Administration introduces




Tax Matters


Tax News

Administration Introduces Its Own IRS Restructuring Bill

Congressman Charles B. Rangel (D-N.Y.) introduced, on behalf of the Clinton administration, a bill to improve the oversight and management of the Internal Revenue Service. The bill, the Internal Revenue Service Improvement Act of 1997 (HR 2428), is intended to implement some of the recommendations of the National Commission on Restructuring the IRS; however, it differs significantly from the commissions recommendations regarding IRS management and governance.

The commission published its recommendations on June 25 (see "IRS Restructuring Commission Calls for Independent Oversight Board; Treasury Strongly Disagrees," JofA, Aug.97). Legislation (HR 2292 and S 1087) already has been introduced in the House and Senate that implements most of the commissions recommendations, including the creation of an independent oversight board that would manage IRS operations (see "New IRS Restructuring Bill," Oct. JofA, p. 28, 1997). Although the Treasury Department agreed publicly that enhanced oversight of the IRS is desirable, it was critical of the commissions proposal to create an independent board, arguing that approach would remove the IRS from executive branch oversight.


Comparing Tax Burden State by State

The administration proposal calls for, instead of an independent board, a management board consisting of senior officials from the Treasury, the IRS and the Office of Management and Budget. The management board would work directly with the secretary of the IRS on its management and operations and be directly involved in decisions concerning modernization of the IRS and tax administration, including reorganization, budget, technology and personnel issues.

The bill also would make the current advisory board, composed of 14 individuals from outside the federal government, a permanent provision in the tax code. The advisory board would advise the IRS secretary and the management board on IRS management and operations, including ways to enhance the fairness of Internal Revenue Code administration.

The bill also would

Taxpayer Relief Act of 1997

How to Implement EIC


The Internal Revenue Service is requesting comments on how it should implement the earned income credit (EIC) due diligence provisions of the recently enacted Taxpayer Relief Act of 1997. Under the new law, effective for 1997 and future years, return preparers must fulfill certain due diligence requirements for returns claiming the EIC. The $100 penalty for failure to meet these requirements is in addition to other penalties that may be imposed under current law. Send your suggestions to Eileen Sherr, AICPA technical manager, by e-mail at esherr@aicpa.org .

  • Establish a five-year term for the IRS commissioner.

  • Streamline the electronic filing system by eliminating many statutory obstacles.

  • Set multiyear funding for the IRS.

  • Create a more flexible management environment for hiring and firing personnel.

  • Require the Treasury secretary and deputy secretary to report to Congress annually on their stewardship of the IRS.

  • Expand responsibilities and independence of the taxpayer advocate.

"This bill should be the basis of a bipartisan effort to create a more efficient, well-managed and responsive IRS," said Rangel in a statement. Cosponsors of the bill include William J. Coyne (D-Pa.), Steny H. Hoyer (D-Md.), Henry A. Waxman (D-Calif.) and Robert T. Matsui (D-Calif.).

Clinton Signs Antibrowsing Bill

President Clinton signed into law legislation that criminalizes the unauthorized inspection of taxpayer records by the Internal Revenue Service, as well as by state and other federal employees. Before the enactment of the Taxpayer Browsing Protection Act (PL 105-35), unauthorized access to or inspection of taxpayer files had not been a criminal offense.

According to the General Accounting Office, there were 1,515 cases in 1994 and 1995 in which IRS employees made unauthorized inspections of taxpayer records. Congressman Bill Archer (R-Tex.), the bills sponsor in the House, said in a statement to the press that although taxpayer records may be provided to the government, such information "belongs to the taxpayer, not to the government, and the government has an obligation to protect the privacy of the taxpayer."

The act provides for a monetary penalty, imprisonment or both for violators. It permits taxpayers to receive awards for civil damages, and it requires that the taxpayer be notified as soon as possible if any person is indicted for inspecting or disclosing a return or return information.

Deputy Treasury Secretary Lawrence H. Summers said IRS employees had been warned about unauthorized access and trained on IRS privacy policies. Taxpayers who suspect an IRS employee is snooping can call the IRS inspection hotline at 800-366-4484.

Tax Files

    All for a Simpler Tax!


    • The National Federation of Independent Business in Washington, D.C., is beginning a grass-roots campaign to replace the entire income tax system by 2001 with something simpler and fairer. The NFIB is urging Congress to create a bipartisan commission to begin work next year on a replacement system. The new system might include a national sales tax and a simplified tax on income that eliminates most deductions and exclusions.

    Separate Ss


    • In a letter to Acting IRS Commissioner Michael P. Dolan, the chairman of the American Institute of CPAs S corporation taxation committee, Theodore B. Stone urged the IRS and Treasury Department not to treat qualified subsidiary elections or terminations made by subchapter S corporations as step transactions. According to Stone, such elections should be treated as separate events, not as part of any other transaction or series of transactions in determining the tax consequences to the parties. The Small Business Job Protection Act of 1996 granted S corporations greater flexibility in treating wholly owned domestic subsidiaries as qualified subchapter S subsidiaries.

    The Benefits of Correct Classification


    • Workers the IRS ruled were misclassified as independent contractors are entitled to participate in pension and stock purchase plans, according to the Ninth Circuit Court of Appeals in Vizcaino v. Microsoft Corp . The workers had signed agreements waiving their rights to certain benefits because they were independent contractors. The IRS overruled the workers classification, requiring Microsoft to withhold federal income taxes and to pay FICA taxes for them. As a result, the benefits waiver is invalid.

    Extending Research Credit


    • Senator Connie Mack (R-Fla.) introduced a bill (S 1131) that would permanently extend the research tax credit. In a statement, Mack said the 13-month extension in the Taxpayer Relief Act of 1997 was "disappointing" and that a permanent extension was "critical to fast-growing research-intensive companies such as those in the computer, telecommunications and biotechnology industries."


SPONSORED REPORT

Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.

QUIZ

News quiz: IRS warning on cyberattacks and a change in pension rules

Once again, the IRS sounds the alarm about a threat from cyberthieves. See how much you know about this and other recent news with this short quiz.

CHECKLIST

Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.