Posts Tagged ‘NAEA’

Should I Violate Federal Law or State Law?

Tuesday, August 28th, 2018

Suppose you have a federal license to perform your occupation in your state of residence. That license allowed you to do [whatever it is you do] anywhere in the United States. Now, further suppose your state legislature passed a law specifically overriding that license, and, in fact, making some of [whatever it is you do] illegal under state law. And further suppose that if you obey that new state law you would be violating federal law as you would not be performing [whatever it is you do] properly under federal law. No state legislature could be that stupid uninformed, right?

One should never take a bet against legislatures doing dumb things, and the actions over the past fifteen months of the Nevada legislature demonstrate that. In 2017 the Nevada Legislature passed AB 324 that amended NRS (Nevada Revised Statutes) Chapter 240A; that reclassified Enrolled Agents (what my federal license is) as people who performed “Document preparation services.” We would have to register with the Nevada Secretary of State, post a surety bond, and we would not be able to negotiate with anyone else or communicate to anyone else the position of a client; if we did so, we would be subject to penalties including possible imprisonment. Hmmm, might an Enrolled Agent need to negotiate on behalf of clients with tax agencies such as the IRS and collect confidential information?

The Nevada Society of Enrolled Agents (NVSEA) filed a lawsuit, and in November 2017 had a temporary injunction placed on enforcement of the law. Last month the court heard arguments, and the ruling came out on August 16th.

The Court finds, that as a result of the amendments made to Chapter 240A by AB 324, Nevada Enrolled Agents cannot comply with both federal and state law. Under federal regulations, Nevada Enrolled Agents must provide competent tax advice, must assist clients in preparing accurate tax returns and other forms, must collect documentation which supports a client’s position and must competently and diligently represent taxpayer clients in proceedings before the IRS. Under Chapter 240A as amended, Enrolled Agents in Nevada are prohibited from performing these duties and face civil and criminal liability for violations of the state law.

The Court went on to note why the law is unconstitutional:

This Court finds that Chapter 240A…hinders and obstructs the free use of the Enrolled Agents’ license to practice before the IRS…Pursuant to NRS 240A.240(5), Enrolled Agents are no longer able to “negotiate with another person concerning the rights or responsibilities of a client, communicate the position of a client to another person or convey the position of another person to a client.” This contradicts Section 10.2(4) of Circular 230, which allows agents to “correspond[] and communicat[e] wit hthe Internal Revenue Service” and engage in “matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer’s rights, privileges, or liabilities.” The amended law also prohibits an Enrolled Agent from “appear[ing] on behalf of a client in a court proceeding or other formal adjudicative proceeding….” NRS 240A.240(6). This provision conflicts with Section 10.2 of Circular 230, which allows agents to “represent[] a client at conferences, hearings, and meetings.” The amended law prohibits Enrolled Agents from providing “advice, explanation, opinion, or recommendation to a client about possible legal rights, remedies, defenses, options or the selection of documents or strategies….” NRS 240A.240(7) This contradicts Circular 230, which states that Enrolled Agents may give written advice regarding tax matters. 31 C.F.R. §§ 10.2, 10.33, 10.37. Finally, the amended statute contradicts Circular 230 because it requires an Enrolled Agent to provide a copy of a client’s file to government entities. NRS 240A.220(1). Yet, pursuant to IRC §§ 7525, 7216, 6713, Enrolled Agents must keep client information confidential and only share client files when ordered to do by a court…

Accordingly, the Court finds that Chapter 240A of the Nevada Revised Statutes, as amended by A.B. 324, conflicts with federal law to the extent it seeks to regulate Enrolled Agents who are authorized to practice before the Internal Revenue Service. The law is therefore unconstitutional pursuant to the Supremacy Clause of the United States Constitution, Article VI, Clause 2.

The permanent injunction was granted by the Court. While the Nevada Attorney General can appeal (the office has another 20 days or so to do so), it’s not likely; the law is clearly unconstitutional on its face.

There are two points I want to make. First, I didn’t write about this earlier because this law was so stupid it was clear to me that it was going to be found unconstitutional. Even before the temporary injunction was granted the Nevada Secretary of State’s office didn’t enforce the law as it pertained to Enrolled Agents.

The second point is how this law was enacted. The state legislature didn’t contact any tax professionals about the law. There apparently is a problem with some document preparer services, and the Assemblyman who wrote AB 324 made an assumption that Enrolled Agents were part of the problem. We’re actually part of the solution in that we help resolve taxpayer problems, but I digress. I’m a member of the National Association of Enrolled Agents and NVSEA to help with legislative policies vis-a-vis Enrolled Agents. While I don’t agree with all of what the NAEA would like to pass, I agree with most of it. And my dues and contributions to NVSEA helped fight an uninformed law.

No matter your profession, stay informed. Talk to your local legislators. Generally, state legislators are approachable and most want to be informed. I’m making a point of meeting mine later this year, and explaining what Nevada Enrolled Agents do, what we had to do, and why we did what we did. Unfortunately, we remain the Lichtenstein of the tax world.

Today, Liechtenstein; Tomorrow, the World!

Sunday, August 24th, 2014

Fellow Enrolled Agent Jason Dinesen calls EAs the Liechtenstein of the tax world. Personally, I think he may be overstating our case; when I tell people I’m an Enrolled Agent the most common reaction is, “You don’t look like you’re in law enforcement.” Sigh….

