditors have a priority before the IRS. Unless the bankruptcy court has specifically stated the IRS statutory lien is NOT secured then it's meaningless. They might say it's treated as unsecured for the purpose of bankruptcy but that still doesn't mean it's generally unsecured.
Still, I think everyone in tax problem work should pay attention because this is a slippery slope.
I'd love to hear if you have spoken to the NAEA, OPR, etc. on the behalf of all us EA's.
statutory lien
Dear Anonymous
You said "I believe all IRS tax debt is secured by a statutory lien."
That does not apply.
The Bankruptcy Court does not give IRS debts a priorty over secured liens.
IRS only gets to collect tax debt owed in order of secured liens - if they have actually filed a lien.
If not, they are treated like any other unsecured creditor.
Rather than discussing theory and generalties, please attend the free webinar where you can get all your questions answered. This is an issue NOT to overlook.
you think that Practice doesn't include tax prep?
Read Proposed Reg-138637-07 (changes to Circular 230) , page 9, Definitions:
...Under the current definition of practice, preparing a tax return or claim for refund (even if the tax return or claim for refund is filed by another person) is practice before the IRS....Accordingly, 10.2(a)(4) of the proposed regulations is revised to eliminate this misunderstanding, and specifically clarifies that either preparing a document or filing a document may constitute practice before the IRS..."
- Kevin Huston, EA, Asheville NC
Dear Taxmama, pt 2
Sorry, didn't fnish my last thought...
Again, true that some tax client's don't have a lien if nothing is yet assessed, but an assessment will often follow filing compliance. If a taxpayer has no assessed balance there is no debt thus only general representation should be initially sold.
Dear Taxmama
You said:
"We often work with tax debts where no lien has yet been filed. So the debt is unsecured."
Does your definition of the word debt mean there is an assessed balance? I believe all IRS tax debt is secured by a statutory lien. It's true that many tax resolution clients don't have a Notice of Federal Tax Lien, but I'd guess most ALL taxpayers with an assessed balance have a statutory lien.
FTC Telemarketing Sales Rule Impact on Tax Resolution Services
The Federal Trade Commission’s (FTC) inclusion of tax resolution services in the Telemarketing Sales Rule (TSR) is crystal clear. The FTC stated:
"The definition of "debt relief service" covers all types of unsecured debt. If the debts you settle are unsecured - for example, medical debts or tax debts owed to the government - you're covered by the new Rule."There are, however, numerous points of issue as to whether tax debts are unsecured or secured. There are also many provisions in the TSR that exempt certain tax resolution practitioners from the Rule. The reality is that there are many questions.To help the industry understand the history of the Rule, its provisions and the law, National Policy Group will join with the Venable law firm of Washington, D.C. to present a free webinar on October 5, 2010 to review the TSR. For information about the free webinar, please contact National Policy Group at Info@NationalPolicyGroup.com.To better understand the implications of the TSR on tax resolution services, please visit the box on page 7 of the FTC’s “Guidebook book of ra” on the TSR which may be found at: http://www.ftc.gov/bcp/edu/pubs/business/marketing/bus72.pdfAdditional information about National Policy Group may be found at www.NationalPolicyGroup.com and Venable at www.Venable.com.
Ever hear of technicalities?
You've made some excellent points.
Let me tell you why your points may not matter.
We often work with tax debts where no lien has yet been filed. So the debt is unsecured.
While you may start your relationship with your client in person, a lot of the work you will do with them will be over the phone.
When you speak to the IRS by phone, they're generally in a different state - ooops! Instant interstate commerce.
Often with an audit, there is an initial determination. Then you reduce the liablity - uh oh, did I just negotiate a debt?
Don't get too complacent, thinking you're immune.
I've just given you a warning.
We need to get definitions - and specifically how this applies to us - and how to keep it from applying to those of us who simply want to help our clients avoid paying taxes they don't really owe, or truly cannot afford.
It's wake-up time!
Read the brochure....
...it doesn't apply.
First, it only applies to unsecured debt. The IRS moves pretty quickly these days to slap liens on property; therefore those debts are secured, not unsecured.
Second, it only applies where interstate telemarketing is involved. If you're only operating locally, you're not covered.
Third, most responses to general media ads are exempt.
Fourth, face-to-face communications are exempt; only when the transaction is over the phone is it covered.
Fifth, the main thrust of the brochure is credit card counseling agencies.
Sixth, you first have to have a 'debt' that you negotiate down. If you're in an audit, and no final notice of deficiency has been issued, no debt exists.
FTC Telemarketing Rules
Tax Mama- thanks for the heads up. One thing I noticed in reading the brochure and FTC matterials is that this rule only applies if the whole think happens over the phone. If the client comes into my office, the rules don't apply.
But I wonder if the FTC understands that the IRS doesn't operate like a credit card company by taking a settlement. If they tink you can pay-you pay. When is the case settled? When the installment agreement is reach or paid off. What about compliance work that may be needed to get the IRS to work with you. They need to talk.
Trish