One Tiptoe Forward for Representation, With that Giant Step Backwards Still Coming

The IRS released a Fact Sheet today on the new transcript redaction policy that begins on Monday. There’s one very slight piece of good news for tax professionals in the Fact Sheet:

If necessary for return preparation, a client may also order a complete (not redacted) wage and income transcript through the IRS. A client must first authenticate their identity with the IRS and a complete (not redacted) wage and income transcript will be mailed to the address of record within five to 10 days. If a practitioner cannot obtain Forms W-2 from the client, or if the client is unable to receive a complete (not redacted) transcript at the address of record, then the practitioner may have to file a paper return.

This is slightly better than it was, but is still unacceptable. First, if I have a Power of Attorney for my client for a particular tax year, I am authorized to act for the client (on the client’s behalf). That means that there’s no reason why the IRS shouldn’t send a tax professional with proper authorization an unredacted Wage & Income transcript. The IRS’s reasoning on this is flawed. Assume an individual hires a tax professional to come into compliance (or deal with an issue). Who do you think will be using the Wage & Income transcript: the client or the tax professional? All this will do is lengthen the process for no particularly good reason. Additionally, all the issues with mailed transcripts remain (security, expatriates, etc.)

Indeed, I strongly believe that tax professionals should be able to pull unredacted transcripts through IRS e-Services (with proper authorization, of course). The goal of obtaining transcripts is for some aspect of compliance; I’m unaware of any tax professionals who pull transcripts “just to have them.” The only thing I (and other tax professionals) have to sell is our time. We simply don’t have the time to waste to pull transcripts that are not needed. Overall, the IRS’s new policy remains poor (though there was that tiptoe forward).

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