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January 2016

Growing Concerns of Appeals’ Face-to-Face Meetings

By Dave R. Stubblefield, Enrolled Agent, Michael D. Williams, CPA-Panhandle and Kenneth M. Horwitz, JD, CPA-Dallas

Both the examination and collection sides of the Appeals offices based in north Texas are not unlike IRS offices nationwide, way understaffed and underfunded for case-related travel to permit face-to-face meetings on unique or complicated issues. This is directly impacting management’s decisions on whether to grant face-to-face meeting requests. It puts taxpayers and their representatives at a great disadvantage. In addition, the absence of face-to-face meetings substantially increases professional fees and extends the time line in which to resolve cases.

Jeanette Ingram, SB/SE appeals team manager (exam), Dallas, will transition soon from her case management position to an Appeals knowledge resource team. Her four remaining staff will be reassigned to Steve Lacey, Austin. Carla Washington, also appeals team manager (exam), will still be in Dallas. Although the exam side of Appeals tries to accommodate all face-to-face requests, it remains to be seen how these changes, along with other caseload re-distributions, will impact requests in the local area going forward.  

Gina Smith, SB/SE appeals team manager (collection), Dallas, is down to two settlement officers who specialize in trust fund recovery penalty and offer in compromise cases, probably the most difficult cases to resolve in face-to-face meetings, much less via telephone or correspondence. During a recent meeting with TSCPA’s Relations with IRS Committee and other tax professionals, Smith indicated that on collection due process cases, face-to-face requests cannot always be met due to staff problems and alignment of expertise. The IRS’s position is that if the taxpayer does not provide information for a productive hearing or the collection Appeals work inventory is out of balance, a face-to-face will not be granted. Taxpayers and representatives wanting a face-to-face may have to travel across Texas, or possibly to Oklahoma, to the Appeals officer’s location, since the IRS has not budgeted funds to cover Appeals “circuit riding.” The IRS follows the same procedures for post-Appeals mediation. They are also dependent on staff allocation, location of the taxpayer and representative, and the volume of case work. Taxpayers may wish to consider appeal denial of a face-to-face meeting with Appeals, either with a settlement officer or Appeals officer, to the appropriate supervisor of the respective Appeals manager in charge of the case.

The IRS has established Virtual Service Delivery (VSD) teleconferencing in campus Appeals. We understand that these VSD systems are now located in Austin, Dallas, El Paso, Houston and San Antonio for virtual “face-to-face” meetings from remote locations. In order for this approach to be effective, the IRS must ensure that quality equipment and transmission techniques are used for quality audio and video reception and that IRS personnel are properly trained. By the same token, the taxpayer and their representative must have similar quality equipment and reception capabilities and be trained to effectively use this approach.

The bottom line is that if the IRS cannot overcome these growing deficiencies in the area of resolving tax disputes in Appeals, the objectives in the Taxpayer Bill of Rights can never be fully achieved.

Small Businesses Beware!

The latest Affordable Care Act (ACA) guidance in IRS Notice 2015-87 (Q & A) and T.D. 9744 is noticeably silent regarding an extension under Code Section 4980D penalty relief from the previous extension that expired on June 30, 2015. Section 4980D imposes an excise tax of $100 per employee per day (or $36,500 per year) on employers for health coverage reimbursement arrangements that do not meet the ACA insurance reform requirements. It affects employers in the small group market that offer stand-alone HRAs to help defray the cost of employees’ insurance premiums and medical expenses. In September, TSCPA issued letters to Congress supporting small business relief from the 4980D excise tax. AICPA is also working closely with Hill staffers to advocate relief from this counterproductive penalty.

Read TSCPA’s letter

Tax Relief for Victims of Damaging Weather

If you or your clients have homes or businesses in a disaster declaration zone, it’s not too late to make the fourth quarter 2015 federal tax estimated payment. The normal filing deadline for the 2015 Form 1040 ES fourth quarter estimated tax payment passed on Jan. 15, 2016. However, the disaster declaration issued Nov. 30, 2015, permits the postponement until Feb. 29, 2016, of certain filing and payment deadlines for those who live or have a principal place of business in affected Texas counties, which means estimated tax payments may still be made without penalty.

