Tax Reform is About to Go Hot
Hill staff have told us to expect a “more detailed” tax reform proposal from Capitol Hill Republicans Monday (although that could slip). Clearly, they have been making progress on a unity bill, but Senate Finance Committee Chairman Orrin Hatch made it clear at last week’s hearing on individual tax reform that there is no deal in place yet. Time is certainly becoming of the essence. But until the tax writing committees take up reform legislation, it continues to be difficult to predict how much progress is being made and what a final product might look like.
What has changed in the past two weeks is that the President has reached out to Democrats for the first time in his administration. Early in the month, he struck a deal with Democratic leaders Chuck Schumer and Nancy Pelosi to get a short-term extension of the debt limit and CR (Continuing Resolution) passed. Now he is talking to Democratic senators up for re-election in red states about tax reform and Democratic leadership about other policy issues such as immigration. It is still too early to ascertain what, if any, effect this will have on tax reform or other priorities such as infrastructure, but it has certainly changed the dynamic.
Technically Speaking, Where Are the Tax Technical Bills?
Last year, congressional tax writers introduced two tax technical corrections bills. The first was a broader bill having corrections going back for many years on issues that have come up from previous tax laws. Later in the year, they introduced a second bill that contained provisions focused on the Partnership Audit Reform bill that was used as a revenue raiser in the Bipartisan Budget Act of 2015.
Technical Corrections bills have special rules surrounding them. First, the provisions must be consistent with the underlying intent of the legislators in passing the tax law change. Second, the provisions cannot have a revenue score associated with the change. Finally, the provision must be agreed to by Treasury/IRS, the Joint Committee on Taxation and both sides of the House Ways and Means and Senate Finance Committees.
Technical corrections bills are often passed under unanimous consent in the Senate due to the bipartisan and technical nature of the bills. Because they have no revenue impact, they cannot be contained in a tax bill passed under reconciliation. There is growing concern in the tax community that last year’s technical corrections bills have not been re-introduced in the House and Senate yet. While progress is being made on a new bill for re-introduction, it is unclear what this bill will contain and when it might be introduced.
NAEA Member Bill Nemeth, EA, Attends FY 2017 EITC Summit in Washington
On September 19, NAEA and Georgia Association of Enrolled Agents (GAEA) Member Bill Nemeth, EA, attended the FY 2017 EITC Summit in Washington, DC. During the Summit, Nemeth and other attendees had the opportunity to listen to remarks presented by Commissioner Koskinen on reducing over claims; issuing the refunds to the right participants; improving participation in the program; and improving administration of the program.
In addition, Denise Davis, Director of Return Integrity Operations, commented on SSA flawlessly processing the heavy volume of W-2s before they were forwarded to IRS (SSA processed 96 million W-2s the last week of January and the IRS received 85 percent of the W-2s by February 15); that fraud filters produced false positives that in many cases overrode actual W-2 documents; and the early submission and processing of W-2s as mandated by the PATH Act was a great improvement to tax administration. Further, while IRS expected 12 million Refundable Credit Returns to be filed by February 15, 10 million of these returns were actually filed by this date. The two million additionally-expected Refundable Credit Returns were filed shortly thereafter.
As for findings related to PATH Act implementation, IRS informed attendees that the agency verified the issue date of SSNs/ITINs was before the date of the return. IRS is still evaluating the security effectiveness of the 16 character security code on 50 million W-2s.
Further, EITC Summit attendees listened to remarks from Steve Klingel, the Director of Refundable Credit Policy and Program Management, on the effectiveness of taxpayer correspondence relating to documentation based on Form 886-H-EITC when an EITC Return is being examined; how the EITC affidavit for residency has a relatively low change rate; how EITC audits have been reduced from 376 million in 2016 to 316 million in 2017; on IRS developing an EITC tool kit for taxpayers; and how students aged 19 to 23 can be qualifying dependents for their custodial parent if they are enrolled in college at least part-time.
NAEA thanks Bill for volunteering his time to attend the summit and representing enrolled agents during his time here in Washington.
During the September 21 IRS National Public Liaison Practitioner meeting in Washington this Thursday, IRS Return Preparer Office Director Carol Campbell revealed the latest updates to the status of PTIN renewals. While the Service has filed a request to stay the PTIN injunction and has appealed the district court’s decision that prohibits IRS from charging user fees for PTIN registrations and renewals, IRS is still preparing for peak PTIN season to open up for renewals by the first week in November. IRS will also send PTIN holders a short security message notifying them that they may change their PTIN-associated email address to an email that can be dedicated solely to receiving PTIN account emails from IRS. PTIN holders would not need to have their primary business email address associated with their PTIN account. A draft of this message is currently in the works, so please watch out for an update.
Also during Thursday’s NPL Practitioner meeting, IRS relayed information about the Equifax data breach affecting roughly 143 million taxpayers. According to IRS, the data breach exposed names, SSNs and mailing addresses; however, this information would likely not be very helpful when attempting to file a successful return since the Security Summit has 37 data point filters and new processes in place that would likely prevent the processing of a return without additional filing information. IRS clarified that at the time of the NPL meeting, affected or compromised taxpayers should only contact IRS through Form 14039, Identity Theft Affidavit, if they KNOW for a fact that someone is attempting to use their data for refund fraud and not if their information was included in the data obtained by the hackers during the breach. IRS will release updates on the breach when more information is available.
Hoboken Tax is here keeping our clients and future clients informed, as we are tax.