Is the IRS Finally Ready to Modernize?

Craig W. Smalley, EA
Founder/CEO
CWSEAPA PLLC
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My sister is married to a postal employee. I often kid with him and tell him he has a job because of tax professionals. Not to mention, we are one of the only fields still required to have a fax line. 

The reason for this is simple: The IRS is antiquated. Tax professionals have to answer letters and send them to the agency certified and by snail mail. We also need a fax machine to send Information Authorization Forms, or Powers of Attorney, to our respective CAF Units. 

This has become a daunting task indeed. However, in the recently released Internal Revenue Service Advisory Report, the agency has laid out its plans for a method by which representatives can serve their clients by electronic means.

The IRS’s Digital Services Subgroup, in the report, states that they have been working with select representatives, testing various electronic methods that could replace the current means of representation. These have included email and online filing, and Information Authorization Forms, POAs and even some correspondent audits were allowed with the program. The testing has been going on for two years now.

The creation of tax pro accounts has been a top priority for groups such as the National Association of Enrolled Agents, the American Institute of Certified Public Accountants and the IRS Advisory Council. It has been part of the tax agency's long-term strategy, but budget constraints kept it in the research stage until now.

"It's a very significant milestone," said Michele Causey, acting director of the IRS Office of Online Services.

Causey announced the August 2 decision to move tax pro accounts into the requirements definition phase at the IRS Advisory Council’s annual meeting on Nov. 15, where the group released more than a dozen recommendations for the Service to improve tax administration, including, for the second year in a row, the suggestion to create these accounts.

Causey said a complementary decision was made August 28 by another IRS leadership body, the Services and Enforcement Executive Steering Committee, to adopt an authorization strategy, another key Advisory Council recommendation.

The Council laid out something called the “eA3 Rule.” This refers to the authentication, authorization and access that are needed to enable digital services for taxpayers and third parties in an effective manner. At the same time, this system would maintain the security and integrity of taxpayer data.

Partially, the authentication strategy will require any new system to comply with the online security guidelines issued by the National Institute of Standards and Technology, meet legal requirements and protect taxpayer data. The authentication system also must provide a way for taxpayers to revoke access to their accounts if they decide to use a different tax preparer.

Before you get excited, there is no timetable for defining the final requirements for tax pro accounts. 

"It could be a very long process," Causey said, before a "minimum viable product" is ready for use by tax preparers. In recent years, the IRS has shifted to an agile development strategy, releasing new web-based apps with limited functions and adding more as they are developed.

This is welcome news for us tax professionals who are ready for the agency to make the transition to modern times with everybody else.

About Craig W. Smalley, EA

Craig Smalley

Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.

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