NTA Concerned about Future of IRS’s Taxpayer Services

On Jan. 6, 2016, National Taxpayer Advocate Nina Olson released her 2015 Annual Report to Congress. She expressed deep concerns that the IRS continues to replace traditional employee-to-taxpayer dialogue with online self-help options and third-party interactions. The report states that the IRS’s future plans may redefine tax administration into a pay-to-play class system, where only the most non-compliant or resourceful taxpayers will receive personal attention.

Olson also cautioned the IRS that granting unregulated preparers access to an online taxpayer account system could create security risks and harm taxpayers. She recommends that the online system be restricted to those preparers who are subject to Circular 230 oversight.

With President Obama recently signing into law legislation that codified the provisions of the Taxpayer Bill of Rights, Olson says it’s time for the IRS to fully incorporate taxpayer rights into everything it does. She said: “For the IRS to do its job well, it must start from the perspective of what government is about – namely, it is of the people, by the people, and for the people. The government is funded by taxes paid by the people. Therefore, the future state vision of the IRS needs to be designed around the needs of the people.”

This report is chock-full of concerning data. Read more:;-Focuses-on-IRSs-Future-Plans-for-Taxpayer-Service

Ringing in the New Year with Extender Woes Behind Us!

On Dec. 18, 2015, President Obama signed into law many of the federal tax extenders as part of the Consolidated Appropriations Act, 2016. In a letter dated October 29, the Texas Society of CPAs had encouraged prompt enactment of extenders legislation to stimulate the economy and avoid a late filing season. We commented specifically on four extenders that were important to the growth of the economy, to small business and for fairness of our federal tax system. We are pleased to report favorable action on these as follows:       

State and Local Sales Tax Deduction – The election to deduct state and local sales taxes in lieu of income taxes is made permanent.      

Section 179 Deduction – The Section 179 deduction is made permanent, with a $500,000 deduction limit that is phased out when property placed in service during the year exceeds $2 million. These amounts are indexed beginning after 2015.

Section 168 Bonus Depreciation – The additional first-year bonus depreciation is extended for five years, generally through 2019. It will stay at 50 percent through 2017, fall to 40 percent in 2018, 30 percent in 2019 and expire in 2020.

Research & Development Credit – The R&D credit is made permanent and improved. Beginning in 2016, businesses with less than $50 million in gross receipts can use the credit to offset alternative minimum tax, and certain start-ups that may not have enough income tax to use the credit can use it to offset payroll taxes (capped at up to $250,000 per year) for up to five years.  

The new act also contains some other provisions that are of particular interest to Texas CPAs. The IRS had sought improved funding and received $290 million ($2 billion less than it sought), but this is earmarked for improving customer service, preventing identity theft and preventing cyber attacks from getting taxpayer information.

The 40 percent excise tax on employer-sponsored Cadillac health plans will be delayed until 2020, but unfortunately the act did not provide relief from the excessive and counterproductive Section 4980D excise tax on health reimbursement accounts as had been encouraged by TSCPA.

The act also increased the penalty imposed on paid tax return preparers who engage in willful or reckless conduct. It is the greater of $5,000 (didn’t change) or 75 percent (from 50 percent) of the preparer’s income with respect to the return or claim for refund.

The Congressional Joint Committee on Taxation has provided descriptions and technical explanations of all the tax provisions in the new act at the following link:

Link to TSCPA letter:


New Due Dates for Filing Forms 1095-B, 1094-B, 1095-C and 1094-C

The due dates for the 2015 information reporting requirements under IRC Sections 6055 and 6056 have been extended.

The due date for furnishing the 2015 Form 1095-B, Health Coverage, was changed from Jan. 31, 2016 to Mar. 31, 2016. The due date for filing with the IRS the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, and the 2015 Form 1095-B, Health Coverage, was changed from Feb. 29, 2016 to May 31, 2016. See other related due date changes on the IRS website:

As a result of these extensions, individuals might not receive certain forms by the time they file their 2015 tax returns.