Tax Roundup, 6/27/14: IRS tries preparer regulation through the back door. And: why was Lerner at IRS?

June 27th, 2014 by Joe Kristan

20130121-2IRS tries “voluntary” end run around the law.  The IRS yesterday announced that it doesn’t need no stinking law (IR-2014-75):

The Annual Filing Season Program will allow unenrolled return preparers to obtain a record of completion when they voluntarily complete a required amount of continuing education (CE), including a course in basic tax filing issues and updates, ethics and other federal tax law courses.

“This voluntary program will be a step to help protect taxpayers during the 2015 filing season,” said IRS Commissioner John Koskinen. “About 60 percent of tax return preparers operate without any type of oversight or education requirements. Our program will give unenrolled return preparers a way to stay to up-to-date on tax laws and changes, which we believe will improve service to taxpayers.”

Tax return preparers who elect to participate in the program and receive a record of completion from the IRS will be included in a database on IRS.gov that will be available by January 2015 to help taxpayers determine return preparer qualifications.

The database will also contain information about practitioners with recognized credentials and higher levels of qualification and practice rights. These include attorneys, certified public accountants (CPAs), enrolled agents, enrolled retirement plan agents (ERPAs) and enrolled actuaries who are registered with the IRS.

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

So the Commissioner is keeping a little list of his friends.  And if you aren’t on his list of friends, you are on his list of not-friends.  It’s obvious what is going on here.  Through PR and subtle or non-so-subtle IRS preference for those on the Friends List, they will make life unpleasant for the non-friends, encouraging them to submit to “voluntary” CPE, testing, and ultimately, IRS control.  The IRS is trying to achieve its preparer regulation, ruled illegal by the courts, through other means.  This eagerness to take on a new program that nobody wants must mean the IRS is adequately funded, and its cries for more resources can safely be ignored.

Other coverage:

IRS Offers Voluntary Tax Preparer Education Program (Accounting Today)

Adrienne Gonzalez, IRS Goes Ahead With Voluntary Tax Preparer Program Despite AICPA Objection (Going Concern)

Leslie Book, IRS Announces Voluntary Education Program For Return Preparers (Procedurally Taxing)

Robert D. Flach, IT’S JUST STUPID  “This program will do little to ‘encourage education and filing season readiness’. ”

 

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

Why did Lois Lerner work at the IRS?

This question came to mind in discussing the Lerner emails with a reader, who noted how a Politico piece about the Grassley email chain revealed this week pointed out this high-level IRS leader’s evident lack of tax skills:

Former ex-IRS tax exempt division chief Marcus Owens said the email chain shows Lerner knew very little about tax law, as there would have been nothing wrong with Grassley and his wife attending such an event, so long as the income was reported.

“It is nothing that rises to the level of referral for examination,” Owens said.

It is a mystery.  Her Wikipedia biography shows that she was a cum laude graduate of Northeastern University and the Western New England College of Law.  She worked as a high-level attorney at the Federal Election Commission, but moved to IRS as “Director Rulings and Agreements” in the exempt organizations branch of the IRS.  She rose to Director of Exempt Organizations in 2006.

Her resume, then, is that of a bureaucrat, rather than a tax practitioner or specialist.  She apparently never practiced tax law before moving into her important policy position — important in the tax world, anyway.

This sort of thing may be common in the federal bureaucracy.  It’s likely that she got a raise for the move, or something.  But it seems that while you could take the girl out of the FEC, you couldn’t take the FEC out of the girl.  She took it upon herself to monitor the electoral process with the tools of the tax law.

Megan McArdle explains why that was a bad idea:

This exchange suggests that Lois Lerner not only didn’t have a good, basic grasp of the tax law she was supposed to be administering, but also viewed her job as an extension of her work at the Federal Election Commission.

That’s not what the IRS is for. The IRS is not given power over nonprofit status in order to root out electoral corruption or the appearance of it. It is given power over nonprofit status in order to make sure that the Treasury gets all the revenue to which it’s entitled

Unfortunately, politicians see the tax law as the Swiss Army Knife of public policy, and it’s unsurprising that an IRS bureaucrat would see it the same way.

