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These New IRS Competency Exams Are Going To Be a Hoot

Our resident tax nerd, Joe Kristan, touched on the IRS competency exam a couple of weeks ago but yesterday the IRS officially rolled out the red carpet. So, if you prepare tax returns but aren’t a CPA, lawyer, or enrolled agent, you now have the distinct pleasure of spending $116 to spend a few hours with everyone’s favorite test vendor – Prometric – whose proctors will keep a watchful eye on you to make sure your ostomy bag isn’t a secret answer bank, that you aren’t packing heat and your gum is appropriately disposed of. What’s the point of all this, you ask? IRS Commish Doug Shulman can answer that:

“This is another major step forward in our effort to enhance tax preparation service to millions of taxpayers. People should feel assured that the person they hire to prepare their federal tax returns has a working knowledge of the tax code,” said Doug Shulman, IRS Commissioner. “The majority of tax return preparers are reputable professionals but the few bad apples cause great harm to taxpayers and the industry.”

Got it? It’s for the good of the country. Just make sure you don’t have a runny nose on the day of your test. That’ll get you in trouble.

[via IRS via NYSSCPA]

IRS Commissioner Doug Shulman Puts Tax Preparers’ Job Security Concerns to Rest

“Perhaps the most telling indicator of taxpayer confusion over the code’s complexity is that today, 90% of individual taxpayers pay for professional tax preparation or tax software to prepare their tax returns. IRS research estimates that, over the past 10 years, the burden for the typical taxpayer has increased by about 20% and would likely be even more if they had to prepare returns themselves without any aids or tools. Moreover, we estimate individual taxpayers and businesses spend more than 7 [billion] hours each year complying with filing requirements.” [Tax-News via Tax Foundation]

Now Non-CPAs Can Taste the CPA Exam Experience!

The IRS Commissioner and his subaltern for preparer regulation this week spilled some of the beans about the “competency tests” that they are imposing on the unwashed (non-CPA, non-lawyer, non-enrolled agent) preparers. Some key bits, as reported by Tax Analysts (sorry, subscriber-only link):


This confirms the obvious: the competency test will be a joke. It has to be, or too few preparers would survive to prepare the nation’s returns. It won’t be completely open-book, but it sounds like you will be able to pass if you have adequate skills at reading and using an index.
This all makes it look like the cynics are right – it’s all about extending IRS power over preparers.

Don’t believe me? Listen to Shulman’s own words:

Today, I want to talk for a little bit about some of our priority programs, such as the Return Preparer Program, the evolution of our relationship with our largest corporate taxpayers, including Schedule UTP, and our work on what we’re calling a real time tax system.

The common thread that runs through them is points of leverage and working smarter.

Points of leverage sounds like what a wrestler uses to pin an opponent. The IRS can use these “points of leverage” to make preparers more subjects of the government and less advocates for their clients. And in their own sweet time, they will.

About 100,000 Tax Preparers Sorta Forgot Those Identification Number Rules Went into Effect This Year

For those of you that haven’t nailed down the CPA yet, hopefully you’re not amongst those receiving nastygrams from the IRS for not complying with the new ID requirements.

And, on behalf of the thousands of tax preparers who did comply with the new rules, Doug Shulman doesn’t appreciate your apathy, “The vast majority of federal tax return preparers complied with the rules. We owe it to the compliant tax preparers to make sure that everyone is on a level playing field.” [Bloomberg]

Some IRS Employees Living by the Motto ‘Do as I Say, Not as I Do’

There’s no shame in asking for help, IRS employees, if that’s what this is about. Don’t forget that the Commish isn’t too proud to ask for help.

In 2008, the year for which most recent data was available, IRS computer programs flagged compliance issues for more than 8,000 of its 109,469 employees and ultimately determined that almost 2.8% had not complied with the law. But those monitoring systems missed 133 additional employees who were potentially not compliant with tax law over a two-year period, according to the audit. The employees were flagged for potentially filing their tax returns late, paying their taxes late, not reporting all of their income and at least one example of a criminal investigation with an additional tax assessment.

Treasury Report: IRS Must Beef Up Oversight Of Its Own Employees [Dow Jones]

Doug Shulman: Cutting the IRS Budget Will Do Nothing to Help the Deficit

“Cuts such as those in the House budget resolution would actually increase the deficit by decreasing revenue,” IRS Commissioner Douglas Shulman said to the Senate Appropriations Subcommittee on Financial Services and General Government.

He said the House proposal would cut $2 billion from the agency’s budget next fiscal year. “Cuts of this magnitude would be substantial and affect all of IRS operations,” from answering taxpayers’ questions on the phone to being able to conduct audits, he said. Shulman said that for every dollar invested in the IRS, the agency collects roughly $200 in revenue. [Dow Jones]

Report: IRS Is Doing More with Less, Still Needs More

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In a report released today, the inspector general said attrition and a heightened workload have combined to leave the IRS understaffed.

The new hires in the agency’s small business and self-employed division resulted in a net gain of just 580 revenue officers by the end of fiscal 2010, according to the report. The IRS watchdog predicted a net gain of 127 revenue officers by the end of fiscal 2012. The study could affect the debate over funding for the agency. It comes two days before IRS Commissioner Douglas Shulman is scheduled to testify before a congressional panel on the agency’s budget. The inspector general warned that, unless the IRS is fully staffed, compliant taxpayers are at a disadvantage. “If the IRS does not have a sufficient number of qualified” revenue officers, the report said, “it could create an unfair burden on the majority of taxpayers who fully pay their taxes on time.” [Bloomberg]

Gird Your Loins, Unscrupulous Tax Preparers

The IRS is on you like white on rice.

