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E-file PINs stolen ... PTIN protest gets class certification ... Trade Act increases minimum failure-to-file penalty

E-file PINs stolen

The IRS revealed in February that thieves had obtained more than 100,000 e-filing personal identification numbers (PINs) by using Social Security numbers (SSNs) the thieves had stolen elsewhere. The automated attack on the IRS website application generating the PINs (which involved a total of 464,000 SSNs) was detected and stopped before more unauthorized PINs were issued, the Service said, and there was no indication that other information associated with the SSNs was compromised. The IRS did not say whether it had received fraudulent e-filed tax returns using the SSN-PIN combinations, but it was notifying the legitimate owners of the SSNs and flagging their accounts to protect against that possibility.

PTIN protest gets class certification

The U.S. District Court for the District of Columbia decided in February that a lawsuit challenging the IRS's requirement that paid tax preparers must obtain a preparer tax identification number (PTIN) and pay a fee could proceed as a class action with respect to declaratory relief. The class, all preparers who had paid the fee, is estimated to be as many as 1.2 million people. However, the court held the plaintiffs had not yet demonstrated the court has subject matter jurisdiction over their request for restitution for fees paid and denied, "subject to reconsideration," class certification with respect to that aspect of their claims (Steele, No. 14-1523 (D.D.C. 2/9/16) (motion granted in part and denied in part)). The lawsuit, filed by two CPAs, claims the IRS lacks authority to charge the fee, but if it does have the authority, the fee should be limited to the Service's actual costs to provide the PTINs, which the plaintiffs say is about one-fifth of what it charges.

Trade Act increases minimum failure-to-file penalty

President Barack Obama on Feb. 24 signed into law the Trade Facilitation and Trade Enforcement Act of 2015, P.L. 114-125, which included a provision increasing the Sec. 6651(a) penalty in certain cases for failing to timely file a required return. The penalty, which applies to income, estate and gift, withholding, and certain excise tax returns, is 5% of the amount required to be shown as tax on the return for a failure to file (not due to reasonable cause or willful neglect) that lasts no more than one month from the due date (without extension), with an additional 5% for each additional month or fraction thereof in which the failure continues, up to an aggregate maximum of 25%. Sec. 6651(a)(3) further prescribes a minimum dollar amount of the penalty for failures that last more than 60 days from the due date. Under prior law, this was the lesser of $135 or the full amount of tax required to be shown on the return. Effective for returns required to be filed in calendar years after 2015, the new law increases the $135 floor to $205.


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.


Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.