IRS PTIN System Online Again

The IRS Preparer Tax Identification Number (PTIN) system was restored online effective February 2, 2013.  It had been "down" after January 18, 2013, due to litigation in federal court.  See: PA EE&F Law Blog posting IRS PTIN Registration System is "Down" (01/28/13).

According to an online notice updated by the IRS on February 4, 2013, upon request of the IRS, the legal stay was narrowed to permit continued operation of the system to register paid tax preparers.

On Friday, Feb. 1, the court modified its order to clarify that the order does not affect the requirement for all paid tax return preparers to obtain a preparer tax identification number (PTIN). Consistent with this modification, the IRS has reopened the online PTIN system.

The IRS continues to have confidence in the scope of its authority to administer this program and is working with the Department of Justice to address all options, including a planned appeal.

Please continue to check this site for additional information as it becomes available.

For a concise history of the conflict over the IRS PTIN system, which remains ongoing, see: Court Upholds Injunction; IRS Revives PTIN System, by Terri Eyden, posted on Accounting Web (02/06/13).

IRS PTIN Registration System is "Down"

The Internal Revenue Service's Tax Professionals system presently is "down" due to litigation.  [Note:  See "Update" at end of posting, below (02/06/13)]

According to the IRS Statement on Court Ruling Related to Return Preparers, updated as of January 25, 2013, a litigation stay is the reason:

As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program. On Wednesday, Jan. 23, the IRS and Justice Department asked for the injunction to be lifted. Regardless of the outcome of that request, an appeal is planned within the next 30 days.

The IRS is continuing to evaluate the scope of the court's order in determining consistent next steps. Please continue to check this site as additional information becomes available.

The federal litigation, which was filed by individual plaintiffs in 2012, regarding required payment to the IRS of annual fees charged to professional tax preparers, was referenced in a mid-summer posting by Michael Kohn on Accounting Today, entitled Appeals Court Upholds PTIN Fee (06/13/12). The Federal Appeals Court upheld such fees:

A federal appeals court has upheld a lower court ruling dismissing the complaint of a tax preparer who argued that the Treasury Department and the Internal Revenue Service did not have the right to charge an annual fee for a Preparer Tax Identification Number.

The case involved Jesse Brannen III, a tax attorney and CPA in White, Ga. Brannen sued the Treasury Department, claiming that it exceeded its statutory authority when it began charging a $64.25 fees for issuing a PTIN and an annual renewal fee of $63. * * *  

Earlier this year, an advocacy group called the Institute for Justice filed suit against the IRS on behalf of three other tax preparers challenging the IRS’s licensing requirements (see Tax Preparers Sue IRS over New Requirements). * * *

The stay dated January 18, 2013, was issued by the trial court in the same case, Loving v. Internal Revenue Service, Civil Action No. 12-385 (See also: Memorandum Opinion, both unofficial links), filed in the U.S. District Court for the District of Columbia.  That litigation had also questioned the IRS' authority to compel annual continuing education and testing of certain federal income preparers.

But the issue of PTIN fees may be revisited in another federal jurisdiction, according to a press release issued today, entitled Atlanta Attorney/CPA Files Lawsuit Challenging PTIN User Fees (01/28/13).

On January 25, 2013, Allen Buckley, an Atlanta attorney/CPA filed suit in the U.S. District Court for the Eastern District of Tennessee, challenging charging of user fees by the U.S. Treasury Department to issue and annually renew Preparer Tax Identification Numbers ("PTINs").

Beginning in 2010, after the IRS recommended the tax return preparation industry be regulated in a new manner not approved by Congress, regulations were issued to implement IRS's recommendations. One of the regulations included the requirement that a PTIN be obtained, and that fees be charged for issuance and annual renewal of the PTIN. The IRS's recommendation called for renewal every three years, but the regulations provided for annual renewal. The initial fee is $64.25 and the annual renewal fee is $63.

The suit seeks a declaratory judgment that charging of fees for initial issuance of a PTIN and annual renewal thereof is unlawful, and also asks for a permanent injunction, preventing the Treasury Department from charging issuance and renewal fees.

Allen Buckley said: "The user fee statute is the basis for charging of fees. Numerous requirements exist for the user fee statute to be used to charge fees, including requirements that the fees are paid voluntarily and a special benefit is received by the payer. Neither of these requirements has been met in this case." * * *

With the IRS PTIN system "down", if a professional tax preparer is not currently registered or renewed, can one register anew or re-register with the IRS willingly for the year 2013?  How?

Recently, federal estate tax forms and federal transfer tax laws have been in flux.  Now federal tax professional preparer requirements for 2013 are too. 

Update: 02/06/13:

The IRS Preparer Tax Identification Number (PTIN) system was restored online effective February 2, 2013. It had been "down" after January 18, 2013, due to litigation in federal court. For an update, see: PA EE&F Law Blog posting IRS PTIN System Online Again (02/06/13).

"Tax Talk" about Federal Individual Taxes

The Tax Talk Today program, scheduled from 2:00 to 3:40 PM on Tuesday, January 10, 2012 (and available for replay online over the next twelve months for registered users), will present a comprehensive discussion of changes in individual income tax rules and procedures, reviewed by highly-knowledgeable speakers -- Preston Benoit, Deputy Director, IRS Return Preparer Office, and Jason Langley, National Public Liaison, Internal Revenue Service, along with three industry commentators.

