TIGTA Review IRS Contractors U.S. Investigations Services, Inc. (USIS), a former contractor of the Office of Personnel Management (OPM), is alleged by the Department of Justice to have provided incomplete reviews of
approximately 665,000 background investigations from March 2008 through September 2012 to the Federal Government.
In addition, the Department of Justice prosecuted several USIS employees under contract to conduct background investigations on behalf of the OPM’s Federal Investigative Services for making false representations regarding their work on background investigations, such as indicating that interviews were conducted or records were obtained, when in fact they were not. Incomplete investigations could result in employing or retaining unsuitable individuals in positions with access to IRS facilities, systems, and sensitive information.
TIGTA performed this audit to assess the impact of OPM background investigations conducted by its former support contractor, USIS, on the IRS.
The OPM provided TIGTA with a list of 3,498 background investigations performed by the USIS on IRS employees or appointees between March 2008 and September 2012 alleged by the Department of Justice to have received incomplete reviews. Of these 3,498 background investigations, IRS records indicated that as of October 2017, the IRS still employed 2,058 of these individuals.
Our review of a statistical sample of 76 USIS background investigations conducted on IRS employees or appointees on board as of February 2016 found that documentation was lacking to support the investigative work represented as completed by the USIS in 75 (99 percent) cases. According to the OPM, the policies during the time frame USIS-conducted background investigations took place did not require documentation to be retained in the investigative file for certain types of investigative actions. However, the OPM concluded that in two of the 76 IRS Reports of Investigation, OPM investigative standards had not been met. TIGTA determined that IRS procedures did not contain a process to assess the quality or completeness of background investigations the OPM provided to it.
Does the Internal Revenue Service have the right to regulate tax preparers?
Attorneys for the IRS made the case that it does during oral arguments yesterday in front of a three-judge panel of the D.C. Circuit Court of Appeals made up of Judges David Sentelle, Brett Kavanaugh and Stephen Williams.
The case, Loving v IRS, was filed last year on March 13, 2012, in response to regulations put forth by the IRS in an effort to monitor tax preparers. The regulations, as written, would require tax preparers to register with the IRS; pass a competency exam; pay an annual fee and meet certain continuing education requirements. The regulations didn’t, however, apply to all tax preparers: it would exempt Certified Public Accountants (CPA), attorneys, Enrolled Agents (EA) and a handful of others. Most of those who were exempt from the requirements as put forth under the new rules are already subject to continuing education and competency exam requirements inside their own industries. That means that the real burden of complying with the new regulations hit independent tax preparers and small businesses disproportionately – those who, under the new rules, must meet the criteria for a new IRS designation, a Registered Tax Return Preparer (RTRP). Without that designation, unless a preparer meets an exemption or exception, he or she may not work.
Proposal to Fix the Horse Act
Three independent tax preparers, Sabina Loving of Chicago, Illinois; John Gambino of Hoboken, N.J.; and Elmer Kilian of Eagle, Wisconsin, believed those rules weren’t fair. They are the lead plaintiffs in Loving and are represented by the Institute for Justice
he crux of the plaintiffs’ argument is this: Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.
U.S. District Court Judge James E. Boasberg agreed. In January 2013, he issued an opinion that would bar the IRS from regulating tax preparers, days before the new tax season officially opened for business. You can read the opinion here(downloads as a pdf).
The IRS appealed that decision and here we are, eight months later, back in court.
Oral arguments in the case were colorful, often punctuated by queries from the judges and occasionally, a joke or two. During arguments, the judges appeared skeptical of the IRS’ reliance on an 1884 statute, the “Enabling Act of 1884,” also referred to as the “Horse Act of 1884” as sufficient authority to regulate tax preparers. The statute was the result of a post-Civil War concern about the abuse of the claim process for the value of dead horses and lost property during the war. To stem the tide of abuse, Congress granted the Secretary of the Treasury the authority to regulate the admission of agents representing claimants before the Treasury Department (the rise of the modern day Enrolled Agents), and to penalize those who failed to comply with the regulations. The Treasury published guidance for those agents – and that guidance is what eventually evolved into Circular 230. If that name rings a bell, you might have seen “Circular 230 language” at the bottom of attorney and tax professional emails.
