October 22, 2019

Robert T. Hedrick, EA, MST
[email protected]

As a part of its Preparer Compliance Program, the IRS conducts Knock and Talk Visits to “help preparers understand and avoid errors” in claiming refundable credits and the head of household (HOH) filing status on Form 1040s. “A revenue agent and criminal investigator or IRS agents on their own” visit select preparers who, in the opinion of the IRS, previously prepared such “claims with a high chance of error.” The visits are described as “outreach and education visits” where the IRA reps talk about past errors, offers suggestions for improving accuracy, answers questions, and explains the consequences for not improving claims involving refundable credits and the HOH filing status. 

According to the IRS website, penalties do not result from these visits, but the IRS will continue to monitor these preparers. “If a preparer’s refundable credit and HOH filing status claims do not show improvement, we [IRS] may conduct a due diligence audit, during the next filing season.”  

Many tax preparation professionals feel that such audits are to be avoided, as there’s a potential for huge penalties, of $520 (for claims on 2018 returns), per credit, per return for unmet due diligence requirements in the 25 returns that will be reviewed by the IRS, in a due diligence audit. Worth noting is that, during the tax season the IRS “may conduct due diligence audits without advanced notice….” That means showing up unannounced during the tax filing season. The IRS does promise to contact preparers to schedule such audits prior to the income tax filing season. 

Should IRS agents visit, it is absolutely critical that their credentials be validated. According to the IRS website, they are supposed to “always provide two forms of official credentials called the pocket commission and HSPD-12 card.” (What the IRS calls the HS PD-12 card is also called the PIV credential and includes a photo, agency identification, etc. The pocket commission includes the badge and indicates whether this is an enforcement credential or not.) 

For what it’s worth, a genuine IRS representative will also provide, upon request, the phone number for verifying information and confirming his or her identity.  However, this phone number is apparently not independently available on the IRS website. Of course, the legitimacy of any phone number provided by an unverified person claiming to be from the IRS must be regarded as suspect until the person’s identity and relationship to the IRS can be authenticated. 

1. https://www.eitc.irs.gov/tax-preparer-toolkit/preparer-compliance-focused-and-tiered/knock-and-talk-visits/visiting/
   
2. https://www.eitc.irs.gov/tax-preparer-toolkit/preparer-compliance-focused-and-tiered/auditing-for-due-diligence-compliance
   
3. https://www.irs.gov/newsroom/how-to-know-its-really-the-irs-calling-or-knocking-on-your-door

Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.

May 7, 2019

By:  Monty Meyer | [email protected]

IRS Authentication Process:

When an individual return is filed, it goes through a process to ensure that the return Is being filed by the taxpayer and the process is conducted by the “Return  Integrity Unit.”  If IRS flags the account for ID theft, then this process may be required.  The return can be filed electronically and accepted, but the refund may be held up until the authentication process is completed.

If the refund is held the IRS will mail a letter 4883C to the taxpayer, which requires them to go through the authentication process within 30 days.  This process can be done over the phone or in person. The letter will have a control number and an IRS phone number that will be needed for the authentication.

If the taxpayer doesn’t respond within the 30-day period, another letter will be sent with an additional request.

The taxpayer can authorize someone to represent them by filing a form 2848, Power of Attorney.  Although, the IRS suggests that the taxpayer be on the call, the author has gone through the process successfully without the taxpayers’ present.

The following are some of the questions the IRS may ask during the authentication process:

• Employer name
• Wages paid
• Federal withholding
• Date of birth of the taxpayer(s)
• Place of birth for the taxpayer(s)
• Father’s name and date of birth
• Mother maiden name and date of birth
• Filing Status
• Form #
• Refund or tax due
• Direct deposit or issue a check

The same type of questions may be requested for a prior year, so be prepared.  

If you don’t pass the authentication over the phone, you will have to schedule an in-person meeting at an IRS office that offers the authentication process.  However, all offices do this process.

If you pass the authentication process, the IRS says to wait 9 weeks for the refund or a notice which may outline other issues.

Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.

February 22, 2019

By:  Deborah L. Kurtzke | DK Tax & Accounting, Inc.

Taxpayers, who currently use Forms 8878 or 8879 to sign electronic Forms 1040 federal tax returns or filing extensions, can use an e-signature to sign and electronically submit these forms to their Electronic Return Originator (ERO).