You must Log In or Register to view the show and its resources, or a transcript afterwards.

This is the Program Outline:

    IRS Return Preparer Regulations Update 

• Registered tax return preparer competency test – who must take it and how to prepare
• Implementation of background check
• CPE Requirements

    What’s new for 2011 Filing Season

• Schedule D changes and new Form 8949 to report capital gains and losses.
• Self-employed health insurance deduction no longer allowed on Schedule SE.
• First-time homebuyer credit only allowed for small number of filers.
• Repayment of the first time homebuyer credit directly on Form 1040
• Business standard mileage rate increased twice in 2011
• Medical care and moving rate increased twice in 2011
• Roth IRAs converted or rolled over in 2010 and not reported on 2010
• Additional tax on distributions from health savings accounts and Archer medical savings accounts increased to 20%
• New Form 8938 may need to be filed if you have foreign financial assets
• Schedule L no longer needed to figure your standard deduction
• Schedule M no longer in use because the making work pay credit has expired
• Alternative motor vehicle credit has expired unless the vehicle is a new fuel cell motor vehicle
• Due date for individual returns pushed two days to April 17 because of Emancipation Day in DC.

    Expired Tax Provisions 

• Payroll tax reduction (Two month extension)
• Expenses of elementary school teachers
• State and local sales tax deduction
• Contributing property for conservation purposes
• Qualified tuition deduction
• IRA distributions for charitable purposes
• Parity for employer-provided mass transit and parking benefits
• Credit for nonbusiness energy property

    Tax Provisions That Will Expire 

• Individual tax rate reductions (the “Bush tax cuts”)
• Reduced tax rate on dividends and capital gain
• Overall limitation on itemized deductions
• Marriage penalty
• EITC, Child, Dependent care and Employer-provided child care credit changes
• Adoption credit
• American opportunity tax credit
• Work Opportunity Credit
• Returning heroes tax credit and wounded warriors tax credit
• Itemized vs. Standard Deduction
• Declining itemized deductions (lower mortgage interest and real estate taxes)
• Increasing standard deduction
• Planning for taxpayer advantage

    Tax Issues Arising From Current Housing Market 

• First-time homebuyer credit repayment or recapture
• Foreclosures and short sales
• Tax Issues Arising From Current Job Market
• Moving expense deduction after being out of work
• Unemployment compensation
• Contract employment and self-employment
• Premature retirement plan withdrawals, early retirement and social security

    New IRS Regulations 

• Proof of delivery of tax documents
• Interest and penalty suspension rules
• User fee for enrolled agents and enrolled retirement plan agents
• EITC requirement to file Form 8867

For background about the Tax Talk Today program and its presentations, see:  PA Elder, Estate & Fiduciary Law Blog posting "Tax Talk Today" Online (11/08/11).

"Tax Talk Today" Online

Browsing through the Trusts & Estates website recently, I noted a useful learning service regarding federal tax laws and return preparation, available on the Internet: Tax Talk Today.

Sponsored by the Internal Revenue Service, Tax Talk Today is a live Internet program featuring industry tax experts and professionals and top representatives from the IRS.

Each program features discussions, real time interaction and the opportunity for viewers to participate in the discussion by e-mailing questions directly to the studio. Late-breaking news from the IRS may augment or pre-empt original programming, making Tax Talk Today a primary you heard it here first source of news about IRS initiatives, rules and decisions.

In addition to the Live webcast, the FREE programs are available for up to 12 months through Tax Talk Today archives, as audio Podcasts or on DVD (perfect for conducting group viewings or for staff training).

This service began in 2001 as a public service of the IRS, according to "Website of the Month: Tax Talk Today" (2004), by  Susan B. Anders, posted by The CPA Journal, published by the New York State Society of CPAs.  Since 2009, the presentations have been produced by Tax Talk Today, Inc., a private company in Bethesda, MD, with content provided by tax-related companies in coordination with the IRS .

Tax Talk Today is promoted as a free service for those "auditing" presentations -- that is, those who do not expect to receive certified professional education credits.  Without payment (but still with a required online registration), you can replay any presentation, either live or archived, over an Internet-connected device.  Also, you can read the word-for-word transcripts of any past session, including any post-presentation supplemental materials.

Free of charge, viewers can tune in to each program and watch live, in addition to watching for up to 12 months by going to the Archives, or listening to the Audio Podcasts.

Earning CPE credit requires a purchase.* * *

The topics are varied, current, and important for tax professionals.  Past presentations are archived for a year, so listening or retrieving materials can be done conveniently.

Examples of archived presentations in 2011 instructive for a trust and estates lawyer, an accountant/preparer, or a consumer interested in this federal tax principles and procedures, include:

• Individuals: Complex Tax Issues Reviewed (09/13/11)
• Small Business Filings – Expenses, Credits & Recordkeeping (07/12/11) 
• Family Filing – Do’s and Don’ts (06/14/11)
• Ethics - Circular 230 Update (05/10/11)
• 2010 Individual Tax Law Update: Changes In A Complex and Uncertain Time (01/11/11)

To watch a presentation or access transcripts of past sessions, you must first provide an email address and create a password, then reply to an automated message sent to that email address.  When you log in for the first time, you must complete a registration form with basic information.