The Internal Revenue Service is taking steps to stop tax preparers with criminal tax convictions or permanent injunctions from preparing tax returns. This is just one of several recent moves to improve the quality and oversight of the tax preparation industry.

More than 700,000 tax preparers nationwide have registered with the IRS and obtained Preparer Tax Identification Numbers (PTINs). This nine-digit number must be used by paid tax return preparers on all returns or claims for refund. Paid preparers must renew their PTINs annually to legally prepare tax returns.

“We owe it to all taxpayers and the many honest tax return preparers to remove the relatively small number of bad actors from the tax preparation industry,” said Doug Shulman, IRS Commissioner. “Just one unscrupulous tax return preparer can cause a lot of financial damage to both taxpayers and the tax system.”

Nineteen ne’er-do-wells have already gotten word that they’ll be stripped of their PTINs for unseemly behavior of some kind or another. Best get that CPA so you don’t have to mess with the whole thing…until you the IRS lumps them in too.

IRS Begins Enforcement of New Return Preparer Rules [IRS]

IRS, DOJ Want a Peek at Some HSBC India Bank Accounts

Back in February, the IRS announced that it would be giving offshore bank account holders another chance to come clean on their tax-avoiding ways. Tax amnesty 1.0 went pretty well and last year, the IRS had a whale of time sticking it to UBS and a number of customers who were holding out. But in all honesty, we all know that picking off a bunch of blondes with above-average chocolatiering skills was some low-hanging fruit. Today the IRS, along with the DOJ, announced their next target of their sniffing-out-offshore-bank-account world tour. HSBC India! – come on down!

The United States is seeking an order from a federal court in San Francisco authorizing the Internal Revenue Service (IRS) to request information from HSBC Bank USA, N.A. about U.S. residents who may be using accounts at The Hong Kong and Shanghai Banking Corporation in India (HSBC India) to evade federal income taxes, the Justice Department announced today.

The government filed a petition with the court to allow the IRS to serve what is known as a “John Doe” summons on the bank. The IRS uses a John Doe summons to obtain information about possible tax fraud by people whose identities are unknown. If approved, the John Doe summons would direct HSBC USA to produce records identifying U.S. taxpayers with accounts at HSBC India, many of whom are believed by the government to have hidden their accounts from the IRS.

And if anyone is getting the idea that this is an HSBC/Hong Kong/India issue, Doug Shulman would like you to know that this is not personal, it’s simply the IRS doing the Treasury’s dirty work, “The IRS continues to focus its attention on international tax evasion,” the Commish said. “This summons request is focused on obtaining more information to help us determine if additional actions are needed. As I’ve said all along, our international efforts are not about just one country or one bank – it’s about our wider effort to ensure compliance with the nation’s tax laws.”

The Treasury isn’t going to fill itself now, is it?

[via WSJ]

A Government Shutdown Is Not an Acceptable Excuse for Blowing Off Your Tax Return

Doug Shulman wants you to put that notion right out of your mind:

Doug Shulman, the IRS commissioner, said that people who file electronically during a shutdown would likely not face any delays in having their returns – and potential refunds – processed. But taxpayers who file by paper, Shulman added, may see some delays. “We’ve got a 100,000 employees. Not all of them are going to be coming to work. But we’re going to have a complement here,” Shulman said. “The nuances of who is going to be doing what I’m not ready to get into. The most important thing for people to know is: We’re going to be accepting tax returns and people should file.”

So as Adrienne just mentioned, you can either ask the AICPA for help, call your tax advisor or simply curl up into a ball and shudder in the corner until the 18th passes.

IRS commissioner: You still have to file taxes during shutdown [The Hill]

IRS Commish Admits That a Government Shutdown During Tax Season Would Be Kinda Weird

The head of the IRS said Thursday that a government shutdown during tax season would be a challenge the agency has never confronted before — and one that would become more complicated as the April filing deadline draws closer. Doug Shulman, the IRS commissioner, also signaled at a House Ways and Means subcommittee hearing that his agency was discussing how to address a potential shutdown with the Obama administration, though he did not spell out any details of those talks. “We run a $13 billion financial services operation, so the idea of stopping it for a few days or a few weeks is strange,” Shulman said, adding that he was hopeful, based on ongoing negotiations, that a shutdown could be averted. [The Hill]

Three Ways to Get on the IRS’s Good Side This Tax Season

All this resentment of the IRS has got to stop. It’s counter-productive, cowardly and most of all, annoying. The gang at Boulder, Colorado-based Webroot understands that you shoo away more IRS flies with honey than with vinegar, so they’ve made a simple suggestion: “This tax season get on the IRS’s good side.”

How does one do that, you ask? Well, Webroot has given you three options to show some love:


1. Send a flower to Doug Shulman – Behind that rough exterior, The Commish is a softee. Sign up for this option and a flower will be added to the bouquet and your name included on a card that will accompany warm his bureaucratic heart. You do have the option of donating a flower anonymously if you’re still not sure Dougie is nothing but a taxborg that gets plugged in every evening.

2. Pro-IRS Stamps – Don’t you just love it when you get unique stamps in the mail? Imagine how good you would feel if the stamp had a tattoo heart with your name in the middle of it. I’ll bet the IRS would like it if you used one to mail in your tax return. Those “Forever” stamps are boring anyway.

3. Like the IRS on Facebook – Seriously, people. Is there a better way to show your appreciation? Besides, I’ve seen what some of you ‘Like’ on FB and quite honestly, it’s far more embarrassing than liking the IRS.