The e-signature option is only available to taxpayers e-filing their tax returns through an ERO, who uses software that provides identity verification and e-signature. To meet e-signature requirements, the ERO must be able to record the taxpayer’s name, social security number, address and date of birth electronically for identity verification purposes.  

Taxpayers may continue to use a handwritten signature and return the form to the ERO in-person, via U.S. mail, private delivery, fax, e-mail, or an Internet website.

The software the ERO chooses to use dictates the e-signature method used to sign the form. Regardless of the method used, the electronic record must be tamper proof once it is e-signed. Some examples of methods used to capture an e-signature include:

• A handwritten signature captured on an e-signature pad;
• A handwritten signature, mark, or command input on a display screen using a stylus device;
• A digitized image of a handwritten signature that is attached to an electronic record;
• A typed name;
• A shared secret such as a PIN, password, or secret code, used to sign the electronic record;
• A digital signature; or
• A mark captured as a graphic.
  

If the taxpayer uses the e-signature option, the ERO must use software that includes identity verification. The software must record the following data:

• Digital image of the signed form;
• Date and time of the signature;
• Taxpayer’s computer IP address (remote transaction only);
• Taxpayer’s login identification — user name (remote transaction only);
• Results of the identity verification check validating that the taxpayer’s ID verification was successful; and
• The e-signature method used to sign the record.  

The ERO is also responsible for maintaining a tamper-proof record in a secure, access-controlled storage system for 3 years from the due date of the return or 3 years from the IRS return receipt date, whichever is later. ERO's must be able to retrieve and reproduce legible hard-copies of the signed form.

Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.

April 5, 2021

Tom Edeus | [email protected]

Background:
On January 25th, 2021, the IRS announced a new way to submit Forms 2848/8821 with appropriate electronic signatures now accepted.  The announcement was an IRS response to the Taxpayer First Act (TFA), enacted on July 1st, 2019. The TFA includes 45 legislative provisions with a goal to modernize and improve functionality at IRS along with enhancing the taxpayer experience.

The improvements in IRS functionality will be evolutionary not revolutionary.  TFA will take ten years to implement at a cost of over $2 billion.   The IRS has systems in place which date back to the 1960’s.  There are 60 case management systems which do not talk to each other.  Progress will be slow.  The new direction is encouraging.   Over 450 new IT staff have been hired.   Funding is in place for at least the time being.

In addition to allowing electronic signatures in January, by the summer of 2021, the IRS will launch a new tax pro account.  If both the client and the tax pro have online IRS accounts, authorizations can be electronically signed by each party independently.  The wait time for CAF approval will be almost immediate.   This will be helpful in instances where time is of the essence.  It does require the client to have an online account, with Secure Access, as discussed more fully below.

For the evolution of the authorization process over the entire ten-year implementation period, see publication 5426, pages 43-45.

The new options for Forms 2848/8821:

Tax pros will now have the option of using commercial digital signature products to obtain client e-signatures on Forms 2848/8821.  

The TFA required the IRS to establish uniform standards and procedures for the acceptance of taxpayers’ electronic signatures.

An electronic signature is an electronic symbol attached to an electronic record used by a person with an intent to sign. A digital signature is a form of an electronic signature that includes encrypted data produced by a mathematical process applied to a record using a hash algorithm and public key cryptography.
No specific technology is required. Examples of acceptable electronic signature methods include:

• A typed name that is typed into a signature block
• A scanned or digitized image of a handwritten signature that is attached to an electronic record
• A handwritten signature input onto an electronic signature pad
• A handwritten signature, mark, or command input on a display screen with a stylus device

If the taxpayer electronically signs the authorization form in a remote transaction, the taxpayer’s identity must be authenticated, unless the individual has personal knowledge of the taxpayer’s identity (e.g., through a previous business relationship, a personal relationship such as an immediate family member, or similar-type relationship such as between an employer and an employee).

To authenticate the taxpayer’s identity for remote transactions, the individual must:

• Inspect a valid government photo ID and compare the photo to the taxpayer via a self-taken picture of the taxpayer or video conferencing. Appropriate photo ID,s include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa or passport;
• Record the name, Social Security Number or Individual TIN, address, and date of birth of the taxpayer; and
• Verify the taxpayer’s name, address and Social Security Number through secondary documentation, such as a Federal or state tax return, IRS notice or letter, Social Security Card, or credit card or utility statement.