All that is simple.  Far harder is recalling what email address and password you supplied originally -- so keep both with your tax records.

"Our office thinks these tax talk sessions are a great idea.

An easy way of getting information out."
-- A Tax Talk Today participant

IRS Issues Revised 706 Instructions & Preparer Requirements

On September 22, 2011, the IRS issued revised Instructions for the recently-finalized Form 706, according to Vincent F. Lackner, Jr., Esq., who sent an email to customers of The Lackner Group, Inc. today.  

As a software developer, he has tracked the development of that form and its instructions carefully.

Early yesterday [09/22/11] evening, the IRS authorized a final draft of the US 706 Instructions for 2011 for release to the general public.

Please feel free to download it from the following link and to circulate it to interested parties:  www.lacknergroup.com/Draft_11i706.pdf

The IRS's ability to post new forms and instructions to its website has been temporarily interrupted due to scheduled maintenance. When it is again able to post to its website next Wednesday morning (9/28/2011), the "Draft" watermark will be removed from this version.

The key change in these instructions relates to the portability of an unused exclusion amount for a married couple from the 1st estate to the 2nd estate. This feature is currently available only for 2011 and 2012 estates. * * *

Once finalized, those Form 706 Instructions should be updated on the IRS Online Instructions for Forms web page.

Vince also sent a detailed comparison of prior Form 706 Instructions and the latest issuance, which relates to the revised Form 706, issued on September 8, 2011.  See: PA EE&F Law Blog postings Revised IRS 706 Form Released (09/12/11) and 2010 Decedent Estates Granted Federal Filing & Payment Relief (09/13/11).

Vince emphasized an important point regarding filing of a Form 706 under certain circumstances:

Even for a married 2011 decedent with a gross estate of $5m or less (there are about 950,000 of these annually), you would need to file a timely and complete 706 in the 1st estate in order to preserve the unused exclusion amount for the 2nd estate.

You might consider filing an extension request (Form 4768) to gain more time to analyze this issue pending the IRS' release of the final 706 Instructions for 2011 sometime next week. * * *

Separately, on September 21, 2011, the IRS issued a Press Release entitled IRS Issues Guidance to Further Implement Return Preparer Oversight, IR-2011-96, which provided "clarification for tax return preparers about when to renew their preparer tax identification numbers (PTINs), how suitability testing will be conducted, and when the continuing education requirement will begin."

Key points include:

• The return preparer initiative requires anyone who is paid to prepare all or substantially all of any federal tax return or claim for refund to register with the IRS and obtain a PTIN. PTINs must now be renewed on a calendar year basis. 
• Certain preparers (individuals who are not attorneys, certified public accountants, or enrolled agents) also must pass a competency examination, undergo a suitability check and complete continuing education courses annually. 
• The IRS will designate individuals who meet these requirements as a Registered Tax Return Preparer, who will be authorized to prepare federal tax returns and claims for refunds and to represent their clients during an IRS examination of a tax return or claim for refund that the individual signed as the paid tax return preparer.
• All PTIN holders must renew their numbers using the online PTIN application or paper Form W-12 and pay the required fee ($64.25 for 2012) after Oct. 15 and before Jan. 1 annually.
• Certain tax return preparers who must pass a suitability check will have to provide their fingerprints so that a Federal Bureau of Investigation database search can be conducted. Generally, the fingerprint requirement will affect those preparers who currently have provisional PTINs.
• Attorneys, certified public accountants, enrolled agents, enrolled retirement plan agent and enrolled actuaries also are expected to be exempt from the fingerprinting requirement at this time.  However, these individuals also must answer all the suitability questions asked on the PTIN application, such as whether they have been convicted of a felony in the previous 10 years.

Also on September 21, 2011, the IRS published proposed regulations (REG-116284-11) that would establish user fees for fingerprinting and taking the competency examination. 

As proposed, the IRS portion of the fingerprinting fee would be $33, and the IRS portion of the testing fee would be $27. These user fees are in addition to any fees charged by the third-party vendors administering the programs. The fees to be charged by third-party vendors are not being announced at this time, but the total fees, including the IRS user fees, are expected to be between $60 and $90 for fingerprinting and $100 and $125 for testing.

For IRS guidance regarding its PTIN program, visit www.IRS.gov/ptin.  You can watch an introductory video here (01/11).

Tax Relief Enacted

As announced in a host of media publications today, December 17, 2010, we have a new federal tax act, representing a political compromise and a temporary Congressional consensus -- but not a long-term solution -- on crucial pending income, estate/gift/generation-skipping, and social security tax issues (among other subjects).

For example, on "Estate of Confusion" (a Forbes Blog) in its posting today entitled "House Passes The Middle Class Tax Relief Act of 2010, H.R. 4853", Hani Sarjii highlighted the compromise, and concluded that "the reform of the estate tax is only temporary."

