November 23rd, 2010 11:13 EST
Paying Federal Taxes Just Got More Expensive
New regulations on preparers increase price tag
Paying federal taxes just got more expensive.
With the Obama administration fiscal year 2010 federal budget deficit coming in at $1.3 trillion, the IRS has implemented new rules to make sure tax preparers are sufficiently regulated so that they can be dismissed from the profession if they fail to collect all possible taxes from taxpayers.
In the process, the added costs tax prepares face in complying with new IRS rules are certain to be passed on to taxpayers, making the costs of paying federal taxes even more expensive for any taxpayer wanting or needing professional help.
According to the IRS website, all paid tax preparers must apply for or renew their mandatory "preparer tax identification number," or PTIN, to become registered as an official tax preparer by Jan. 1, 2011.
By mid-2011, the IRS expects to have available an IRS competency exam that federal tax preparers must pass to demonstrate their proficiency at preparing federal tax returns.
Attorneys and CPAs are exempt from the test requirement.
Those who register and get a PTIN before the competency exam is available will have until the end of 2013 to take and pass the exam.
Additionally, registered federal tax preparers will face a new continuing education requirement of 15 hours per year, with required courses to include three hours of federal tax law updates, two hours of ethics and 10 hours of other federal tax law.
Those meeting IRS requirements will be certified as an IRS registered tax return preparer.
More than 1 million federal tax preparers have already obtained their PTIN, but they must renew before Jan. 1, 2011, to be qualified to work on 2010 tax returns.
The IRS estimates that approximately 139 million tax returns for the 2010 tax year will be filed nationally in 2011, according to USA Today.
More than 60 percent of these will be put together by a tax preparer, the IRS estimates.
The American Institute of Certified Public Accountants, or AICPA, estimates that the new IRS rules will impact some 1.2 million paid tax preparers, costing smaller firms at least $390 million in the first year of implementation - costs that inevitably will be passed on to taxpayers.
"The estimated costs in connection with the IRS` proposed regulatory regime are substantial," Alan R. Einhorn, chair of the AICPA`s tax executive committee, said in a letter written last week to the IRS, estimating the new regulations could rise to the level of hundreds of millions of dollars of new costs imposed on small CPA firm businesses alone.
Einhorn urged that the IRS "should not paint the CPA firm with the same broad brush as the unenrolled preparer based on the fact that licensed CPA professionals who are responsible for the work of their staff are regulated by state boards of accountancy and must meet CE requirements that generally exceed the levels proposed by the IRS."
Predictably, the IRS does not appear inclined to listen to the CPAs` pleas.
Obamacare to cost $1 billion in salaries for new IRS agents
WND reported in March that collecting taxes under Obamacare will cost the federal government more than $1 billion a year in salaries alone, Republicans in Congress estimated.
The Obamacare legislation passed by Congress will require the IRS to hire as many as 16,000 additional auditors, agents and other employees to investigate and collect billions in the new taxes the legislations imposed on Americans, according to the House Committee on Ways and Means Committee Republican Report prepared for ranking member Rep. Dave Camp, R-Mich., and Rep. Charles Boustany, R-La., on March 18, 2010.
In March 2009, the federal government`s average annual salary was $42,035 for tax examiners, $91,507 for internal revenue agents and $63,547 for tax specialists, according to the Bureau of Labor Statistics` "Occupational Outlook Handbook, 2010-11 Edition."
Averaging these three pay grade averages yields an estimated $65,696 per IRS tax specialist hired, assuming an equal number of tax examiners, internal revenue agents and tax specialists will be employed.
The resulting conclusion is that the 16,500 new IRS personnel needed to collect taxes under the Obamacare legislation will cost the federal government somewhere in the realm of $1,083,989,499.
The IRS media office objected that Joint Committee on Taxation publication JCX-18-10, issued on March 21, titled, "Technical Explanation of the Revenue Provisions of the Reconciliation Act of 2010," "[T}he official name for the Obamacare legislation, does not specify any number of IRS personnel that must be hired to implement the tax provisions of the bill.
Rep. Kevin Brady, R-Texas, disagrees.
"The Internal Revenue Service will see its largest expansion since withholding taxes were enacted during World War II to enforce the glut of new tax mandates and penalties included in the Democrats` latest health care plan," states a press release on Brady`s congressional website.
Brady is the ranking Republican on the Joint Economic Committee.
"We need thousands of new doctors and nurses in America, not thousands more IRS agents," Brady insists. "In addition to more complicated tax returns, families and small businesses will be forced to reveal further tax information to the IRS, provide proof of `government approved` health care and submit detailed sales information to comply with new excise taxes."
By 2016, IRS will required under the Obamacare legislation to monitor the health insurance status of individuals and businesses throughout the nation and determine if the health insurance purchased as reported on tax returns meets the level of coverage required by the law, or pays all required fees and penalties for failure to do so.
IRS cracks down on offshore bank accounts
Determined to collect every last dollar of income tax due, the IRS has begun cracking down on U.S. citizens with offshore bank accounts, so much so that tax attorneys and planners are being inundated by inquiries from clients who believed their offshore accounts were legal.
"Douglas Shulman, the IRS commissioner, thinks everyone with an offshore account is a hardened criminal," Kent Lawson, a tax attorney, told the North Bay Business Journal in California.
Lawson claims there are 17,000 cases in the U.S. needing to amend taxes to reflect the IRS crackdown on offshore bank accounts, even when a foreign bank account is completely innocent of wrongdoing.
IRS penalties on unreported offshore bank accounts have now been increased to possibly 50 percent of the account balance in cases where the violation is found to be willful.
ABOUT THE AUTHOR: Jerome R. Corsi received a Ph.D. from Harvard University in political science in 1972. He is the author of the #1 New York Times bestselling books THE OBAMA NATION: LEFTIST POLITICS AND THE CULT OF PERSONALITY and the co-author of UNFIT FOR COMMAND: SWIFT BOAT VETERANS SPEAK OUT AGAINST JOHN KERRY. He is also the author of AMERICA FOR SALE, THE LATE GREAT U.S.A., and WHY ISRAEL CAN`T WAIT. Currently, Dr. Corsi is a Senior Managing Director in the Financial Services Group at Gilford Securities as well as a senior staff writer for WMD.com.
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ABOUT RED ALERT: Jerome Corsi`s RED ALERT is your weekly, global financial strategies newsletter. Designed to be your guide to economic trends in the best of times and the worst of times, it is edited by New York Times best-selling author Jerome Corsi, Senior Managing Director of the Financial Services Group at Gilford Securities as well as a WND senior staff writer and columnist. For 25 years, Corsi worked with banks throughout the U.S. and the world developing financial services marketing companies to assist banks in establishing broker/dealers and insurance subsidiaries to provide financial planning products and services to their retail customers. Corsi developed three third-party financial services marketing firms that reached annual gross sales levels of $1 billion in annuities and equal volume in mutual funds. Corsi received his Ph.D. in political science from Harvard University in 1972.
By Dr. Jerome Corsi
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