The IRS argues that the law still allows for regulation of tax preparers. The statute predates the modern income Tax Code which was codified in 1913. Much has changed since – including Congress’ apparent reluctance to pass any laws granting the IRS specific authority to regulate preparers.
Proposal to Fix the Horse Act
The amount of time that passed from the 1884 case and now didn’t go without notice in front of the panel. Consider this brief exchange between Justice Department Tax Division lawyer Gilbert Rothenberg and the panel:
Panel: That’s how many years?
Rothenberg: That’s about a century.
Judge: And then after a century, Treasury suddenly decides these words empower us to do this…?
Another exchange revolved around two simple conjunctions: “and” and “or.” Under the law, there are four criteria to be considered an agent. The statute uses the word “and” to connect the four but, as argued by Rothenberger, the IRS believes that “and” could also mean “or.” The panel didn’t seem convinced.
There are a number of parties interested in this matter. Clearly, IRS and the three practitioners involved directly each have a specific stake in the outcome. Beyond that, tens of thousands of tax practitioners could be affected, as well as taxpayers, Congress and those concerned about the uptick in government regulation.
When cases like this attract additional attention, those who have interest or expertise in the subject can ask the court for permission to file a brief to explain their point of view. That doesn’t make them a party in interest, nor does it grant them a seat at the bench. It’s simply a brief for consideration and generally happens where matters of public interest are at stake (for example, same sex marriages). These briefs are called amicus briefs or, since we lawyers love Latin so much, amicus curiae. It means, literally, “friend of the court.”
A couple of amicus briefs were filed in Loving. One, in support of the IRS, was filed by five former IRS Commissioners. Another, in support of the plaintiffs, was filed by a number of tax preparers, including a former IRS employee; a few CPAs; an EA; and the Tax Foundation, a 501(c)(3) nonpartisan research institution (and pretty awesome read) based in Washington, D.C. You can read the amicus brief here (downloads as pdf).
Shortly after the amicus brief in support of the plaintiffs was filed, I called up one of the parties, Joe Kristan, to ask him about his participation. Kristan is a CPA and authors the informative and entertaining Tax Update Blog. He doesn’t have an actual dog in this fight: CPAs are exempt from most of the regulations. So why, I asked, was he involved? He offered a laundry list of reasons: it’s bad law, bad policy and bad for the consumer.
In addition to the arguments cited by the plaintiffs that the IRS doesn’t have the authority to regulate tax preparers – and Congress has never stepped in to give them that power – Kristan has concerns about handing over even more power to the agency. Using an analogy from my profession, Kristan compared the law to giving the prosecutors the right to regulate defense attorneys.
During our call, we both agreed that there are bad tax preparers out there but Kristan used that fact to seize upon one of the main criticisms of the IRS scheme: there are ways of dealing with bad acts and these regulations won’t keep the bad preparers honest. It doesn’t, for example, deal with the issue of fraud in the industry. And, he says, those who can manipulate the system will now have the equivalent of a “seal of approval” from IRS, giving consumers a false sense of security.
But what about those education requirements and the competency exams? Kristan shrugs off the notion that some testing keeps taxpayers safe, saying that the test is a “literacy test, not a competency test.” He does believe that tax professionals should keep their credentials up and their skills sharp but feels that should be voluntary. The real problem with tax compliance issues, he says, simply won’t be resolved through more regulation.
Whether those regulations will be enforced is still a question pending the decision of the panel. I’m not sure that the IRS made enough of a case to convince the court to overturn the prior decision. You can listen to the oral arguments here(downloads as mp3). The arguments are about 45 minutes long… and well worth the listen.
A decision by the Appeals Court isn’t expected for a few months.
Tax Jokes…now that’s an oxymoron. We will throw out some starters and you can add your own.
