- The following is provided as an overview about how Enrolled Agents fit into the US tax system. Post Civil War - Congress enacted legislation that gave citizens of the US authority to make claims for the value of horses and other property lost during the War. These claims were to be filed with the Treasury Department.
- It soon became evident that more claims had been submitted than horses lost?
- July 7, 1884 - Under President Chester Arthur, the General Deficiency Appropriation Bill (HR 2735) signed into law. (known as the Horse Act of 1884 and the Enabling Act.)
- This law gave the Secretary of the Treasury authority to regulate the admission of attorneys and agents who represented claimants before the Treasury Department and to take appropriate disciplinary action against those who failed to comply with the regulations or who were incompetent.
- 1966- More revisions to Circular 230 became effective in September 1966.
- The Treasury Department/IRS agreed to continue the Special Enrollment Exam and provide an official name for these representatives by establishing the “Enrolled Agent” designation.
- 1994 More revisions to Circular 230 became effective in 1994.
- Enrolled Agents were approved to use the initials “EA" to denote the Enrolled Agent title.
Saturday, July 8, 2017
History of Enrolled Agents
Saturday, April 29, 2017
White House proposal
(President President Trump Releases a One Page Plan):
Individual Tax Reform
(President President Trump Releases a One Page Plan):
Individual Tax Reform
- Reduce seven (7) tax brackets into three (3) tax brackets.
- The current marginal rates are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
- Three new proposed rates of 10%, 25%, and 35%.
- The administration has yet to identify the tax bracket income levels for these new rates?
- Repeal the Affordable Care Act's (ACA) 3.8% net investment income tax imposed upon unearned income and capital gains of high-income taxpayers.
- Double the standard deduction.
- Limit itemized deductions to mortgage interest and charitable contributions.
- Repeal the estate tax.
- Repeal the Alternative Minimum Tax (AMT).
- Provide tax relief for families with child and dependent care expenses.
- The administration has yet to clarify how this relief will differ from the current expenses under IRC §21.
- Lower the business tax rate to 15%. While the current corporate tax rate is 35%, many small businesses (S-Corp's P-Ships) pass through their income via K-1's to the individual level.
- The administration has yet to identify any rules which may be established to prevent individuals from creating pass-through entities to avoid being taxed at a lower business rate, rather than higher individual rate? But there would be rules established to prevent this practice from taking place?
- Establish a territorial tax system.
- Foreign earned income would generally be excluded from this system.
- Eliminate tax breaks for special interests.
- Establish a "one-time tax" on corporate earnings realized and held overseas (on which tax is deferred).
Saturday, April 8, 2017
Friday, April 7, 2017
|Lady Godiva, 1897 by John Collier|
- The IRS lien remains, even if you’re in “Currently-Not-Collectible” (CNC) status. At this point, the only way to remove the IRS lien is to pay off the entire amount of tax due.
- Here are some options, if lien removal is your primary goal:
- sell your house, then pay this tax debt out of the proceeds and either buy a cheaper home or live in an apartment
- find a lender willing to approve a home equity loan for the amount of the tax debt, then pay off the IRS entirely and make monthly payments to the lender
- set up an installment agreement with the IRS to pay off the entire amount due; this works only if you can do it within six years
- If none of those options are appealing, and some may not be possible... the alternative is Currently-Not-Collectible (CNC) status. You can qualify for this if your sole source of income is Social Security Disability Insurance payments or if your monthly allowable expenses exceed your monthly income. If you are able to get this status, you don’t have to make any more payments to the IRS, ever, so long as your income doesn’t improve significantly. However, the tax debt remains, the lien remains, and interest continues to accumulate. That’s not a happy solution, either, I’m sure.
- The one "bright light at the end of the tunnel" is that the IRS has a time limit for collecting on this sort of tax liability. The limit is ten years from the date of assessment, plus whatever time is spent while contesting the debt in any way, such as via an Offer-in-Compromise or a petition to Tax Court. If you filed for bankruptcy, the ten-year clock would pause, too. (Keep in mind that you can sometimes discharge IRS liabilities in bankruptcy, but you can’t remove an IRS lien that way.)
- For example, if your 2012 tax liability was assessed on December 25, 2013 -- this means the IRS can no longer collect on your 2012 tax liability – and the lien will expire a natural death on December 25, 2023, plus however many days the Offer-in-Compromise (OIC) was in process?
Good News for OIC and CNC as posted by Keith Fogg in Procedurally Taxing
On Procedurally Taxing, Keith Fogg discussed in his blog posted February 15, 2017
• Tax Court Opinion, *Brown v. Commissioner*, Docket No. 20006-13L. [importance of this decision for low-income folks with equity in their home who owe the IRS]
• This Tax Court Case can now be cited as authority for using assets to “plug the gap” when expenses exceed income. If the asset is needed to help the taxpayer meet reasonable basic living expenses then the asset arguably can be excluded for calculating the reasonable collection potential. While *Brown v. Commissioner* addresses the financial analysis for CNC the same financial analysis can be applied for OIC. In the past our LITC has cited *Porro v. Commissioner,* TC Memo 2014-81 and *Crosswhite v. Commissioner,* TC Memo 2014-79 though they are only TC Memo cases. In all of these cases the financial analysis is similar as discussed in this recent *Brown* decision.
• In *Porros*, the settlement officer excluded net equity/assets in excess of $200,000 (extrapolating living expenses over ten years)from the taxpayer’s reasonable collection potential calculations. In *Crosswhite*, the Court sent back to the appeals office a case where the appeals officer rejected an OIC and only considered net equity, but failed to determine the taxpayer’s reasonable collection potential by considering future income and monthly deficits.
• Our LITC and other LITC’s in Ohio have been successful excluding pensions, equity in home (though we usually attach a rejection of a home equity loan) and equity in automobiles (though we also submitted handicapped tags). To complete the financial analysis, our LITC uses the Social Security Administration’s actuary tables to determine life expectancy. The next step is to multiply the taxpayer’s monthly deficit by the remaining months on the actuary table. If the total amount of money needed to "plug the gap" is greater than the actual value of the asset then the asset is excluded.
In other words, if the asset will be exhausted before the year of death, then the asset is excluded and is not considered when determining the reasonable collection potential. Our LITC and other LITC’s have been successful using this analysis as described in *Brown.*