Commissioner Calls on More CPAs to File Electronically

M argaret Milner Richardson, commissioner of the Internal Revenue Service, said she was discouraged that so few CPAs filed their clients returns electronically. Richardson told members attending the American Institute of CPAs fall tax division conference in Orlando, Florida, that the AICPA Survey of Practitioner Attitudes Toward the IRS, published last April, revealed that over three out of four respondents had never filed an electronic return with the IRS and that one in four who had done so did not plan to in 1996. This is not good news for those of us at the IRS who are working to reduce paper and expand electronic tax administration, said Richardson.

Edward S. Karl, AICPA director of taxation, told the Journal the AICPA was involved in ongoing discussions with IRS operations personnel to explain how IRS systems could be modified to accommodate CPAs. Many CPAs cannot take advantage of electronic filing because there are restrictions on the complexity and number of returns that can be filed electronically, said Karl. The tax practitioner who prepares the most complicated returns is the least likely to be able to file electronically; generally, CPAs tend to file the more complicated returns, said Karl. He also said the AICPA had published Electronic Tax Return Filing Practice Guide in July 1995 to encourage members who could file electronically to do so. The practice guide (order no. 024012JA) is available for $17.50 by calling the AICPA order department at 800-862-4272.

Companies get a head start
The commissioner was more enthusiastic about the number of companies that have signed up early to use the Electronic Federal Tax Payment System (EFTPS). Richardson said that by December 1996, the IRS had received over 600,000 enrollment forms for EFTPS and that by spring 1997 she anticipated an explosive growth in the number of companies using the payment system. The commissioner said she expected even more companies to enroll early when they learn how easy EFTPS is to use.

In 1993, Congress mandated a major increase in the amount of tax revenues that had to be collected electronically. As a result, 1.2 million companies—all of whom had paid over $50,000 in employment taxes during 1995—must begin using EFTPS by July 1, 1997. Richardson said that by 1999 all companies making deposits in excess of $20,000 also would be required to use EFTPS. We hope taxpayers will not wait until they are required to use EFTPS, said Richardson. She said she would like to make the electronic payment program a collaborative effort between the IRS and businesses.

Filing by phone
Richardson said she expected as many as 23 million taxpayers who use form 1040EZ to file using the telephone in 1997. She also said that last year over 10 million taxpayers had refunds deposited in their bank accounts and she suggested more businesses promote the direct deposit refunds.

More information on the various IRS electronic payment and filing systems is available on the IRS World Wide Web site at .

New Rules for Tax-Exempt and Government Benefit Plans

T he Internal Revenue Service issued new nondiscrimination rules to qualified employee benefit plans maintained by governments and tax-exempt organizations under Internal Revenue Code section 501(a). Notice 96-64 is a result of modifications made in the Small Business Job Protection Act of 1996.

The IRS said that because information in notice nos. 92-36 and 89-23 and announcement 95-48 was no longer adequate, practitioners should look to 96-64 for guidance. For government plans, the new rules

  • Extend the date for applying certain regulations until plan years beginning on or after October 1, 1997.
  • Clarify certain nondiscrimination and minimum coverage rules and provide a special option for applying nondiscrimination tests for years prior to 1999.
  • Allow governments until plan year 2001 to apply for a reasonable, good faith interpretation of existing law in determining which entities must be aggregated.
  • r plans maintained by tax-exempt organizations, the new rules
  • Also extend the date for applying certain regulations until the first plan year beginning on or after October 1, 1997.
  • Extend the remedial amendment period and other administrative relief until the last day of the first plan year beginning on or after October 1, 1997.
  • Extend through the 1997 plan year relief under existing regulations permitting employees of certain tax-exempt entities to be disregarded in applying section 410(b) to a section 401(k) plan.
  • Allow governments until plan year 2001 to apply for a reasonable, good faith interpretation of existing law in determining which entities must be aggregated.

Comments or suggestions in response to this notice should be submitted to the IRS by April 30, 1997. Address comments to CC:DOM: CORP:T:R (Notice 96-64), Room 5226, IRS, POB 7604, Ben Franklin Station, Washington, D.C. 20044. Comments also can be submitted electronically via the IRS World Wide Web site at http://www.irs.ustreas. gov/prod/tax_regs/comments.html.

Invalid ID Numbers Will Delay Refunds

A ccording to an Internal Revenue Service news release (IR 95-50), individual income tax returns that do not include valid Social Security numbers (SSNs) or IRS-assigned individual taxpayer identification numbers (ITINs) will be held up in processing, with all related claims possibly disallowed and the tax readjusted. The IRS also said that previously issued temporary identification numbers no longer are valid.

The IRS said taxpayers who are not U.S. citizens and do not have SSNs should apply for new ITINs as soon as possible. A taxpayer also must apply for an ITIN if he or she is claimed as a dependent by a U.S. citizen, married to a U.S. citizen who files a joint return, can be claimed as an exemption on a U.S. spouses return or is filing a U.S. tax return to claim a refund. Taxpayers whose returns have missing or incorrect numbers will be asked to call a special toll-free number. The IRS said that if a taxpayer in fact has a valid ID, the phone call should settle the matter.

How to file
U.S. citizens and foreign individuals legally entitled to work in the United States can obtain SSNs by filing Form SS-5, Application for Social Security Card . All others required to file U.S. tax returns will need to complete Form W-7, Individual Application for IRS Taxpayer Identification Number . A copy of form W-7 is available from the IRS by calling 800-TAX-FORM (800-829-3676) or by dialing 703-487-4160 from a fax machine and requesting item no. 10229. A copy of the form also can be obtained electronically via the IRS World Wide Web site at
http://www.irs.ustreas. gov or the IRS bulletin board at 703-321-8020.

    • The Internal Revenue Service issued a market segment specialization program (MSSP) audit technique guide on the oil and gas industry. According to the IRS, MSSP guides are used to help IRS examiners focus on significant issues in a particular industry or class of taxpayer. The guide will bring examiners up to speed on vehicles used for hedging and claiming ordinary vs. capital losses.
    • The Bureau of National Affairs, Inc. and its subsidiary Tax Management Inc. published a resource guide for taxpayers participating in the IRSs advanced pricing agreement (APA) program. The APA Source Book includes information on the weeks of the month the IRS prefers to hold prefiling conferences, what IRS officials will record during a meeting and the data the IRS will record in the ABA database. The source book can be obtained for $125 by calling 800-223-7270.
    • In an effort to encourage millions of taxpayers to file their returns by telephone, the IRS will mail certain taxpayers a TeleFile worksheet instead of a tax form. Taxpayers with no dependents, taxable income of less than $50,000 from wages, interest or unemployment compensation and the same mailing address as the year before are eligible to use TeleFile.

Where to find January’s flipbook issue

Starting this month, all Association magazines — the Journal of Accountancy, The Tax Adviser, and FM magazine (coming in February) — are completely digital. Read more about the change and get tips on how to access the new flipbook digital issues.


Get your clients ready for tax season

Upon its enactment in March, the American Rescue Plan Act (ARPA) introduced many new tax changes, some of which retroactively affected 2020 returns. Making the right moves now can help you mitigate any surprises heading into 2022.