Did you ever notice that when you put the words “The” and “IRS” together it spells “THEIRS.”
Q: Ever wonder why the IRS calls it Form 1040?
A: Because for every $50 that you earn, you get $10 and they get $40.
After reading a nursery rhyme to his child, the tax accountant said, “No son, it would not be tax deductible when Little Bo Peep loses her sheep but I like how you think.”
A doctor, a tax lawyer, a little boy and a rabbi were out for a Sunday afternoon flight on a small private plane. Suddenly, the plane developed engine trouble. In spite of the best efforts of the pilot the plane started to go down. The pilot grabbed a parachute and then he yelled to the passengers that they had better bail out and jump. Unfortunately, there were only three parachutes remaining.
The doctor grabbed one parachute and said, “I am a doctor, I save lives so I must live.” The doctor then jumped out of the plane leaving two remaining parachutes for three people left on the plane. The tax lawyer grabbed a parachute and said, “I am the smartest man in the world and I save people money so I deserve to live!” He grabbed a parachute and jumped leaving one remaining parachute for the little boy and the rabbi.
The rabbi looked at the little boy and said, “My son, I have lived a long and full life. You are young and have your whole life ahead of you. Take the last parachute and live in peace.” The little boy handed the parachute to the rabbi and said, “Do not worry, rabbi! The smartest man in the world just took off with my backpack.”
An estate and trust lawyer was reading the will of a rich man to the people mentioned in the will: “To you, my loving wife Rose, who stood by me in rough times as well as good, I leave the house and two million dollars.” The lawyer continued, “To my daughter Jessica, who looked after me in sickness and kept the business going, I leave the yacht, the business and one million dollars.” The lawyer concluded, “And to my cousin Dan, who hated me, argued with me and thought that I would never mention him in my will, well, you are wrong. “Hi, Dan!”
A CEO was interviewing job applicants for the lead role in a financial division of a large company. He knew he needed to devise a test for choosing the most suitable candidate. He asked each applicant this question, “What is two plus two?” The first interviewee was a government auditor. His answer was “Twenty-two.” He then asked the second interviewee who happened to have an engineering background. He pulled out a slide rule and came up with the answer, “Somewhere between 3.999 and 4.001.” The next interview was an attorney who stated, “In the case of Jenkins vs IRS, two plus two was proven to be four.” Finally, the businessman interviewed a tax accountant and he asked him for the answer to two plus two. The accountant go up from his chair, walked over to the door, closed it, came back and sat down next to him. The tax accountant leaned across the desk and said, “How much do you want it to be?”
A clerk walks into the boss’ office and says, “The auditors have just left, sir.” The boss then asks the clerk, “Have they finished checking the books?” “Very thoroughly,” the clerk replied. “Well, what did they say?” said the boss. The clerk replied, “They want 15% to keep quiet.”
“I just taught my kids taxes by eating 38% of their ice cream.” – Conan O’Brien
“The U. S. Senate is considering a bill that would tax Botox. When Botox users heard this they were horrified. Well, I think they were horrified but it was difficult to tell.” – Craig Ferguson
What’s the difference between death and taxes? Congress does not meet every year to make death worse.
“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.”
– Mark Twain
“65% of people say that cheating on your income tax is worse than cheating on your spouse. The other 35% were women.” – Jay Leno
A mugger stops a guy on the street at gunpoint. “Give me all your money,” he says. The muggee is indignant and yells at the mugger, “You cannot do this because I am an IRS Agent.” “In that case,” says the mugger, “give me all MY money!”
A tax accountant and a lawyer were laying on a beach in Hawaii sipping Mai Tai’s. The lawyer started telling the tax accountant how he came to be in Hawaii. The lawyer said, “I had this downtown property in Memphis that caught fire and after the insurance paid off I moved here.” The tax accountant said, “I had a downtown property in Miami that got flooded and I moved here with the insurance proceeds.” The lawyer took another sip of his Mai Tai and then asked in a low voice, “How do you start a flood?”
