I love hearing from my readers! I occasionally get stories, jokes and quotes which I try to post when appropriate. Thanks to Jackie for sending in the following:
A father walks into a restaurant with his young son. He gives the young boy 3 nickels to play with to keep him occupied.
Suddenly, the boy starts choking, going blue in the face. The father realizes the boy has swallowed the nickels and starts slapping him on the back.
The boy coughs up 2 of the nickels, but keeps choking. Looking at his son, the father is panicking, shouting for help. A well dressed, attractive, and serious looking woman, in a blue business suit is sitting at a coffee bar reading a newspaper and sipping a cup of coffee. At the sound of the commotion, she looks up, puts her coffee cup down, neatly folds the newspaper and places it on the counter, gets up from her seat and makes her way, unhurried, across the restaurant.
Reaching the boy, the woman carefully drops his pants; takes hold of the boy’s testicles and starts to squeeze and twist, gently at first and then ever so firmly. After a few seconds the boy convulses violently and coughs up the last nickel, which the woman deftly catches in her free hand.
Releasing the boy’s testicles, the woman hands the nickel to the father and walks back to her seat at the coffee bar without saying a word.
As soon as he is sure that his son has suffered no ill effects, the father rushes over to the woman and starts thanking her saying, “I’ve never seen anybody do anything like that before, it was fantastic. Are you a doctor?”
‘No,’ the woman replied. I’m with the I.R.S.’
It seems that the IRS’ on again off again love affair with the idea of certifying tax preparers is on again. Earlier this month, IRS Commish Doug Shulman announced a proposal that would require tax preparers be licensed and certified. The immediate feedback on the proposal has been mixed.
My colleagues at the ABA are, of course, backing the idea of such a proposal. The ABA has been actively supporting increased oversight of tax preparers since 2004.
Even before the ABA voiced their opinion on the matter, IRS Taxpayer Advocate Nina Olson has called for regulation of the tax preparation industry (her calls for action date to 2002). In her most recent report to Congress, Olson again called for increased oversight of tax preparers. She cited a 2006 “undercover” study by the Government Accountability Office (GAO) where auditors posing as taxpayers made 19 visits to several national tax preparation chains in a large metropolitan area. Errors were found on all 19 returns, some of which resulted in thousands of dollars of improper refund amounts. In more than half of the cases, the preparers advised that reporting certain income was unnecessary “because the IRS would have no way of knowing about it.”
A similar study conducted by the Treasury Inspector General for Tax Administration (TIGTA) found nearly identical results. TIGTA auditors targeted not only commercial chains but 16 small, independently owned tax return preparation offices, as well. More than half of the returns contained errors and more than a third of those mistakes were considered to be “willful or reckless.” All of the business returns were prepared inaccurately.
So it would follow that requiring additional training and education might help resolve these issues. Or maybe not. Two states have already implemented certification requirements: Oregon and California. The initial feedback is that the accuracy of the returns prepared in Oregon has increased. But California? Not so much. The accuracy of those returns has actually decreased. Does that mean that that certification doesn’t work… or is that just California?
Therein is the problem: will certification actually improve tax compliance and reduce fraud?
Even if it would, how could the IRS possibly regulate the industry? In 2007, there were nearly 138 million individual federal income tax returns filed. Sixty-one percent of those individual federal income tax returns — about 84 million — were completed by paid preparers.
And how would we pay for it? The IRS is already underfunded. And our economy is not exactly the ideal time to be adding to the budget. Implementing many of the ideas put forth by Olson and Shulman will cost tax dollars – and while the goal may be noble, are we really willing to pay additional tax dollars to protect our tax dollars?
As you can imagine, this topic is a hot one in the tax pro world. For more information, you can see my article in the Intelligencer (subscription required). And for some great commentary, see these posts:
The official IRS release on the proposal can be found here.
What do you think? A big yes or a big mess?
Just a few days ago, IRS Commissioner Doug Shulman asked for public feedback on proposals to clarify a 1989 law regarding the taxation of cell phones. Apparently, he got some. Earlier today, Shulman announced that he, together with Treasury Secretary Geithner, has asked Congress to repeal the tax altogether.
(Remember, Congress makes the tax laws, not the IRS.)
Shulman is in luck since there are bipartisan bills in both the House and Senate to “repeal” the tax by way of eliminating cell phones as listed property under Section 280F. The bill in the Senate (S.144) has been introduced by Sen. John Kerry (D-MA) and has 45 co-sponsors. The bill in the House (H.R. 690) has been introduced by Sen. Sam Johnson (R-TX) and has 33 co-sponsors. Both bills have been relegate to committee. Senators Kerry and Ensign introduced a similar bill in 2008 that did not pass.
So, the ball is really in your court now, taxpayers. The IRS has heard you loud and clear. Make sure that your representatives do, too. To voice your thoughts on these bills, contact your Congressional officials. You can find information about your Senators here and your Representative here.
The IRS is fighting back on the cell phone issue – only someone forgot to call their PR person first.
As blogged earlier, the IRS has asked for feedback on its proposal to set more specific rules for the taxation of personal use of cell phones. The current rules require the entire “value” (whatever that means) of the cell phone to be reported as income to the employee unless the employee can provide records which justify a personal/business split.
Employers have fired back that phones have been provided for the convenience of the employer, not the employee, much like a landline and it would be impossible in some cases to distinguish between personal and business usage. In particular, bundled plans or unlimited minutes packages would not be affected by personal calls – from a cost perspective, the employer pays the same amount for the entire service whether it’s used for personal use or not.
Employees have expressed concern over the idea that they may be taxed on something beyond their control. If the phones are distributed as a condition of the job, and the employee uses it solely for business use, under at least one of the provisions of the IRS’ proposal, the employee would have to report a percentage of the bill as income.
The IRS has retorted that this is not about the employees but a clarification for the employer.
I’ll grant them that the old rule is confusing and overbroad. So fixing it is a good thing. But why not eliminate it altogether?
And if you keep it, don’t try to be slick and say that it’s not about the employee. It is most definitely about the employee. It’s called the potential to collect untaxed revenue. Seriously, IRS, we get it. You want our money. Stop trying to call it something that it’s not.
The IRS has even gone so far as to claim it has been approached by some businesses wanting it clarified to make it easier to have employees pick up the tab for their personal calls. Really? And which businesses are those? Right.
I don’t think that it’s escaped notice that the economy in 1989 (when the cell phone rule was first enacted) was eerily similar in many ways to today’s economy: shaky global currencies, government bailouts, banking crisis… The IRS was looking for more money then and it’s looking again now.
No, I’m not happy about the prospect of taxing personal cell phone usage, but let’s call a spade a spade: this isn’t about helping anyone out, it’s about bringing in more money.
