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February 2017

Form 2848 Processing Delays’ Workaround

By Julie Dale, CPA-Austin 

As CPAs wishing to assist our clients in the most efficient manner, we often are thwarted with issues in responding to IRS correspondence. One such hurdle is with delays in the IRS’ processing of Form 2848, Power of Attorney and Declaration of Representative. The IRS must have a valid Form 2848 on file for us to obtain the data on our client’s account to resolve a tax notice. The IRS recommends that we fax the Form 2848 to 855-214-7522 (for Texas residents) to expedite processing rather than mailing it. However, even fax is proving to be an ineffective filing method. 

In the National Taxpayer Advocate’s 2012 Annual Report to Congress, Nina Olson provides statistics in “Most Serious Problem #16, IRS Processing Flaws and Service Delays Continue to Undermine Fundamental Taxpayer Rights to Representation.” The report indicates that Form 2848 filings increased by 89 percent between fiscal years 2004 and 2012 with the number of dedicated employees responsible for processing these forms actually decreasing by 34 percent. The IRS’ timeframe for processing the form increased 233 percent, from three calendar days in 2010 to 10 days, due in part to the decrease in staffing levels. 

TSCPA's Federal Tax Policy Committee is aware of a recent instance where a Form 2848 was successfully faxed more than two months before an attempt to access information through IRS e-Services, which failed due to the Centralized Authorization File (CAF) check indicating that the CPA was not approved to access the data. 

Most CPAs cringe at the thought of calling the IRS. Issues with IRS customer service calls leave us frustrated, such as waiting on hold to fax a Form 2848 to an IRS agent only to receive a “courtesy disconnect.” We may have to accept this burden and call the IRS Practitioner Priority Service at 866-860-4259. This is a dedicated line for tax practitioners. The hours are 7 a.m. to 7 p.m. local time. The best times to call are generally early morning or late afternoon. Even if a Form 2848 is not on record, you are allowed to fax the form to the IRS agent so that he or she can assist you with your client’s account. The agent always asks if you want the CAF unit to process the form as well. 

We hope that this recommendation will assist you in being able to better serve your clients during the busiest time of year.

How Do the Administration’s Freezes Affect the Tax Community?

The new president has issued numerous executive orders during the first weeks of his term. Although these directives commonly occur when the administration changes party affiliation, tax professionals are left wondering if or how they should react.


The White House issued a memorandum on Jan. 20, 2017, temporarily freezing new or pending regulations that have not yet become effective. Regulations sent to, but not published in the Federal Register were immediately withdrawn. Regulations published, but not effective were postponed for a 60-day review.


The section 385 debt-equity regulations were finalized before the regulatory freezes, so for now, those rules stand. However, the proposed regulations on the new centralized partnership audit regime issued earlier this year were withdrawn and may need to be completely re-issued.


In addition, President Trump signed an executive order proposing that federal agencies repeal two existing regulations for every new proposed regulation. Most IRS regulations may be exempt from the two-for-one rule. (The executive orders do not apply to independent agencies.)


Another executive order also issued on Jan. 20 targeted certain Affordable Care Act (ACA) penalties such as the individual mandate. In response, the IRS announced Feb. 15 that it would allow electronic and paper returns to be accepted in instances where a taxpayer does not report their health coverage status. As of now, all other health coverage information reporting requirements and shared responsibility payments remain in place. Our members should understand that the announcement does not imply that the IRS will not act after processing such returns to then assess appropriate taxes, penalties and interest and our members should so advise their clients. Preparers should process existing health care forms and returns under current ACA regulations until the IRS or the Treasury Department issue further announcements.


On Jan. 23, the president ordered a 90-day hiring freeze of federal civilian employees in the executive branch. One big concern is that the IRS may not be fully staffed for the filing season, potentially delaying tax refunds and taxpayer assistance needed to complete and file accurate returns. At least one news article indicated that any new IRS hires prior to Jan. 22 with a start date prior to Feb. 22 might potentially bypass the freeze. We also have heard that the IRS believes it may get an exemption for seasonal hires through April 15. During the 90-day freeze, an audit will be conducted for a long-term plan to cut the federal government’s workforce through attrition.


Read more.


Update on Section 4980D Excise Tax for HRAs

In 2015, TSCPA’s Federal Tax Policy Committee initiated several advocacy efforts for relief of the $100 per day per affected employee penalty to small businesses for health reimbursement arrangements (HRAs) that did not qualify under the Affordable Care Act (ACA) market reform. Two months ago, President Obama signed the 21st Century Cures Act which granted partial relief, the establishment of HRAs for qualified small employers for reimbursements of health insurance and out-of-pocket medical costs (cannot exceed $4,950 individual or $10,000 family) as long as the employee demonstrates to his/her employer that he/she has essential minimum coverage. Reimbursement of Medicare-eligible employees’ Medicare premiums or reimbursement of Medicare supplemental policy premiums are also permissible under the new and retroactive provisions. The new law provided retroactive relief to employers who have been reimbursing employees for individual health insurance policy premiums since the effective date of section 4980D. However, if an employer reimbursed out-of-pocket health costs prior to the establishment of the new HRA provisions (Jan. 1, 2017) and after the implementation of section 4980D, the $100 per day per employee excise tax still applies.


Congress did not address the 2 percent S-corporation shareholder issue, so it appears Notice 2008-1 is still in play. For 2 percent shareholders, in order to deduct the premium on their individual income tax return, the company must reimburse them for the individual premium or pay the premium directly and include the premium amount in the 2 percent shareholder’s Form W-2 wages (box 1) so they can deduct the premium in full on their individual income tax return.


On Jan. 20, President Trump signed an executive order to roll back certain aspects of the ACA, including penalties. However, the order is vague and does not address specific penalties. In a recent AICPA Washington tax brief, practitioners were told to continue calculating individual mandate penalties in preparing Forms 1040 this year for taxpayers not in compliance in spite of the executive order.


Read more.