The authentication requirement is consistent with responsibilities under Circular 230 when preparing or assisting in the preparation of, approving, and filing documents relating to IRS matters or in determining the correctness of oral or written representations made by the practitioner to the Department of  the Treasury.

The new “Submit Forms 2848 and 8821 Online” process will allow you to upload authorization forms with either electronic signatures or wet signatures to the CAF unit for normal processing as well as withdrawal requests.  Use the new IRS page “Submit Forms 2848 and 8821 Online” which was created to receive the forms and uses a secure messaging platform.  Identities must be verified using Secure Access with a Secure Access username and password.  Forms can be submitted in either PDF, jpeg, or png but only one at a time. Forms are routed to CAF unit for normal processing.

To use the “Submit Form 2848 and 8821 Online” platform, an individual must register for Secure Access.  Individuals already registered for secure access, including e-Services Online Tools for Tax Professionals or similar online tools, can use the upload platform to submit Forms 2848 and 8821. To register for Secure Access, you will need your personal information and mailing address from your most recently filed tax return, your financial account number, your U.S. based mobile phone to receive a one-time activation code  which can be mailed  if you do not have a mobile phone.  Secure access offers a more rigorous identity check with two factor authentications.

Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.

July 13, 2021

Deborah L Kurtzke, CPA MST | DK Tax & Accounting Inc.
[email protected]

IRS Can Continue Collecting Social Security Benefit after 10-year Statute Expires: In Dean v. U.S., 2021 PTC 188 (11th Cir. 2021), the Eleventh Circuit affirmed a district court and held that the IRS could continue seizing a taxpayer's monthly social security benefit to pay his delinquent tax debts after the expiration of the 10-year statutory collection period in Code Sec. 6502. The court noted that, while a levy made outside the statutory 10-year collection period generally must be released and a continuing levy on salary or wages must be released at the end of the 10-year collection period, Reg. Sec. 301.6343-1(b)(1)(ii) provides that a levy on a fixed and determinable right to payment, which right includes payments to be made after the 10-year period of limitations expires, does not become unenforceable upon the expiration of the period of limitations and will not be released until the liability is satisfied.

Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.

January 24, 2022

Brian Daly - Tax Practice & Procedures Committee | Bottom Line Solutions
[email protected]

Signed, sealed, delivered does not mean “duly filed” according to Federal Circuit Court of Appeals or maybe the Court was not a fan of Stevie Wonder.  In Brown, (CA Fed. Cir. 2022) 129 AFTR 2d ¶2022-311, the court determined that a return was not duly filed, according to IRC 7422(a), as the tax return preparer signed the return, but not in accordance with Treas. Reg. § 301.6402-2(e) which governs when a legal representative can sign a return.  This raises the question “What is a duly filed return when signed by the taxpayer’s representative?”

Those of us in practice know that Form 2848, Power of Attorney and Declaration of Representative, is required for the Internal Revenue Service to recognize us, as a taxpayer’s representative.  Included on the 2848 are additional options such as signing a return.   In the situation where your client is not able to sign the tax return and wishes you to sign on their behalf, it is important to know the applicable procedural rule.

To be able to sign a return on behalf of a client, you must complete the 2848 as normal including checking the box on line 5a to “Sign a Return” and include the following statement on the lines provided:

“This power of attorney is being filed pursuant to 26 CFR 1.6012-1(a) (5), which requires a power of attorney to be  attached to a return if a return is signed by an agent by reason of _________________.”

Fill in the blank with any of the three authorized reasons which are as follows:

1. Disease or injury,
2. Continuous absence from the United States (including absence from Puerto Rico) for a period of at least 60 days prior to the date required by law for filing the return, or
3. Specific permission is requested of and granted by the IRS for other good cause

This could be dangerous, if the IRS does not agree with the above reasons, leaving the taxpayer with an unfiled return and the applicable penalties. If time allows, the best reason is to get permission from the IRS.

Here is where the magic happens.  To meet the duly filed provision of IRC 7422(a), the taxpayer’s representative must attach the 2848 to the filed return, if a paper return is filed.  If the return is electronically filed, the IRS requires the representative to attach the executed 2848 to Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, and mail it to the address in the instructions.

Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.