On December 16, 2010, the United States House of Representatives passed H.R. 4853, the Middle Class Tax Relief Act of 2010. The vote was 277 in favor and 148 against.  The bill will now go to President Obama’s desk to be signed into law.

H.R. 4853 is a compromise between President Obama and Republicans. It will extend the Bush Tax cuts and provide temporary estate tax reform: an estate tax rate of 35% and a $5 million exemption for individuals, for two years.

H.R. 4853 is going to change estate planning.  * * * Also, H.R. 4853 will not end estate tax uncertainty. * * *

C-SPAN reports that "The President is set to sign in to law the Middle Class Tax Relief Act of 2010 (H.R. 4853) later this afternoon [3:50 p.m]."  See also: Bloomberg News, House Passes Tax-Cut Extension, Sends Bill to Obama  (12/17/2010, with video).

My intention now is not to summarize the law, but to list a few resources online for a reader to explore and research initially.

Professor Paul L. Caron lists excellent links -- including a shorter summary (PDF, 3 pages) and a longer summary (PDF, 12 pages) -- regarding the new federal tax law in his posting President Obama Signs Tax Package Into Law (12/17/10) on the Tax Prof Blog.  [Update:  See also: More on the Obama-GOP Tax Bill (12/19/2010).]

For a running reference on the political developments leading to the new law, see: Thompson Reuters Tax Watch and its Archive covering the period November and December, 2010.  See also: Blog posting entitled Are We Having Fun Yet? (12/13/2010), by William (Bill) D. Pargaman, Esq., of Austin, TX, who prepared a tentative summary of the pending legislation as of December 9, 2010.

Descriptions about the underlying bill and its amendments are set forth by The Library of Congress (Thomas).  See also: Open Congress, which lists news articles and blog postings related to it, and which also sets forth the text of the House-approved bill.

The U.S. Senate's Committee on Finance posted links on a webpage entitled S.A.4753: The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, as follows:

• Summary of The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 [PDF, 485 KB, 12 pages] (12/10/10).

• JCT Estimated Budgetary Effects of the Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 [PDF, 28.8 KB, 9 pages] (12/10/10).

• Legislative Text of The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 [PDF, 137.6 KB, 74 pages] (12/13/10).
  

BNA also provides a link to that last item above -- the final text of H.R. 4853, as amended numerous times -- being the "Senate Amendment to the House Amendment to the Senate Amendment."

Update: 2010-12-20:

In an article entitled CCH First to Offer Comprehensive Coverage of 2010 Tax Relief Legislation (12/20/2010), posted by the Centre County Times (State College, PA), a link leads to a Special Report -- CCH Tax Briefing, dated December 17, 2010, entitled President Signs Two-Year Extension Of Bush-Era Tax Cuts, Payroll Tax Relief, Estate Tax Compromise (PDF, 11 pages):

Congress has approved and the President quickly signed a mulibillion dollar tax cut package, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) (H.R. 4853). The new law follows through on the framework agreed to December 6 by President Obama and GOP leaders in Congress. The 2010 Tax Relief Act extends the Bush-era individual and capital gains/dividend tax cuts for all taxpayers for two years. The bill also provides for an AMT “patch,” a one-year payroll tax cut, 100 percent bonus depreciation through 2011 and 50 percent bonus depreciation for 2012, a top federal estate tax rate of 35 percent with a $5 million exclusion, and more. * * *

This is an excellent resource, which was posted publicly (and quickly!) for professionals and the public.  I commend CCH for doing so.  It should be a timely and trustworthy summary.

Offshore Accounts in Dangerous Waters

According to "IRS: Offshore account holders told fess up to lower penalties" (03/27/09) by Kevin McCoy, published in USA Today, the Internal Revenue Service finally is claiming its tax stake in unreported offshore accounts owned or controlled by U.S. citizens, under severe penalties if voluntary compliance is not forthcoming.

Trying to lure wealthy Americans to disclose assets hidden offshore, the IRS on Thursday announced a six-month program that offers lower penalties to those who come forward and pay taxes due on the secret holdings.

The offer includes clients of UBS, the Swiss banking giant that last month gave federal investigators the names of American owners for about 300 accounts in a continuing federal court showdown.

Along with lower tax penalties, those who comply are expected to avoid criminal prosecution.

"This is a chance for people to come clean on their own," said IRS Commissioner Douglas Shulman.

"For taxpayers who continue to hide their heads in the sand, the situation will only become more dire." * * *

The IRS Commissioner commented on the 2009 Amnesty Program in a posted Press Release entitled "Statement from IRS Commissioner Doug Shulman on Offshore Income" (03/26/09).

