well, “quick” and “easy” on paper. in real life at the irs, it’s different.
by 卡塔尔世界杯常规比赛时间
there’s always room for improvement—even (or, especially?) at the internal revenue service.
for one thing—or really eight things—the process of filing returns could stand a little fine-tuning.
the only problem is, changing some parts of the process require changing the tax code, and that requires congressional legislation, and that requires…well, no one really knows.
more tax: imagine a fully online irs | the real cost of interstate sales tax | irs at death’s door? | beyond tax prep: the big cha-ching! | crisis at the irs | the irs’s 10 biggest problems | fear and loathing for tax season ’22 | padar joins vc-backed tax fintech for banks | covid chokes an already crippled irs | tax regs for the metaverse | 10 steps to a superior tax department | accountants critical of competitor price-cutting | automate busy season with apps you already use | sales & use tax costs are higher than anyone thought | survey: nobody loves the wayfair decision | busy season forecast: more chaos | a woman named wanda leaves an ira nightmare | are you under-pricing your client accounting services? | your best advice: get smart, get tech, get moving | worries for small business clients |
- more in tax season here | more in research & surveys here | more in the 卡塔尔世界杯常规比赛时间 shop here
pro members: log in here or 2022世界杯足球排名 today.
here are the eight problems with the process of filing tax returns identified by the taxpayer advocate service—and just as many simple solutions.
1 – treat electronically submitted tax payments and documents as timely if submitted before deadline.
the problem
there’s a “mailbox rule” that considers a tax return or other document timely if it’s postmarked by midnight of its deadline date. but that’s only for stuff mailed through the postal system.
there’s no such rule for electronic filing. that shouldn’t be a problem, given the speed of light, but an actual rule reduces 186,000 miles per second down to a speed of a usps delivery truck.
the rule: the on-time threshold is when the digitally dispatched documents arrive at the irs. and it turns out that the speed of light won’t save a tardy taxpayer. though the irs encourages taxpayers to use its electronic federal tax payment system, the eftps webpage displays this warning: “payments using this web site or our voice response system must be scheduled by 8 p.m. et the day before the due date to be received timely by the irs.” (emphasis in original)
in other words, using snail mail gives the taxpayer an extra 28 hours to file a return.
the solution
easy: amend internal revenue code § 7502 to apply the mail box rule to digital filings.
2 – authorize irs to establish minimum competency standards for tax preparers
the problem
卡塔尔世界杯常规比赛时间 recently discussed this issue. research has shown that non-credentialed tax return preparers tend (overwhelmingly) to prepare inaccurate returns, and their ethics are often questionable.
requiring some level of competency and something to the effect of a license to practice would seem to be the obvious solution. alas, a district court ruled that the irs cannot require competency or certification. only congress can do that.
the solution
easy. amend title 31, § 330 to allow the irs to establish minimum standards for federal tax return preparers.
3 – require irs to work with software companies to incorporate scanning technology for individual paper returns.
the problem
ninety percent of tax returns are filed electronically. but that leaves some 15 million returns on paper, all of them vulnerable to transcription error. and the cost of processing paper is astronomically higher, $15.21 vs. 36 cents. ironically, most of those paper returns were prepared electronically.
existing technology, already in use in many states, allows the return information to be printed in “2-d barcoding,” which allows easy, accurate scanning. the irs could be working with tax software companies to standardize this technology, but—more irony here—it can’t afford to.
the solution
easy. provide the irs with multiyear funding for the purchase and implementation of scanning technology.
4 – extend the time for small businesses to make subchapter s elections
the problem
an s corporation may elect to be treated as a passthrough entity at any time during the preceding taxable year or by the 15th of the third month of the current taxable year.
trouble is, many new small business owners don’t find out about the deadline until they hire a tax practitioner after the deadline. failure to make a timely election can have adverse tax consequences, such as incurring taxation at the corporate level and rendering shareholders ineligible to deduct operating losses on their individual returns. they might also end up paying fines for inadvertently inaccurate returns. requesting a late s corporation election is possible but complicated.
the solution
easy. amend irc § 1362(b) (1) to allow a small business to elect to be an s corporation by simply checking a box on its first timely filed form 1120s.
5 – adjust individual estimated tax payment deadline to occur quarterly
the problem
estimated tax payments are due on the 15th of april, june, september, and january.
those are quarterly payments, but they don’t coincide with calendar quarters. the april to june deadlines are period is just two months. june to september is three months. september to january is four months, and january to april is three months.
trouble is, many small businesses keep their books based on regular three-month quarters. furthermore, the uneven periods complicate the calculation of net income estimates. workers in the gig economy can get especially confused.
the solution
easy: amend irc § 6654(c)(2) to set deadlines 15 days after the end of each calendar quarter.
6 – harmonize reporting requirements for taxpayers subject to both the report of foreign bank and financial accounts and the foreign account tax compliance act
the problem
the bank secrecy act requires taxpayers to report foreign accounts with aggregate value exceeding $10,000.
meanwhile, the foreign account tax compliance act requires certain taxpayers to report foreign assets exceeding specified thresholds on their tax returns.
the two laws result in overlapping filing requirements, which can be a burden on taxpayers, especially those living overseas.
the solution
easy:
-
- amend irc § 6038d to eliminate duplicative reporting of assets on form 8938
- amend irc § 1471 to exclude financial accounts of citizens resident in other countries.
7 – adjust the filing threshold for taxpayers filing as married filing separately and nonresident alien individuals
the problem
individuals must file tax returns if their gross income exceeds a) a certain exemption amount, and b) an applicable standard deduction amount.
but some individuals must file if their gross income exceeds solely the exemption amount. these unfortunate individuals are
-
- married u.s. taxpayers filing separate returns (mfss), and
- nonresident aliens, regardless of their filing status.
under the rules of the tax cuts and jobs act of 2017, the exemption threshold for these two groups of taxpayers dropped from $4,150 to effectively $0. in other words, income of a penny or more requires an mfs or alien resident to file a return.
the solution
easy: amend irc § 6012(a)(1)(a) to give mfs and alien resident taxpayers the same exemption threshold as all other taxpayers.
8 – amend the lookback period for allowing tax credits or refunds under irc § 6511(b)(2)(a) to include the period of any disaster-related postponement of time for filing a return under irc § 7508a.
the problem
taxpayers who have overpaid their taxes may claim a credit or refund three years after the return was filed or two years from the time the tax was paid.
but there are limits to the lookback period.
-
- those claiming overpayment within three years of filing can receive credit or refund for payments within those three years.
- those who do not claim overpayment within three years are entitled to credit or refund for payments with only two years.
it gets more complicated when there is a federally declared disaster that allows the secretary of the treasury (which oversees the irs) to “disregard” certain deadlines. but does “disregard” mean “postpone”?
when a filing deadline is postponed, the three-year lookback period is not extended to include the period of the postponement.
the solution
easy. amend irc § 66511(b)(2)(a) to provide that when a postponement of a deadline is declared due to a federally declared disaster, the amounts paid in the three-year period preceding the filing of a claim plus the period of the postponement be eligible for credit or refund.
all of these solutions need congressional action to be effected. the changes to the existing tax code are minor and not even worth debating, and each would make the process of paying taxes a little less onerous.