Two dozen members and officers of the National Association of CPA Practitioners took a strong agenda of tax-related issues to Capitol Hill in early May, visiting a score of legislative and committee offices.
The visit is an annual effort by the NCCPAP to educate legislators and congressional staffers on this issues that are most important to tax practitioners and their clients; this year, those included regulating tax preparers, the repercussions of the Tax Cuts and Jobs Act — particularly around Section 199A — and the outsourcing of tax debt collection.
“We try to stay non-political,” explained NCCPAP president Neil Fishman. “We’ll speak to anyone who’ll give us the time. Some of these offices we have ongoing relationships with, and we also met with some new members of Congress.”
“When we set up our meetings, we’re trying to go to the offices where they have a stake in tax law, so you’re not going to someone who’s on a committee for the preservation of the forests, or something like that,” added Sandy Zinman, chair of NCCPAP’s Tax Policy Committee. “If we’re lucky enough to talk to the legislative director, they’re pretty knowledgeable about this stuff, and there were some good conversations. At the Senate Finance Committee, they really understand where we were with a lot of these issues.”
Overall, the association considered this year’s visit to Washington a success. “When we had our post-Hill meeting, the consensus was that most of the issues were well-received,” said Fishman.
Below are some of the primary issues NCCPAP took to Washington:
Regulating tax preparers. NCCPAP supports S. 1192, a bill introduced by Democratic Senators Ron Wyden and Ben Cardin that would give the Internal Revenue Service the authority to regulate tax preparers. (The IRS had previously tried to establish a regulatory regime for preparers, but the 2014 Loving decision shot that down, ruling, among other things, that the agency didn’t have specific legislative authority to regulate preparers.)
Many of the tax practitioners Zinman knows routinely find themselves facing new clients whose previous preparers did shoddy work.
“It’s so important to the profession that real serious professionals are doing the work, and it raises the level of professionalism, and it’s something that we should all be looking for,” he said. “Across the board, anyone who prepares tax returns that I speak with is all in favor of this. We’re willing to have our PTIN numbers on people’s tax returns, we’re willing to have the IRS accumulate all our information — because I don’t want to lose my license. My license is worth more than cheating the IRS out of $10.”
Added Fishman, “If you’re an Enrolled Agent, a CPA or an attorney, there’s someone who can come down on you if you do wrong, but for all the others, there are no repercussions if they do wrong. There has to be accountability on their part as well.”
He noted that NCCPAP had previously recommended making tax preparation fees a page 1 adjustment, so that the return would have to include the preparer’s ID number to claim the deduction: “That way, the IRS has a cross-reference, so they can go to that person and see if they’re reporting that they’re preparing taxes. We’re looking at bringing that back next year.”
Sec. 199A and self-rental. The new rules around Section 199A have caused no end of confusion for tax practitioners, and one area NCCPAP wanted to bring to legislators’ attention was self-rental — where a doctor, say, owns a residence personally but rents part of it to a corporation to serve as their office.
“The AICPA has addressed the issue of rental, and did a really nice job on it with triple net leases and 199A and whether it qualifies as a business,” said Zinman, “but no one as far as I know has really addressed the whole separate issue of self-rental, which is a slightly different animal, and has always been a different type of tax treatment with S corporations.”
Sec. 199A and a marriage penalty. Zinman explained, “One of our members did an analysis and said, ‘Wait a second — there’s a calculation you have to do to determine if you qualify for a credit – the limitation is $157,500 for an individual or married filing separately and its $315,000 for a joint tax return — that’s not really equitable — it’s like the marriage penalty.’ It can fall one way or the other.” As a result, tax pros need to calculate whether their married clients would benefit from filing married-filing-separately to save some money.
“We asked Congress and the IRS to take a look at this,” Zinman noted. “The IRS is saying, that’s in the law, look to Congress to get it changed, but at the Senate Finance Committee, they said they were looking to the IRS to get guidance on this. We said, ‘You’re looking to the IRS, and they’re looking to you for the law.’ There’s a little passing of the buck there.”
Outsourcing of tax debt collection. The IRS is now in the midst of its third congressionally mandated experiment with using private debt collectors to collect tax debts. The NCCPAP is concerned about oversight of the program participants and met with staffers for the Senate Finance Committee to discuss the issue.
Staffers were positive about the success of the program this time around, “but who knows how regulated the private debt collectors really are being. That’s always our concern,” said Fishman. “It doesn’t appear to be bringing in the amount of money they were anticipating. This may be more successful, but not as successful as some people thought it would it be.”
Perhaps more important, he noted, is the fact that the federal government already has a debt collector: “The IRS is your collection arm — why cut their resources?”
Transportation benefits. Qualified fringe transportation benefits are now taxable, but one of NCCPAP’s members wrote an analysis explaining that it would be beneficial to the economy to leave them untaxed.
Economic nexus. With last year’s Wayfair decision by the Supreme Court causing enormous disruption in the world of state sales tax and e-commerce, the NCCPAP sees a need for the creation of a new economic nexus standard that is clear and consistent.
