Advocacy
A key purpose for NAEA is advocacy for state and federal efforts to support fair tax policy and tax administration initiatives.
NAEA aims to be the leading voice with governing bodies to address member challenges and effect change.
Advocacy is the heart of NAEA and one of the association’s most valued member benefits by:
NAEA works to develop policy priorities that reflect the intersection of what EAs are facing in their everyday practices and the realities of where we as an association can move the needle and impact change with Congress, the IRS, and beyond.
Congress has a unique opportunity to provide the leadership and oversight needed to bring about transformative and long overdue changes to our tax administration system. These opportunities include establishing minimum standards for return preparers and oversight of the nearly $60 billion in IRS funding in the Inflation Reduction Act to modernize its infrastructure and reinvent how it provides services to taxpayers and tax professionals.
Minimum Standards for Tax Preparers
Problem: Anyone may set up shop as a paid federal tax return preparer because the IRS lacks authority to set and enforce minimum standards. This has resulted in widely differing standards at the state level, as well as an increased strain on the tax administration system. Both the National Taxpayer Advocate (NTA) and the Government Accountability Office found unlicensed preparers commit more errors resulting in a loss of tax revenue. Taxpayers are exposed to potential tax deficiencies, penalties, lost refunds, or other mistakes. The Trump and Biden administrations have supported oversight of return preparers in their annual Blue Book proposals.
Solution: Congress should give the IRS authority to require tax preparer minimum standards, including a competency exam, continuing education, and a background check. Paid preparers should be required to obtain a preparer tax identification number (PTIN), pass an examination covering basic Form 1040 tax questions, and lose the right to prepare tax returns for serious malfeasance.
Legislation: The Senate Finance Committee is working on bipartisan legislation that would seek to address this problem, and NAEA strongly supports those efforts. Representative Jimmy Panetta (D-CA) has been a leader on this issue in the House and continues to pursue legislation. In 2021, Panetta introduced the Taxpayer Protection and Preparer Proficiency Act. According to Mr. Panetta, “[m]istakes by incompetent tax preparers have led to many taxpayers getting audited or penalized through no fault of their own … [a]nybody who pays for their taxes to be prepared deserves to know that their tax preparers are professional, proficient, and principled and, if not, will be held accountable by the IRS.”
Improving Math Error Notices
Problem: The Internal Revenue Code allows the IRS to make “math error” corrections to tax returns that contain simple math or clerical errors. Math and clerical adjustments are made automatically and require taxpayers to initiate responses to reverse them within 60 days. If the taxpayer does not contest within the 60-day period, the taxpayer forfeits their right to challenge, and the IRS can move forward with its normal collection process. Each year, millions of Americans are negatively affected by this process. The notices are often found to be confusing and vague as they do not explain what error the IRS has corrected or how a taxpayer can contest the adjustment.
Legislation: NAEA supports bipartisan legislation, the Internal Revenue Service Math and Taxpayer Health (IRS MATH) Act, introduced by Senators Bill Cassidy (R-LA) and Elizabeth Warren (D-MA), and Reps. Bill Schneider (D-IL), and Randy Feenstra (R-IA), which would direct the IRS to improve math error notices by requiring clearer explanations of the error corrected. The IRS would also be required to list options for seeking an abatement, prominently display the 60-day period, and notify the taxpayer of abatement determinations.
Modernizing IRS Tools for Tax Professionals
Tax professionals, in particular, play an outsized role as intermediaries between the IRS and more than half of all filers. If the IRS aims to create an efficient, customer-centered tax administration system, it should leverage tax professionals by providing tools for accessing client tax data and communicating with the IRS on behalf of taxpayers. While the agency continues to update its systems, we believe the IRS and related congressional oversight must focus on the following:
Overhaul the Centralized Authorization File (CAF) System and Tax Pro Accounts
Problem: The Taxpayer Bill of Rights clearly states taxpayers have a right to representation. Yet the current system for powers of attorney (POA) and taxpayer information authorization (TIA) requests fails to meet taxpayer or tax pro needs. Despite the IRS’s recent efforts to improve Tax Pro Accounts and link to CAF, tax pros still lack a comprehensive, scalable online account with integrated digital communication tools to access tax information and services.
Solution: The IRS must redesign the CAF function to create frictionless, omnichannel POA and TIA processes (e.g., through fax, the Document Upload Tool, or an API for volume submissions/withdrawals). It also must provide tax pros and trusted practitioner firms user-friendly, instant and secure access to taxpayers’ transcripts, and the ability to manage powers of attorney online.
The Taxpayer Advocate Service (TAS) and Electronic Tax Administration Advisory Committee (ETAAC) have both called on the IRS to enhance Tax Pro Accounts, adding access to self-assistance and digital communication tools and allowing authorized representatives access to all their clients’ tax records. The IRS also must test and focus group with tax pros and tax professional organizations to ensure the tools they launch are functional and meet the needs of tax pros and their clients.
Balanced Enforcement and Taxpayer Notices
Problem: In response to COVID-19, the IRS temporarily suspended liens and levies and other collection activities in March of 2020. Nearly a year later, in response to significant backlogs at the IRS, the agency suspended a dozen additional letters, including non-filer notices and automated notices issued when a taxpayer owes additional tax. While the pause in compliance action was needed, the return to normal operations has been too slow, leading to inconsistent enforcement and poor communication with taxpayers. The IRS has resumed some of its taxpayer communication and compliance notices (e.g., a January initiative to begin mailing letters alerting failure to file a tax return), but more work is needed to provide balanced enforcement.
Solution: Narrowly, resuming the Federal Levy Program would show taxpayers the consequences of ignoring tax debts. More broadly, the IRS should issue enforcement notices in a steady cadence in all areas of exam and collection. And if facing operational challenges, the IRS should still send “soft notices,” which notify taxpayers of actual or potential noncompliance and prompt them to address issues voluntarily, and place alerts of these notices in taxpayers’ online accounts.
IRS Launches New Effort Aimed at High-Income Non-Filers (March 2024)
In a letter to IRS Commissioner Danny Werfel last October, NAEA offered the enrolled agents perspective on the agency’s significant cutback to compliance initiatives and requested IRS start sending reminder notices immediately to non-filers and those with balances due in excess of $10,000.
IRS Announces Delay in Form 1099-K Reporting Threshold for Third Party Platform Payments in 2023 (November 2023)
NAEA asserted the $600 threshold is too low and will lead to taxpayer confusion around which transactions are taxable income and which are more personal and non-taxable. The $600 threshold creates a high compliance burden for small businesses and taxpayers. As a result, IRS plans for a threshold of $5,000 for 2024 to phase in implementation.
IRS Launches Paperless Processing Initiative (August 2023)
The announcement comes as the IRS has been under pressure from NAEA and other stakeholders to show progress in their efforts to modernize the agency and improve customer service with the influx of funding from the Inflation Reduction Act. The paperless processing initiative gives taxpayers the option to go paperless for IRS correspondence by the 2024 tax season and allowing the agency to achieve paperless processing for all returns by the 2025 tax season.