Did you know that 10 out of 9 accountants cannot count?
Regis Philbin is back in primetime, hosting 11 new episodes of “Who Wants to Be a Millionaire.” But because of the President’s new tax plan, it has been re-titled to “Who Wants to Win Just Under $250,000.” – Jimmy Fallon
“Today the IRS gave some guidelines on how to avoid getting audited. Number one, do not list deductions that will raise a red flag. Number two, make sure that you file on time. Number three, do not make any stupid anti-war speech at the Academy Awards.” – Jay Leno
When it comes to taxes, there are two types of people. There are those that get it done early, also known as psychopaths, and then the rest of us.” – Jimmy Kimmel
Enrolled Agent – the WRONG CHOICE is a post that should NOT have to be written, and it is not directed the many EA’s that we know and work with on a daily basis. Rather, it is squarely directed at the National Association of Enrolled Agents [“NAEA”] marketing efforts and those EA’s that continue to perpetuate the bald-faced lies that should attract the attention of IRS Office of Professional Responsibility [“OPR”]. Let’s begin our discussion by starting with an article the is riddled with the deliberate misrepresentations of material facts and deceptive statements. EA vs. CPA: Which is Right for You? which we found through a link on the website of Greenfields Accounting the website of Jake Johnston, EA. [we note the article date is 3/26/2012].
EA vs. CPA
Let’s begin with an overview of NAEA
If you have difficulty viewing the slides, you can access them here.
We are going to try to be as succinct as we can by linking to many of our prior posts on aspects of this topic.
The article suggests “Choose an EA” when:
When you have out-of-state returns. Enrolled agents are the only taxpayer representatives who receive their unlimited right to practice from the federal government (CPAs and attorneys are licensed by the states). That means if you need to file in more than one state and eventually need representation before that state in an audit or resolution case, the same EA can do it, Pinck says.
The National Association of State Boards of Accountancy which includes the state regulatory agencies – State Boards of Accountancy for each of the fifty states, the District of Columbia and four territories have created a website, CPAVerify.org.
Free and open to the public, CPAverify.org is a CPA lookup tool populated by official state regulatory data sent from Boards of Accountancy to a central database. The website represents the first ever single-source national database of licensed CPAs and CPA firms. Determine a CPA or CPA firm’s
credentials without having to search each of the 55 Boards of Accountancy website individually. Additionally, CPAverify.org also includes markers of enforcement, non-compliance or disciplinary action for added confidence in hiring a CPA.
The process to verify an EA’s credentials required you to email the IRS.
When you need help resolving an IRS dispute or expect to owe. People who don’t have the resources to pursue a taxation attorney often hire EAs instead for civil resolution cases, according to David Miles, an enrolled agent with 20/20 Tax Resolution in Broomfield, Co. Not only do EAs rates tend to be more affordable, they can their tax law expertise to represent clients in tax proceedings, audit hearings and appeals.
Another misrepresentation of the truth, and an outright violation of Circular 230 [Sec 10.51(a)(5). There are numerous sanctions for self-designation as an “expert” that apply to attorneys, CPA’s and Enrolled Agents. See How Not To Become An Expert.
Here’s a breakdown of the two professions:
An EA is authorized by the U.S. Department of the Treasury to represent taxpayers before the IRS for audits, collections, and appeals, according to the National Association of Enrolled Agents (NAEA). EAs advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts and any entities with tax-reporting requirements.
EA’s only tend to focus on preparing taxes, and many specialize in tax resolution. In addition to an IRS-administered testing and application process, enrolled agents must complete at least 72 hours of continuing education every three years.
Enrolled Agents ARE NOT, REPEAT NOT PROFESSIONALS
Enrolled Agents have absolutely NO requirements for minimum education or experience. They are not required to have graduated from high school, nor are they required to document experience to obtain the EA credential. The Internal Revenue Service only hire them as CLERKS -mail or file clerks with their ability to document thirty hours of college-level accounting courses. See – Tax Careers At The IRS