The IRSAC Wage & Investment Subgroup (hereafter “subgroup”) is comprised of a diverse group of tax professionals including Certified Public Accountants, Enrolled Agents, educators, general tax practitioners, and persons with financial backgrounds. The members of this group have a wide range of experience in taxation, including both preparation of tax returns and representation of taxpayers. We are honored to serve on the IRS Advisory Council and appreciate the opportunity to submit this report.
The Subgroup would like to thank W&I Commissioner Peggy Bogadi for her recognition of the value of the Subgroup as an integral part of her leadership team. The Subgroup has had the privilege of working with the professionals within the W&I operating divisions of the IRS and found them to be extremely helpful in providing the information, resources, guidance, and IRS personnel necessary to develop our report. We also appreciate the support provided by our designated liaisons who did a masterful job navigating the IRS and ensuring that we had access to the information necessary to develop our analysis and issue our report.
The Subgroup has researched and is reporting on the following three issues:
1. Reducing Processing time for the Form 2848, Power of Attorney and Declaration of Representative
The Subgroup was asked to review the process for submitting Forms 2848 to the Service and the form itself to make recommendations for any improvements and modifications. Reductions in processing time and input errors will conserve resources and enhance practitioner interaction with the Service in resolving taxpayer concerns. Our recommendations include development and increased use of electronic processes, and changes to Form 2848 to prevent rejects and resubmissions.
2. Review the Transcript Request Policy for the Practitioner Priority Service (PPS) Toll-Free Line
The Subgroup was asked to look at the demand for transcript requests made on the Practitioner Priority Service (PPS) Line, review the current methods in which transcripts are provided by the IRS, and make recommendations on how the PPS Line can be better utilized. Our recommendations include limiting the use of the PPS Line to practitioners covered by Circular 230 and to allow the use of Form 8821, Tax Information Authorization, to access the Transcript Delivery System (TDS).
3. Assisting Tax Preparers Working with Clients that are Victims of Identity Theft
The Subgroup was asked to provide assistance in developing guidance for tax preparers to assist their clients in working with the IRS to resolve their tax-related identity theft issues. We recommend that the IRS develop checklists and media outreach tools to assist practitioners and taxpayers by advising them how to protect data and work through the IRS process to resolve issues. In addition, the IRS should provide periodic status information to victims.
Furthermore, it is recommended that two issues be included in next year’s portfolio. First, the current revised ITIN request process is extremely burdensome for taxpayers, withholding agents, and tax practitioners. The ITIN procedures need to be reviewed to address foreign government documentation along with applicant compliance requirements. Second, the Automated Under Reporter Program should be reviewed to determine if any additional efficiency could be identified to make it an even better compliance program.
The Subgroup was asked to review the process for submitting Forms 2848 to the IRS and the form itself to make recommendations for any improvements and modifications. Reductions in processing time and input errors will conserve resources and enhance practitioner interaction with the Service in resolving taxpayer concerns.
In fiscal year 2012, 3.4 million authorization requests were submitted to the Centralized Authorization File (CAF) Unit. Fewer than 10 percent were submitted electronically, the balance being either fax or hard copy paper submissions. On September 3, 2013, the IRS retired Electronic Disclosure Authorization. Subsequently, all authorization requests will be paper submissions.
Based on recent data, approximately 16 percent of the authorization requests are rejected due to missing or incomplete information. Some of the most common errors are missing taxpayer or representative information; failure to properly sign the form; non-specific tax matter identification; missing Designation, Licensing Jurisdiction or Authority; and failure to attach the prior Form 2848 to retain the previous representation. In addition, it is estimated that 18 percent were duplicates. Duplication occurs when a representative submits a request to the CAF Unit, which has not posted and calls the PPS Line. The assistor will ask for a copy of the POA, which is then faxed to the assistor. Upon concluding the call, the assistor will forward the faxed POA to the CAF Unit.
- Reinstitute electronic processing of Third Party Authorizations and publicize it as a best practice.
- Consider using more electronic processing to reduce paper by using e-fax and scanner technology.
- Require PPS assistors to confirm if the POA has already been faxed or mailed to the CAF Unit. If it has, the POA should not be sent to the CAF Unit. Re-emphasize I.R.M. 126.96.36.199.3 to all appropriate staff or, in the alternative, have the assistor input the Form 2848 directly into the CAF.
- Develop a check sheet to be used in completing the Authorization Request in order to avoid the most common mistakes and post it on the web.
- Publicize the web page through practitioner alerts.