In a posting on his Tax Prof Blog, Professor Paul L. Caron noted "IRS Offers Amnesty to Those Who Evaded Tax Through Offshore Accounts" (03/26/09); and he listed articles published about the IRS foreign holdings amnesty program. I've added the articles' titles and authors, and noted some substantive points:

• "IRS increases pressure on Swiss bank clients" (03/26/09) by Devlin Barrel, published by Associated Press, who noted: "[Taxpayers] coming forward are now confronting a list of nearly 30 detailed questions, asking not just about financial documents, but any travel to conduct banking business, documents and correspondence related to the accounts, and which bank employees helped them manage the accounts." * * *
  
• "UBS Offshore Customers Offered Eased Tax Penalties" (03/26/09) by Ryan J. Donmoyer, published by Bloomberg, who noted: "It is legal for Americans to have money in offshore accounts, which many do for legitimate reasons such as when they own a home or business overseas. The accounts must be disclosed to the Treasury Department when they hold more than $10,000, and U.S. taxes must be paid on any income earned."* * *
  
• "IRS aims to reel in offshore-account holders --Penalties reduced, criminal prosecution unlikely for those who come clean" (03/26/09) by Andrea Coombes, posted on MarketWatch, who noted: "The U.S. loses an estimated $100 billion in tax revenue every year because of money stashed offshore, according to Sen. Carl Levin, D-Mich., who with other lawmakers introduced the Stop Tax Haven Abuse Act in March. * * *
• "I.R.S. to Ease Penalties for Some Offshore Tax Evaders" by Lynnley Browning, published by The New York Times, who noted: " In another shift, the I.R.S. will generally not prosecute taxpayers who come forward voluntarily, provided they are not drug dealers, arms merchants or others with ill-gotten gains. And it will not assess a 35 percent penalty on money secretly transferred to foreign trusts — a common method of tax evasion. The goal, Douglas Shulman, the I.R.S. commissioner, said during a briefing 'is to get taxpayers who have been hiding assets offshore back into the system.'" * * *
  
• "IRS launches crackdown on offshore tax evasion" (03/26/09) by Corbett Daley, published by Reuters, who noted: "IRS memos sent to agency examination staff said offshore tax cases should 'receive priority treatment.' 'Offshore cases sent to the field are work of the highest priority," said one document, which was made public by the IRS. "Examiners should utilize the full range of information gathering tools in properly developing offshore issues with special emphasis on detecting unreported income. This includes interviewing taxpayers, making third-party contacts and timely issuing summonses to taxpayers and third parties." * * *
• "IRS Cuts Penalties to Lure Tax Evaders" (03/27/09) by Evan Perez & Tom Herman, published by The Wall Street Journal, who noted: "A key part of the program, IRS officials said, is 'developing intelligence' on bankers, lawyers, accountants and others who help the rich hide assets from tax authorities. This raises the likelihood that the IRS and the Justice Department could take aim at major financial firms, as they have against UBS AG, the Swiss bank that admitted in a settlement last month that some of its bankers had helped U.S. clients evade taxes." * * *
  

Clearly, past tax law and current tax return forms require that a U.S. citizen who has an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return.

The IRS has made various tax amnesty offers as recently as 2005 and 2003 to enforce these rules. But the political and economic climates have chilled sufficiently to steel the IRS' intentions towards non-reporting citizens.

For those U.S. citizens who have continued to ignore the legal requirements of reporting and paying income tax, the "amnesty" program may be viewed as harsh, but it may be their last chance before criminal prosecution.

This program and the alternative enforcement routes are now supported politically by the new federal law. And it is consistent with prior initiatives by the IRS. See: Abusive Offshore Tax Avoidance Schemes -- An Abusive Scheme Toolkit for External Stakeholders, updated in April, 2009.

Offshore accounts and trusts have been utilized by some Pennsylvanians to avoid both federal and state income tax, as evidenced by a prosecution in Pennsylvania announced recently by the IRS on its website in a posting entitled "Pennsylvania Father and Sons Sentenced in Tax Fraud Scheme."

On March 26, 2009, in Scranton, Pa., Wendall Sollenberger was sentenced to 42 months in prison and ordered to pay $1,274,615 in restitution to the Internal Revenue Service (IRS).

Last week, Avery Sollenberger, Wendall's father, was sentenced to 44 months in prison and Gary Sollenberger, Wendall's brother, was sentenced to 42 months in prison. In September 2008, a jury found Avery, Wendall, and Gary Sollenberger guilty of conspiracy to defraud the IRS. According to court documents, the Sollenbergers own and operate a house framing business in Hanover, Pennsylvania.

Evidence introduced at trial stated that beginning in 1994, Wendall, Gary and Avery began to employ a deceptive scheme consisting of bogus trusts, a foreign corporation and an off-shore bank account in Cyprus to conceal assets from the IRS. The three men have not paid any income tax on their business earnings since 1994.

During the trial, the government also introduced evidence of defendants expenditures including the purchase of a $100,000 race car, a $40,000 custom made motorcycle, a motor boat, gold, silver, rental properties, a second home in Altoona, Pennsylvania, and hunting trips to Idaho. * * *

See also: Press Release, "UBS Client Charged with Filing False Tax Return Boca Raton, Fla. -- Resident Hid Income and Assets in Secret Swiss Bank Account" (04/02/09).

CCH summarized the terms of the amnesty program in its Tax News posting on March 27, 2009 entitled "Voluntary Disclosure Terms."

