The new identification rules for remote signatures aren’t going over well. (See update below.) At a CPE event yesterday former IRS Stakeholder Liaison Kristy Maitre outlined the new e-filing identity match requirement we are supposed to meet (now! for extended 2013 returns!). These include “third-party verification” of identities of our long-time clients if they don’t visit the office. The ones that visit, we only need to see their papers.
The 250 or so practitioners present didn’t appreciate the joke at all. They asked the obvious question: how do we even comply with this? It’s not at all clear how we get “third-party verification.” I can pretty much guarantee that nobody is complying with that requirement now, because few are aware of it, and the ones that are don’t know where to start.
While the requirements are supposed to be part of the IRS war against identity theft, this effort is like responding to the attack on Pearl Harbor by bombing Montreal. Identity thieves don’t waltz into tax prep offices and pay us to prepare fraudulent refund claims. They prefer TurboTax.
Yet, there may be a method to the madness, suggested by one practitioner. What if some outfit is gearing up to provide third-party verification services — say, one of the national tax prep franchises? And the IRS has quietly created their revenue stream with this absurd rule? You might say this preparer is cynical; I say he’s been paying attention.
So let’s fight. Kristy is collecting comments and questions to send to her erstwhile IRS colleagues to try to stop this nonsense. Send your comments to firstname.lastname@example.org. I believe the IRS will back off if we brandish the electronic torches and pitchforks.
Update, 11:30 a.m. I received a call from an IRS representative this morning saying that they have been getting phone calls as a result of this post (well-done, readers!). She tried to reassure me by telling me that the third-party verification doesn’t apply to in-person visits. I knew that. I told her that as I read the rules, there are either “in-person” or “remote” transactions, with no third category of, say, “I’ve worked with this client for many years and they’re fine.” She didn’t disagree, though she still thinks I’m overreacting. She did say IRS field personnel are “elevating” the issue and seeking “clarification” from the authors of these new rules, including what “authentication” means for in-person visits and what a “remote transaction” is that would require third-party verification. Keep it up, folks!
Russ Fox, Yes, Mom, I Need to See Your ID
Jana Luttenegger, Updated E-Filing Requirements for Tax Preparers
Jason Dinesen, Hold the Phone on the IRS E-file Outrage Machine
TaxProf, The IRS Scandal, Day 377.
News from the Profession. Crocodile Injured By Falling Circus Accountant in Freak Bus Accident (Going Concern)
Kay Bell, National Taxpayer Advocate joins fight to stop private debt collection of delinquent tax bills. I’d rather she fight to keep the IRS from implementing its ridiculous e-file verification rules.
Jim Maule, It Seems So Simple, But It’s Tax. “People are increasingly aware that the chances of getting away with tax fraud are getting better each day.”
Missouri Tax Guy, NO! The IRS did not call you first.
Tax Justice Blog, Legislation Introduced to Stop American Corporations from Pretending to Be Foreign Companies. How about we just stop taxing them?
Kyle Pomerleau, Tom VanAntwerp, Interactive Map: Where do U.S. Multinational Corporations Report Foreign Taxable Income and Foreign Income Taxes Paid? (TaxPolicy Blog). Holland does well, as does Canada.
Howard Gleckman, Tax Chauvinism: Who Cares Where a Firm is Incorporated?
So we are left with a sort of financial chauvinism. It is important to some politicians to be able to say that a company is a red-blooded American company. But when it comes to multinational firms in a global economy, why does that matter?
Andrew Mitchel now has some online tax quizzes for your amusement. If they are too tough, the next item might restore your self-esteem.
If you can’t answer these questions, taxes are the least of your problems. Tackle these quizzlers (via Alex Taborrok):
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow.
More than $102. Exactly $102,. Less than $102? Do not know. Refuse to answer.
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, would you be able to buy.
More than, exactly the same as, or less than today with the money in this account? Do not know. Refuse to answer.
3. Do you think that the following statement is true or false? ‘Buying a single company stock usually provides a safer return than a stock mutual fund.’
T. F. Do not know. Refuse to answer.
I won’t give away the answers, but I shouldn’t have to. Sadly, most people find these questions hard. From Alex Taborrok:
Only about a third of Americans answer all three questions correctly (and that figure is inflated somewhat due to guessing). The Germans and Swiss do significantly better (~50% all 3 correct) on very similar questions but many other countries do much worse. In New Zealand only 24% answer all 3 questions correctly and in Russia it’s less than 5%.
At least that helps explain Vladimir Putin’s popularity.
Tags: maule, TaxProf, Kay Bell, Russ Fox, Going Concern, Andrew Mitchel, Howard Gleckman, Missouri Tax Guy, Alex Tabarrok, Jason Dinesen, Jana Luttenegger, Kyle Pomerleau, Tax Justice Blog, Kristy Maitre, Tom VanAndwerp