Moreover, Lerner’s overbroad instincts also seemed to kick into high gear when Republican politicians were involved. Of course, such reports might well be survivor bias — Republicans are complaining about Lerner, while Democrats who also had run-ins with her may be keeping quiet for fear of fueling the fire. At this point, however, the fire is burning merrily on its own. If Democrats who encountered Lerner’s overzealous use of her powers are out there, they’d do well to come forward and tell their stories to reassure Americans that even if her actions were overbroad, they weren’t broadly partisan.

They would have emerged by now.  The stats, as we noted yesterday, demonstrate one-sided enforcement.

It’s unlikely that Ms. Lerner came to the IRS with the idea of using her position to harass the opposition.  She just happened to be in a position to do so when applications from groups she didn’t like — perhaps that she even saw as dangerous and wrong — came across her desk.  It’s possible that she did it entirely on her own.  And that’s the scariest thing — a bureaucracy that moves on its own to squash ungoodthinkers is much more dangerous than a top-down conspiracy.  It may be hard to replace an administration, but it’s almost impossible to replace a bureaucracy.

 

taxanalystslogoChristopher Bergin, The IRS Has Been Set Up (Tax Analysts Blog):

I don’t know if the IRS has been politicized. Until recently that possibility would have been unthinkable. But the potential of the 501(c)(4) rules to be a setup for the politicization of the IRS is enormous. You simply can’t have the tax collector refereeing the people who provide it with its budget. 

Christopher calls for the repeal of 501(c)(4).

TaxProf, The IRS Scandal, Day 414

Johnnie M. Walters, Ex-IRS Chief, Dies at 94 (New York Times):  “Johnnie M. Walters, a commissioner of the Internal Revenue Service under President Richard M. Nixon who left office after refusing to prosecute people on Nixon’s notorious “enemies list,” died on Tuesday at his home in Greenville, S.C. He was 94.”

Funny how nobody is doing that anymore.

 

Jason Dinesen, I Can’t Do Much to Help You Once the Transaction Is Completed.  “The point is: the time to ask for tax advice about something that will generate a massive tax bill is beforehand, not afterwards.”

Russ Fox, FBAR Deadline Is June 30th, but It’s Not a Midnight Deadline.  “My advice is simple: File the FBAR asap–it at all possible by Saturday.”

TaxGrrrl, Kentucky Fried Hoax: What Happens To The Cash?

Peter Reilly, Kuretski – Was Legal Dream Team Really Trying To Help The Taxpayers?

Jack Townsend, False Statements Crime Element of “Knowingly and Willfully” Requires Proving Knowledge that Making False Statement Is Illegal

Robert D. Flach brings the Friday Buzz!

 

This happened in 2008.  It's raining again.

This happened in 2008. It’s raining again.

 

Lyman Stone, Pennsylvania House of Representatives Passes Suspension of Tax Credits (Tax Policy Blog). “Most of these credits amount to narrow carve-outs for favored industries and firms, and thus their elimination would generally be good tax policy as a way to make the tax code more neutral.”

Richard Phillips, Clinton Family Finances Highlight Issues with Taxation of the Wealthy (Tax Justice Blog).

Scott Eastman, Tax Inversions are a Symptom, Corporate Tax Reform is the Cure (Tax Policy Blog).

Howard Gleckman, CRFB’s New Online Budget Simulator (TaxVox).  “Neither Congress nor the White House seem to care much about the budget deficit these days, but if you do, the Committee for a Responsible Federal Budget has created an updated online budget simulator that lets you try to get a handle on fiscal policy.”

 

The new Cavalcade of Risk is up at Worker’s Comp Insider.  Good stuff always at the blog world’s roundup of insurance and risk management — including Hank Stern on a potential diabetes breakthrough.

Oops. U.K. tax system errors mean 3.5 million unexpectedly owe (Kay Bell)

 

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