[The IRS Commissioner] emphasized that the terms being offered for the disclosure of offshore accounts are an outgrowth of current policy and carry penalties at a level consistent with voluntary disclosure programs in the past. Within this framework, Shulman enumerated the amounts that would need to be paid by taxpayers with heretofore undisclosed offshore accounts who "come clean" under the program:

• Back taxes due on newly disclosed assets for the last six years;
• Interest due on these back taxes for the last six years;
• A 20-percent accuracy-related under Code Sec. 6662 or a 25-percent delinquency penalty under Code Sec. 6651 for each tax year at issue;
• Looking to the past six years, a 20-percent penalty on the total balance of all the taxpayer's foreign bank accounts or assets during the year among the past six in which the accounts had their highest aggregate value. * * *
  

In the past, Pennsylvania did not elect to participate in the IRS' Offshore Voluntary Compliance Initiative, and, may not participate in this latest program. Therefore Pennsylvania residents intending to participate in this IRS amnesty program should consider their future interactions, too, with the Pennsylvania Department of Revenue.

IRS Implements Final Return Preparer Regs

On December 22, 2008, the Internal Revenue Service published Treasury Decision 9436, which finalized "Tax Return Preparer Penalties Under Sections 6694 and 6695."

TD 9436 contains final regulations implementing amendments to the tax return preparer penalties under sections 6694 and 6695 of the Internal Revenue Code (Code) and related provisions under sections 6060, 6107, 6109, 6696, and 7701(a)(36) reflecting amendments to the Code made by section 8246 of the Small Business and Work Opportunity Tax Act of 2007 and section 506 of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008.

The final regulations affect tax return preparers and provide guidance regarding the amended provisions.

These regulations are effective on December 22, 2008. * * *

These regulations are the culmination of a long process conducted by the IRS, through successive statutory enactments and periodic administrative regulations (temporary, proposed, or final).

In addition to new standards of preparation of federal tax returns, a preparer will also be required to generate more "paperwork", according to the Paperwork Reduction Act Summary, provided in T.D. 9436:

This information is necessary

• to make the record of the name, taxpayer identification number, and principal place of work of each tax return preparer,
• [to] make each return or claim for refund prepared available for inspection by the Commissioner of Internal Revenue, and
• to document that the tax return preparer advised the taxpayer of the penalty standards applicable to the taxpayer in order for the tax return preparer to avoid penalties under section 6694.

The collection of information is required to comply with the provisions of section 8246 of the Small Business and Work Opportunity Tax Act of 2007 and section 506 of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008. [Links & formatting added.]

Find updated information (summaries and legislative text) regarding the 2007 Tax Act and the 2008 Tax Act posted on the Legislation page of the website of the U.S. Senate Finance Committee.

The scheduled publication of T.D. 9436 in the Federal Register followed its announcement on December 16, 2008, by the IRS, together with related guidance regarding return preparer penalties:

• T.D. 9436 (PDF, 211 pages) -- Final regulations under IRC §§ 6694 and 6695A
• Notice 2009-5 (PDF, 10 pages) -- Interim guidance on the application of T.D. 9436
• Rev. Proc. 2009-11 (PDF, 22 pages) -- List of forms subject to the return preparer penalties

See also: Updated Guidance Concerning Tax Return Preparer Penalties Released (T.D. 9436; Notice 2009-5; Rev. Proc. 2009-11) posted 12/16/08 by CCH; and "IRS Revises Tax Return Preparer Penalty Regulations" (12/17/08) posted by WebCPA.

According to the "Background" section of T.D. 9436, the 2007 Tax Act had changed the standards affecting tax preparers on both disclosed positions and undisclosed positions:

The 2007 Act's amendments to section 6694 also changed the standards of conduct that tax return preparers must meet in order to avoid imposition of penalties in the event that a return prepared results in an understatement of tax.

For undisclosed positions, the 2007 Act replaced the "realistic possibility'' standard with a standard requiring the tax return preparer to have a "reasonable belief that the position would more likely than not be sustained on its merits.''

For disclosed positions, the 2007 Act replaced the "not-frivolous'' standard with a standard requiring the tax return preparer to have a "reasonable basis'' for the tax treatment of the position. * * * [Formatting added.]

The 2008 Tax Act further altered the standards regarding tax returns with undisclosed positions or for tax shelters:

On October 3, 2008, section 506 of the 2008 Act modified the standards of conduct that tax return preparers must meet in order to avoid imposition of the section 6694(a) penalty.

Specifically, the 2008 Act changed the standard for undisclosed positions from "reasonable belief that the position more likely than not will be sustained on the
merits'' to "substantial authority for the position.''

The 2008 Act maintained the "reasonable basis'' standard for disclosed positions.

If a position is with respect to a tax shelter (as defined in section 6662(d)(2)(C)(ii)) or a reportable transaction to which section 6662A applies, it must be "reasonable to believe that the position more likely than not will be sustained on the merits.'' * * * [Formatting added.]

T.D. 9436 was based upon proposed regulations recently published. See: PA EE&F Law Blog posting "IRS Proposes Final Preparer Penalty Regs"(07/02/08).

There were some changes reflecting public comments, as explained under its heading "Summary of Comments and Explanation of Revisions."

T.D. 9436 also provides "interim guidance" regarding new provisions in the 2008 Tax Act. Those interim regulations will be finalized through future federal rule-making procedures.

