Is the Redacted Transcripts Plan Really Helpful?

Craig W. Smalley, EA
Founder/CEO
CWSEAPA PLLC
Columnist
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I don’t know about you, but I think the IRS has taken things a little too far. 

Some background: I was a first adopter of e-services many years ago. I had to verify my identity at the time. I have no idea why I later had to revalidate my identity, but I did. 

Now, we are dealing with redacted transcripts. If you are working with a non-filer, you can pull a Wage and Income (W&I) Transcript, but they are useless because there is no EIN or company address on them. 

In light of all this, you have to wonder what the IRS is thinking.

It’s true: Identity theft is out of control. I can remember 15 years ago, when I ran into this problem for the first time. I actually got fired by the client because he thought I was the one who did something. As these cases became more and more prevalent, the agency cracked down even more, until we’ve reached the point of redacted transcripts. 

Let’s start with e-services. The IRS has to verify your identity, and you need a Centralized Authorization File Number (CAF), which anyone can obtain. When you file your first Power of Attorney, you obtain a CAF. 

Here’s a thought. Perhaps the Service should limit the issuance of CAF numbers to just licensed CPAs, EAs and attorneys. It seems logical. Then, since we are the only ones who can see these transcripts, they don’t have to be redacted.

The problem with a redacted transcript is if you work with non-filers, you should always at least get an 8821 so you can pull the W&I Transcripts.  We can’t use these anymore to file a return because the EIN and address of the company issuing the information return are redacted.  We are required to e-file returns but can’t because we can’t see this information. Even if we paper file, we can’t attach a Form 4852, as required.

So where does this leave us? We can’t rely on the taxpayer, who hasn’t filed a return in several years, to supply us with their information returns. Honestly, they are already non-filers, and if the IRS doesn’t scare them, I certainly won’t. It’s the same reason you get your money up front with resolution cases. 

I’ve done what I can do. I wrote my senator, Marco Rubio, and Representative Val Demmings.  However, we all know that some intern will write a nonchalant letter back and file my letter somewhere it will never see the light of day. The President of the National Association of Enrolled Agents (NAEA) wrote a letter to the acting Commissioner of the IRS before the redacted transcripts went into effect, but even theirs fell on deaf ears. 

Again, practitioners are not the criminals stealing the identities of our clients. It’s just an all-around bad move by the Service. I would urge them to reconsider this latest move so Enrolled Agents, who already underwent a rigorous background check, can do their jobs effectively.

 

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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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Oct 30th 2018 03:20

Hi Craig! Great post. We are clearly at a tipping point with the IRS. FYI - I was able to successfully request a non-redacted W&I transcript the other day from IRS' Practitioner Priority Service. It 'had to be' sent directly to the taxpayer though via US Mail and it really slowed up our ability to efficiently respond.

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to John R. Dundon II EA
Oct 31st 2018 16:19

Not to mention, you have to count on the client to give it to you

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Oct 31st 2018 19:58

If you can't rely on the non-filing taxpayer, why are you doing his tax returns anyway?

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Nov 1st 2018 15:05

Stranger than fiction? Just talked to PPS. Asked the agent if she was getting a lot of requests for un-redacted transcripts to be sent to the tax payer. "NO", but 80% of my job, she said, has been to fax transcripts to third parties. She said, I am told that by December or January we, PPS, will no longer fax any transcripts to third parties. And then she said, weird, but of course if you have a 2848 you are considered the taxpayer!

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