But kudos to the National Association of Enrolled Agents: The NAEA is doing some positive public relations. If you fly American Airlines in the coming months you will hear NAEA President Lonnie Gary explaining what an EA really is–America’s tax experts. Here’s a link to the video that will be running.

The Las Vegas Culinary Union Should Look at a Calendar Before Calling EAs in March

Thursday, March 6th, 2014

The Las Vegas Culinary Union (formally, Local 226 of the Culinary Union) doesn’t like non-union casinos here in Las Vegas. One such casino is the Cosmopolitan Hotel. It’s one of the newest of Las Vegas’s mega-resorts, and it’s a beautiful facility. Last year I attended the National Association of Enrolled Agent’s national conference in August at the Cosmo (I was taking the third and final year of the National Tax Practice Institute). The Culinary Union would like all convention business at the Cosmo to vanish. This year’s conference is also scheduled for the Cosmo. The Culinary Union decided on the strategy of calling EA’s…in the middle of tax season.

Today, someone from the Culinary Union called me. I was on the phone, so the call went to voice mail. After listening to the first 20 seconds of the message I hit delete. I don’t have time for much besides work, sleep, and the gym during the height of tax season–and it is just that right now: the height of tax season.

I’m not taking sides for or against the Culinary Union. They may be right in their fight against the Cosmo or they may be wrong. However, they’re dead wrong in calling tax professionals at the height of tax season. If anything, the Culinary Union’s current action is counterproductive. While today’s call will not impact whether or not I attend the conference, if I did make a decision based on the call I’d be attending.

A hint to the Culinary Union: Tax professionals are far less busy after April 15th. We have time to listen then…but not now.

Life as a Second-Class Citizen

Friday, January 31st, 2014

I’m quite perturbed at the IRS today. The NAEA in its weekly eAlert email confirmed that I am now a second-class citizen. I reported last week about being told that tax professionals might be unable to order transcripts through the Practitioner Priority Service. The NAEA wondered about this, too:

The trouble is that we have also received several messages from members who have been turned away from PPS [Practitioner Priority Service] when requesting client transcripts. When we forwarded examples from EAs who had been denied service and instructed to file Forms 2848 (by fax, of course, because IRS cares about its partners) and wait five days to download transcripts through e-Services, the response was:

We are monitoring implementation of the changes to PPS Service and addressing any inconsistencies identified. The new policy is intended to focus the service we provide on those requests from Tax Practitioners who are working with their clients on tax account related issues that require direct contact with IRS. We will direct requests that do not support tax account work with a client and related to non-tax matters to other appropriate resources. That said, if a Tax Practitioner meeting the above criteria requires a transcript, a transcript will be provided through PPS. [Emphasis added]

So if I’m working on a tax account issue, I can call PPS, hope they agree that it’s a tax account issue, and obtain a transcript. It also means I can no longer obtain a transcript with a Tax Information Authorization (Form 8821) even though the form specifically allows for transcript requests! And even though TIGTA wanted more tax professionals to use 8821s rather than a Form 2848 (Power of Attorney) in situations where all the tax professional needs is a transcript.

I have a few clients who only want me to obtain transcripts on their behalf and do not want me to have a Power of Attorney. They now have the choice of:

  1. Giving me a Power of Attorney, allowing me to obtain transcripts, and then, after I let them know I have obtained the transcripts, revoking the Power of Attorney (giving the overworked IRS CAF unit double-work);
  2. Using the new Get a Transcript option to obtain a transcript themselves. (Though see below for problems with this service.)
  3. Giving me a Tax Information Authorization, and hoping that PPS will bend the rules and order the transcripts.

Meanwhile, the Get a Transcript has its own problems. My partner attempted to use the service, but it could not verify either him or his wife as living where he’s lived for years. Second, the verification information relies on publicly available information for many. (It did for my partner, myself, and one other individual.) This is anything but a secure system. (I have sent a request to TIGTA noting the weakness of the system and requesting that they audit it. If TIGTA audits this, it’s unlikely we will hear anything for many months–probably not until 2015.)

A special demerit needs to be awarded to NAEA for this bad advice:

As we mentioned last week in our coverage of IRS’ new online transcript delivery system (“Get Transcript”), in many cases you may find the process easier if your client goes online to pull his or her own transcript and e-mails it to you. And yes, we know this approach is complete nonsense and share our concern with the agency during nearly every conversation. [Emphasis Added]

While I agree completely with the NAEA that the new IRS policy is complete nonsense, a client should never email a transcript (unless he redacts his social security number by each entry). I requested my Wage & Income Transcript for 2012, and the document has my social security number printed by each item of income. Email is fast, but it is not secure; that’s why we and most tax professionals use a web portal for secure communications. (Had NAEA written, “…and send the transcript by secure means to you,” I’d agree completely with them.)

Overall, we have another step backwards for tax professionals. This will especially impact those with Tax Information Authorizations (8821s) on file and use them for obtaining transcripts. You will now have to obtain Powers of Attorney from every client. There is one other possible solution to this portion of the problem: Have the IRS modify eServices so that we can also obtain information when we have a Tax Information Authorization on file. Until this is done, the Tax Information Authorization has only one value: the ability to be copied on notices the IRS sends to a client.