- Modify the Form 2848, Part II, "c" Enrolled Agent to indicate Licensing Jurisdiction should be blank. Also, modify the I.R.M. and other instructions to inform the staff of this.
- Modify the Form 2848, Part 2 to bold “Check if to be sent notices and communications.”
- Modify the Form 2848 to refer the preparer of the form to the web page for most recent updates.
The Subgroup was asked to look at the demand for transcript requests made on the PPS Line, review the current methods in which transcripts are provided by the IRS, and make recommendations on how the PPS Line can be better utilized.
In July 2012, a sample of approximately 500 calls to PPS Line was reviewed. Thirty-two percent of these calls were requests for transcripts only. No other account issues were discussed or resolved. The majority of the transcript-only requests were from three large companies making repeat calls to request the maximum number of transcripts allowed per phone call. These calls are consuming time and resources that could be used to help practitioners with priority account related services. The IRS provides three other methods to request transcripts. They are the TDS, the Income Verification Express System (IVES) and the Return and Income Verification System (RAIVS).
- Limit the PPS Line to practitioners covered under Circular 230. PPS should issue transcripts for account resolution purposes only.
- Include a tele-prompt on the PPS Line call menu to direct transcript-only requests to TDS, IVES, or RAIVS.
- Allow the use of Form 8821, Tax Information Authorization, to access transcripts on the TDS system.
- Improve the POA CAF posting time to make the e-services TDS application more user friendly. (Refer to recommendations offered in Issue One of this report).
- Create a web-based tool that would make it possible to view and print a transcript online. This tool should include a feature that allows the taxpayer to send a transcript to a third party.
The Subgroup was asked to provide assistance in developing guidance for tax preparers to assist their clients in working with the IRS to resolve their tax-related identity theft issues.
Rampant identity theft is one of the largest challenges for the IRS. In the first half of 2012, the IRS prevented the issuance of $4.2 billion of potentially fraudulent refunds which encompassed 860,000 returns that were indicative of identity theft. The current level of investigation and resolution of cases by the IRS is commendable, especially with the significant budget cuts experienced. Identity theft and refund fraud deplete confidence in the system and create a pervasive problem that the IRS cannot mitigate without working with the tax preparers, taxpayers and other agencies.
Inroads have been made by the IRS, but continued efforts are required to reduce the taxpayer burden and empower the tax preparer community to assist the IRS with detection and prevention similar to the Outreach Referral Program within the banking community. The evolution of the fraudulent schemes remains a challenge, but increasing education and best practices within the tax preparer community will form a conduit to decrease the cycle times of resolution for affected taxpayers.
- Develop a checklist which details the appropriate procedures to assist tax professionals in advising taxpayers on the steps they should take to further protect their personal data once they report to the IRS that they have been a victim of identity theft. The form should reinforce the measures that are indicated in the “Taxpayer Guide to Identity Theft” on the IRS website.
- Develop a “Where is My Case” tracker that mirrors the “Where is My Amended Return” tracker in the form of a status bar available on the IRS website which uses a number other than a Social Security number. This will provide the taxpayer with 1) a support mechanism for getting updates on his/her ID theft case without using Social Security numbers to identify the taxpayer victim and 2) the ability to access touch points prior to case resolution using the standard operating procedure currently in effect of 180 days.
- Develop and air Public Service Announcements via Public Access TV, Print, Radio and Social Media outlets that encourage and explain preventative steps, practical tips and red flags for possible identity theft activity and its sphere of influence over other personal data using the following best practices as a guide to accomplish objectives:
- The Tax Practitioner must use password protection for all client files.
- The Tax Practitioner must shred all old files in lieu of regular disposal methods.
- The Tax Practitioner must protect PTIN and CAF numbers.
- The Tax Practitioner must garner strict access to tax files by outside temporary help.
- Develop and air Public Service Announcements via TV, Print, Radio and Social Media outlets that encourage and explain the necessity for tax preparers to demonstrate to the consumer how tax preparation practices and the knowledge of practitioner best practices help to prevent fraud and identity theft. Alternatively, explain unscrupulous practices taxpayers should avoid.
- Develop a media campaign that markets the IRS website utilizing banner ads on preparer websites of more than 50,000 hits.
- Develop and monitor data transmissions, electronic tax return filing and fax transmissions and encourage use of encrypted portals.
- Develop a communications plan to keep practitioners up to date on how to identify issues related to refund fraud and various schemes used by criminals.
- Extend and expand outreach efforts for the External Leads program to include all businesses that offer financial services and products.