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We’re about to head out to NAEA’s National Conference 2019 (#NATCON19) and look forward to seeing everyone there. Before we go, though, we wanted to provide you with just a few thoughts on what we’re seeing from the Big House (aka 1111 Constitution aka IRS HQ) and from the Hill.
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NAEA Works with Key Legislators on Regulating Unenrolled Tax Return Preparers
NAEA has been the leader for nearly two decades on efforts to regulate unenrolled tax return preparers. Starting in 2000, key tax writing legislators have introduced NAEA sponsored legislation to create a rational means of establishing minimum standards and a process for removing incompetent or unethical return preparers. Once the IRS came onboard under former Commissioner Douglas Shulman, NAEA worked with the agency to ensure they established a strong regulatory structure and meaningful testing requirements for all preparers not already covered by Circular 230. After the courts shut down the Registered Tax Return Preparer program, NAEA began working with members of the Ways and Means and Finance Committees to find common ground. Currently, the government relations team is focusing on enacting legislation introduced in both houses of Congress (S. 1192/H.R. 3330). This legislation would restore the pre-court case regulatory framework.
While the enactment of this legislation is NAEA’s top priority, the GR team has also focused its attention on a few conservatives in both houses to convince them that there is a problem and that, at the very least, IRS should be able to remove the bad players. From these discussions, Congressman Ron Estes (R- 4th KS) has introduced legislation to empower the IRS to rescind the PTINs of incompetent or unethical tax return preparers. The team is also working with other conservative lawmakers to establish an estimate of revenue lost because unenrolled preparers complete tax returns claiming refundable credits. Conservatives would like to lower the amount of mispayments under these provisions of the Internal Revenue Code. The GR teams believes that establishing this connection—the unenrolled and lost revenue—will help move conservatives to supporting stronger minimum standards.
Tax Professionals Urged to Review Data Safeguards
IRS issued a press release (IR-2019-122) urging tax professionals to take advantage of the summer months to run a security check list. The Service followed up with two more related releases, “A ‘Taxes-Security-Together Checklist’ – Step 1” (IR-2019-127) and, unimaginatively, ”A ‘Taxes-Security-Together’ Checklist – Step 2” (IR-2019-131).
The first release lays out the security checklist, which we produce below. The two follow up releases, mercifully, attempt to take a deeper dive into the advice offered in the first:
Tax Extenders Omitted from Bipartisan Budget Deal
- Deploy the “Security Six” measures.
- Activate anti-virus software.
- Use a firewall.
- Opt for two-factor authentication when it’s offered.
- Use backup software/services.
- Use Drive encryption.
- Create and secure Virtual Private Networks.
- Create a data security plan.
- Federal law requires all “professional tax preparers” to create and maintain an information security plan for client data.
- The security plan requirement is flexible enough to fit any size of tax preparation firm, from small to large.
- Tax professionals are asked to focus on key risk areas such as employee management and training; information systems; and detecting and managing system failures.
- Educate yourself and be alert to key email scams, a frequent risk area.
- Learn about spear phishing emails.
- Beware ransomware.
- Recognize the signs of client data theft.
- Clients receive IRS letters about suspicious tax returns in their name.
- More tax returns filed with a practitioner’s Electronic Filing Identification Number than submitted.
- Clients receive tax transcripts they did not request.
- Create a data theft recovery plan.
- Contact the local IRS Stakeholder Liaison immediately.
- Assist the IRS in protecting clients’ accounts.
- Contract with a cybersecurity expert to help prevent and stop thefts.
The White House and Congress has reached a bipartisan deal on federal spending. Sounds like progress, at least at first blush, particularly given that bipartisan deals are few and far between these days.
No surprise to NAEA’s GR team, however, the deal failed to include an extension of the expired temporary tax provisions, typically shorthanded to “extenders,” such as incentives for alternative energy, deductions for mortgage insurance, and other miscellaneous credits and deductions (see the most recent Joint Committee on Taxation annual list of temporary tax provisions, and expiration dates here: JCX-8-19). Opposing extension of these tax benefits has united conservatives—who do not support alternative fuel incentives—and liberals – who see the deductions as welfare benefits for the wealthy.
Bottom line: Like many in DC, we thought the spending/debt ceiling bill would be the train to which Congress would attach the extenders boxcar (as well as, possibly, a boxcar for addressing TCJA drafting errors, including the leasehold improvement amortization period). Given the engine left the station without the boxcars, frankly don’t see a path forward for extenders, at least in the short run.
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NAEA E@lert | Volume 1: Issue 34
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