Taxable Talk

The National Association of Enrolled Agents (NAEA) is reporting via its Facebook page that the IRS has decided to “retire” two products from eServices: Disclosure Authorization (DA) and Electronic Account Resolution (EAR). Apparently the IRS, which is already cementing its reputation among Congress and the public, wants to make sure that the tax professional community isn’t left out.

For those of you who aren’t tax professionals, let me explain what this is about. In order for me to represent a taxpayer in front of the IRS, I must have a signed Power of Attorney (Form 2848). Once I have a signed POA, I can either enter it in through eServices, or I can mail or fax it to the IRS Centralized Authorization File (CAF) unit. Once in the IRS’s computer system, the IRS knows that I’m representing the taxpayer. If I have a POA, the IRS will discuss and disclose a clients’ information to me. Rightly, the IRS wants the taxpayers to authorize this before I have the ability to see information.

Using eServices to enter a POA has been a great boon for my practice, and I assume anyone who deals with any representation matters. After entering the POA, I can obtain transcripts from the IRS. If a client says he hasn’t filed a (say) 2011 return, I can obtain a Wage & Income transcript and know much of what needs to be on the return. This saves me time, saves the client money, saves the IRS time (I’ve done everything in an automated manner rather than, well, see below), and increases the efficiency of the system.

This shutdown will apparently be effective on August 11th. So beginning on August 12th, I will either have to fax or mail POAs, or I can call the Practitioner Priority Service (PPS). While on the phone with PPS, I can fax over a POA (yes, I have a real fax machine in my office) and the IRS will order transcripts to be faxed back to me. (PPS will also forward the POA to the CAF unit.) However, a transcript ordered through PPS takes up to 72 hours to be received. That means a client in a representation matter will most likely need two appointments before we can make a plan of action. It can take two weeks for a POA sent to the CAF unit to be entered into the system. (Last year there were times when it was taking over a month for the CAF unit to enter information.)

This will increase my costs (which I will pass on to clients). I will have more phone calls to make, and it will take more time to obtain information. While I can do other work while on hold for PPS (hold times have been running about 30 minutes), it usually takes about 15-30 minutes once I am off hold for the IRS to verify the information. I make my income from the time I spend, so I will have to charge a client an extra amount for this time.

This will also increase the costs to the IRS. I wrote my practitioner liaison an email, and noted the additional costs:

1. There will be many more telephone calls to PPS.  Calls where practitioners must fax documents undoubtedly take longer, so this will increase the need for personnel.
2. There will be many more faxes to the CAF unit, requiring additional personnel.
3. The cost for the automated portion cannot be particularly significant.  The products are there already.  In general, the processes are automated, so human intervention is less.
4. Because it will take longer for many practitioners to obtain information—especially practitioners dealing with collections matters—it will take longer for issues to be resolved.  This will increase the burden on the IRS (both in manpower and in slowing down collections).

I have no idea what the IRS was thinking when they made this decision. This decision is, at best, penny-wise and pound foolish. I guess Sir Isaac Newton’s Third Law of Motion has been proven again: For every action, there is an equal and opposite reaction. This morning, I reported on a decision by the IRS that makes complete sense and will save both the IRS and taxpayers time and money. So a decision by the IRS that would cost taxpayers and the IRS money was, I suppose, inevitable.

Tags: IRS.eServices, Practitioner.Priority.Service

This entry was posted on Thursday, June 6th, 2013 at 1:43 pm and is filed under IRS. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.