After consideration of the public comments and the amendments made by the 2008 Act, the proposed regulations are adopted as revised by this Treasury decision.

Section 1.6694-2 of these final regulations does not provide substantive guidance reflecting amendments to the Code made by the 2008 Act.

Rather, the Treasury Department and the IRS are reserving Sec. 1.6694-2(c) in these final regulations and are simultaneously issuing a notice in the Internal Revenue Bulletin providing interim guidance on the amendments to the Code made by the 2008 Act.* * * [Formatting added.]

Few accountants, attorneys, or tax preparation officers remain unfamiliar with these substantial duties and significant penalties involving returns they sign as "preparer" for filing with the IRS.

In 2009, many taxpayers will learn from their tax preparers that the rules of the game for tax returns have changed.

 Estimated total annual [paperwork] reporting burden:
10,679,320 hours.
    Estimated average annual burden per respondent:
15.6 hours.
-- Internal Revenue Service, T.D. 9436 (12/22/08)

"Taxgirl" Blog Featured by ABA Blawgs

The American Bar Association Journal's Blawg Directory today features the Taxgirl blog written by a Pennsylvania attorney -- Kelly Erb, Esq., of Philadelphia.

Her commentaries, updates, and generic advice about tax matters draw such national attention. In fact, she is on the ABA Journal's second annual list of the 100 Best Legal Blawgs (you can vote for her blog's position on that list here).

Separately, Kelly often posts responses to tax-related inquiries posed on the Probate & Trust Law Listserv, operated by members of the Real Property, Probate & Trust Law Section of the Pennsylvania Bar Association; and so her name is familiar to me as a knowledgeable tax attorney.

In delivering "tax news, tax info and tax policy" -- which normally is bland and boring -- to readers of her Blog, she brings an upbeat, wry writing style that dulls the pain and gooses the juices. Her personal views often shine through, both in her selection of materials and in her commentaries about tax topics.

Kelly also represents the newly-wired practitioner, who is connected & available not only through fax and email (as are most attorneys), but also through her personal profiles on Twitter, LinkedIn, Facebook, and even Skype.

Her blog represents a new manner of presentation for a specialized, practicing lawyer, who reveals much about her personality, preferences, and lifestyle as a real person, not as an icon or a "suit."

Characteristically open, she invites readers of her TaxGirl blog to submit inquiries for response: "Have a tax question? Don’t know where to turn? Ask the taxgirl!"

My question would be: "Kelly, how do you find the time to do all this while practicing law and mothering three kids?"

By whatever means or magic she does it all, I, as one of her peers, am proud that she practices in Pennsylvania.

ABA's Estate & Trust Primers (Updated Links)

The American Bar Association, through its Real Property, Trust & Estate Law Section, posts excellent general explanations regarding estate planning principles and the planning process that eventually will materialize into surrogate decision-making or a fiduciary administration when needed.

As reliable general information, long-posted online, these lawyer-authored, publicly-posted legal resources can be referenced to clients who inquire about such topics before state-specific laws are applied to their specific situations.

Just over a year ago, I reviewed some of the ABA's online resources about estate planning topics. See: PA EE&F Law Blog posting "ABA's Estate Planning Primers Online" (11/28/07).

Recently I noticed rearrangement of the ABA's information on the RPTE Section's web page. At the risk of repetition, I again emphasize the value of those resources, both to the professional and to the consumer; and I copy the updated links.

These are the topics and articles, presented in outline form, in the ABA-RPTE's "Frequently Asked Questions -- Estate Planning" as excerpted from its website:

I) Estate Planning Overview:

1. What is Estate Planning?
2. Glossary of Estate Planning Terms

II) An Introduction to Wills:

Frequently Asked Questions about Wills

1. What Happens if You Die Without A Will?
2. What A Will Does
3. What A Will Does Not Do
4. How To Execute a Will

Types of Non-probate Property

1. Jointly Owned Property
2. Trusts
3. Annuities and Retirement Benefits
4. Life Insurance

III) Revocable Trusts:

What is a Revocable Living Trust?

IV) Power of Attorney:

Questions Regarding Power-of-Attorney

1. Introduction
2. Who Should Be Your Agent?
3. How The Agent Should Sign?
4. Beyond Signing Checks

State Laws Vary

1. What if I move?
2. Will my Power of Attorney expire?

V) Living Wills, Health Care Proxies, and Advance Health Care Directives:

Questions Regarding Living Wills

1. Introduction
2. Living Wills
3. Health Care Proxy
4. Why Have Health Directives?
5. Obtaining and Maintaining Living Wills and Health Care Proxies
6. Organ and Tissue Donation
7. Communication is the Key

Other Resources on Living Wills

VI) The Probate Process:

1. What is Probate?
2. Should you Avoid Probate?

VII) Planning With Retirement Benefits:

1. Income Taxation of Qualified Plans and IRAs
2. Distribution of Plan Assets to the Participant
3. Distribution of Plan Assets After the Participant's Death
4. Estate Tax Considerations
5. Planning Considerations

VIII) Guidelines for Individual Executors and Trustees:

1. Introduction
2. Understanding The Will
3. Is Probate Necessary?
4. Managing Estate Assets
5. Handling Debts & Expenses
6. Funding the Bequests
7. Trust Administration
8. Closing the Estate
9. Common Questions

IX) The Lawyer's Role:

What is the Lawyer's Role?

