Taxpayer May Not Be Properly Notified of IRS Liens

The Treasury Inspector General for Tax Administration (TIGTA) noted in a recent report that taxpayers and their representatives may not be receiving proper notification when tax liens are issued. TIGTA found that 2 of 125 liens may not have been properly sent to the taxpayer and 6 of 31 (31 of 125 taxpayers had valid authorized representatives) liens were not properly sent to the representative. Using direct projection, TIGTA estimated that over 15,000 taxpayers might been affected by personal failure to be notified and about 60,000 representatives may not have been fully prepared by IRS notification.

The failure to notify representatives is more significant than it might appear; many taxpayers are quite dependent on their representatives/preparers on tax issues. In some ways, this finding is not as bad as it looks (TIGTA estimates that over 98% of taxpayers undergoing liens are properly notified) but for those who are not properly notified, an already intimidating prospect becomes even scarier. Of course, taxpayers could pay their taxes (or send appeals for compromise if in awful financial straits) and avoid the lien in the first place.

Tax Foundation Tax Estimator

The Tax Foundation, a libertarian/conversative-leaning organization which publishes the Tax Policy Blog linked at right, has developed a calculator which allows users to estimate their upcoming tax liability under three scenarios: all "Bush" tax cuts are retained (recently proposed by three moderate Democrats), all "Bush" cuts go away (the default if Congress does nothing) and the "Obama" budget plan (selective cuts are kept, others expire). One should keep in mind that this will only provide a estimate of the upcoming taxes; nevertheless, this could be an useful tax planning tool.

How Will the Financial Reform Act Affect Bank Customers?

An analysis of the Financial Reform Act by AccountingWeb shows a variety of impacts on financial activity--some clearcut, such as the elimination of SOX for certain small public companies and a significant tightening of interest-only loans and prepayment penalties on mortgages while others are more subtle--some unclear degree of limits on hedge fund and derivative trading by banks. The Consumer Financial Protection Agency has been given a sizable amount of power and banks are likely to need to have additional legal compliance officers.

As indicated in previous posts, any increase in government regulations given the present weak economy makes me somewhat nervous; having said that, I also recognize that only BP stands in lower public regard than the large banks today within the business community. Hopefully, the tighter regulations will not dry up the willingness of banks to lend to individual consumers of middle-quality credit; however, don't be surprised to see "tight money"; which would further endanger the shaky recovery.

$50 to Register with US Government as Tax Preparer

Recently issued IRS proposed regulations include a $50 technology fee to register with the IRS as a tax preparer. Additionally, a smaller fee appears likely for online access. While the link to the actual proposed regulation was broken, it APPEARS that the fee is a one-time fee.

While this fee on the face is fairly innoculous, an equity question is raised. Traditionally, the IRS has limited direct preparer representation of taxpayers to self, spouse, business "partner", officers of a business or appropriate representative of estate or trust, direct preparer in some cases, enrolled agent, CPA or licensed attorney. Given that tax preparers who not EAs, CPAs or JDs will be paying this fee, equity suggests that they should now be eligible to directly represent taxpayers. Whether this should happen from a professional perspective is likely to generate similar debate to that raised by the testing requirements of the new taxpayer PIN registration--I look forward to seeing the tax bloggers comment on this issue.

SOX Undarned--$75 Million Exemption for Smaller Public Companies Likely

The North (San Francisco) Bay Business Journal is predicting that Congress will exempt public companies with capitalization of less than $75 million from certain audit requirements--including an audit of internal control. The provision, intended to be "permanent", is likely to be included in Congress's financial reform legislation.

I have mixed feelings about this decision. The first facet involves government regulation. As stated in earlier posts, I believe that the federal government generally overregulates business and that overregulation has slowed economic growth and perhaps even led some companies to list in non-US exchanges. On this facet, Congress deserves commendation. On a second facet, Clark Keeler (interviewed in the article) raises a good point--Sarbanes-Oxley has effectively become "best practices" in internal control development and disclosure and companies failing to reach the SOX standards stand at risk of higher interest rates, lower bond ratings and/or lower stock market prices. Therefore, I hope that "small" public companies which opt out of explicit SOX compliance will still attempt to achieve SOX compliance on auditing issues, especially internal control.

An Appeal to Slow IRS 1099 Regulations

Democratic Senators Evan Bayh (IN), Paul Begich (AK), Ben Nelson (NE) and Jeanne Shaheen (NH) have called on the IRS to find ways to keep the new health-care (often called Obamacare) reporting regulations from overwhelming small businesses. A particular concern is a provision which requires the filing of 1099s to vendors which have sales of over $600 to healthcare providers during the year. The Senators encourage the IRS to find ways to reduce the paperwork burden; perhaps by allowing healthcare providers to consolidate this information with other paperwork.

We applaud these predominately moderate Senators for taking important first steps toward realizing the damage that heavy Federal regulation has done to American economic activity--including employment levels. Sadly, many Democrats and no small number of Republicans still need to get this "memo."

PCAOB Attempts to Upgrade Confirmation Standard

The Public Companies Accounting Oversight Board has proposed a confirmation standard to supercede present AU 330. Daniel Goelzer of PCAOB says that the new standard would modernize confirmation requirement, increase the focus on confirming with independent third parties and more explicity address risks of errors and frauds. Interested parties have about 60 days for public comment before the new standard is sent to the SEC for consideration.

Confirmations have been a hallmark of audits for decades now. While it is not clear how the new guidelines will put greater emphasis on independent parties; the increased focus on fraud and errors is consistent with recent auditing standards such as SAS 99.

10 Commandments [??] for CPA Practice

Connecticut CPA William Brighenti gives his insights into how to succeed in the business practices of a CPA--though at times it is hard to tell whether the advice is spoof or serious. The first five edicts: hire good-looking accountants, pay a salary rather than hourly wage to avoid overtime costs, keep the hope of partnership alive to keep the accountants eager, try to take jobs on a retainer and quote an hourly cost rather than a total cost. The final five assertions: let the hired staff handle the telephone, charge the maximum possible, be vigilant against fraud and deceptive financials, avoid sitting on charitable boards and pay only for results, not promises.

Specific topics (reducing telephone use and being vigilant against fraud stand out) are of value and admittedly Brighenti's ideas will increase profitability--but probably only in the short run. If serious, Brighenti is too cynical by half; if spoof, the piece is well executed.

Some Love for Kay Bell and the Carnival of Taxes and a Warning to Those with Spam Posts

[1] I dropped the ball and did not submit this month, but Kay Bell deserves commendation for continuing to publish Don't Mess with Taxes which presently is on a monthly basis. The carnival will probably be out this afternoon and includes a variety of tax tips of legal, policy and personal finance natures. Kay has been kind enough to link to several dozen of my posts during the Carnival and I believe that reading today's carnival will be worth your time.

[2] As strongly as I can make this point, I want to discourage spammers in the comments section (have I been too lenient on close calls in the past?--perhaps). At the risk of appearing to be a xenophobe, I ESPECIALLY will pull posts written in languages other than English (unless an English translation is included--I still may pull it anyway if I am dissatisfied). With non-English language posts, I literally do not know whether the commenters have a valid point or whether they are promoting a spam, pornographic or phishing site.

UPDATE (July 22)--I have now required word verification to reduce spam. My apologies for inconvenience to legitimate commenters.