X) Who We Are:

About the Section of Real Property, Trust and Estate Law

XI) Tax Changes From 2001

Changes to Federal Estate Taxes 2004-2010

On its RPTE Resources web page, a few important external online references are linked, including one that I had not encountered before -- U.S. Tax Code Online, which presents the United States Internal Revenue Code, Title 26 of the U.S. Code (26 USC), as a structured and searchable document.

You can access the Code through its own hierarchical table of contents, a comprehensive (flat) table of contents (Note: this file is almost 300K and takes a while to retrieve), or an index by section number, handy when you're looking up a citation in another document.

Each section of the Code contains navigation buttons which provide immediate access to the next and previous section, the table of contents, the section index, the text search request form, and this document. * * *

Two other expansive, reliable Internet legal resources stand out among the other links listed on that web page:

• Internet Legal Resource Guide - An index of websites concerning law and the legal profession

• The Legal Information Institute - Cornell Law School provides links and information to Supreme Court decisions and other legal documents and resources.

In providing such information, the American Bar Association continues to provide a laudable public service to consumers.

* * *

"Information is not knowledge."
-- Albert Einstein

"Lack of knowledge... that is the problem."
-- W. Edwards Deming

"All my knowledge comes from research."
-- Stan Sakai

"Knowledge is power."
-- Francis Bacon

IRS Tests ADR Programs in Appeals

On December 1, 2008, the Internal Revenue Service, in its Bulletin No. 2008-48 (PDF, 40 pages) included Announcement 2008–111 (beginning on Page 1224), entitled "Test of Procedures for Mediation and Arbitration for Offer in Compromise and Trust Fund Recovery Penalty Cases in Appeals".

The announcement by the IRS modified prior revenue procedures to enable a two-year test program involving two new forms of alternative dispute resolution for taxpayers on certain appeal matters:

This announcement modifies Revenue Procedures 2002–44, 2002–2 C.B. 10, and 2006–44, 2006–2 C.B. 800, by establishing a two-year test of the mediation and arbitration procedures for Offer in Compromise and Trust Fund Recovery Penalty cases that are under the jurisdiction of the [IRS] Office of Appeals.

The new pilot program was the subject of an informational release, IR-2008-135, entitled "IRS Announces Two New Appeals Programs" (12/01/08), announcing post-Appeals mediation or arbitration procedures for test programs in the two settings of an Offer in Compromise (OIC) and a Trust Fund Recovery Penalty (TFRP).

Beginning Dec. 1, 2008, for a two-year test period, Appeals will offer post-Appeals mediation and arbitration for OIC and TFRP cases for taxpayers whose appeals are considered at the Appeals office in Atlanta, Ga.; Chicago, Ill.; Cincinnati, Ohio; Houston, Texas; Indianapolis, Ind.; Louisville, Ky.; Phoenix, Ariz.; and San Francisco, Calif.

Under these two alternative dispute resolution programs, the taxpayer or Appeals may request nonbinding mediation. The taxpayer may decline Appeals’ request for mediation. Appeals will evaluate a taxpayer’s request for mediation based on the criteria detailed in Revenue Procedure 2002-44 and Announcement 2008-111.

A request for binding arbitration must be made jointly by the taxpayer and Appeals. The mediation and arbitration procedures do not create any additional authority for settlement by Appeals. * * * [Formatting added.]

The Announcement notes that such ADR procedures will not be available when "the taxpayer has already attempted to resolve the matter through Fast Track Mediation" or when an offer in compromise was submitted by a taxpayer to the IRS as an alternative to an IRS collection action.

In a summary article drawn from these materials, entitled "IRS Introduces Two Appeals Programs" (12-02/08) posted by WebCPA, the distinctions between mediation and arbitration, as alternative dispute resolution devices to be tested at selected IRS offices, were highlighted:

During the test period, appeals employees will advise the taxpayer of the availability of these alternative dispute strategies and the deadline for requesting such strategies.

The post-appeals mediation process is available for both legal and factual issues. The mediator's role is to facilitate settlement negotiations so the parties can reach an agreement, but the mediator does not have settlement authority over any issue.

The arbitration procedure is available for factual issues only. The arbitrator's role is to hear both sides of a disputed issue and then render a decision based on the specific factual issue. The decision is binding on both parties. However, the arbitrator does not have the authority to decide that the offer in compromise itself must be accepted or that a person is or is not liable. Neither party may appeal the decision of the arbitrator or contest the decision in any judicial proceeding. * * * [Formatting added.]

Testing of such ADR devices by the IRS is significant. Hopefully the test will reveal the processes to be efficient and effective in resolving IRS claims against taxpayers.

The IRS ADR test program follows a trend in many areas of law for resolution of disputes more through open exploration, direct discussion, and an acceptable agreement by parties, in a process controlled and supervised by an experienced, independent mediator or arbitrator, rather than through adverse positioning, formal litigation, and a court's adjudication.