Publication 5316 (Rev. 11-2017)
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Report Internal Revenue Service Advisory Council Annual Report November 2017 Publication 5316 (Rev. 11-2017) Catalog Number 71824A Department of the Treasury Internal Revenue Service www.irs.gov The Internal Revenue Service Advisory Council 2017 Public Report Table of Contents GENERAL REPORT ........................................................................................................3 ISSUE ONE: THE ESSENTIAL NEED TO PROVIDE THE INTERNAL REVENUE SERVICE WITH ADEQUATE FUNDS TO FULFILL ITS MISSION .....................................................................................................................12 ISSUE TWO: ATTENDANCE BY COMPLIANCE AND COUNSEL PERSONNEL AT APPEALS DIVISION CONFERENCES......................................15 ISSUE THREE: THE FUTURE OF THE IRSAC ......................................................20 LARGE BUSINESS & INTERNATIONAL SUBGROUP REPORT ........................23 ISSUE ONE: LB&I EXAMINATION PROCESS ......................................................25 ISSUE TWO: CAMPAIGNS .......................................................................................31 ISSUE THREE: SCHEDULE UTP .............................................................................37 DIGITAL SERVICES SUBGROUP REPORT ............................................................43 ISSUE ONE: TAX PROFESSIONAL ACCOUNT ....................................................46 ISSUE TWO: THIRD-PARTY APPLICATION PROGRAM INTERFACES (APIs) ..................................................................................................51 ISSUE THREE: FORM 2848 POWER OF ATTORNEY AND DECLARATION OF REPRESENTATIVE .............................................................................................56 SMALL BUSINESS/SELF-EMPLOYED AND WAGE & INVESTMENT SUBGROUP REPORT ....................................................................................................63 ISSUE ONE: W-2 VERIFICATION CODES AND ENGAGING TAX PRACTITIONERS .....................................................................................................66 ISSUE TWO: ACCOUNT LOCK/UNLOCK............................................................ 72 ISSUE THREE: MARKETING/PROMOTING PRIORITY PRACTITIONER SERVICE IMPROVEMENTS TO THE PRACTITIONER COMMUNITY ............77 ISSUE FOUR: TAXPAYER AND PRACTITIONER CONCERNS REGARDING PRIVATE DEBT COLLECTION .....................................................83 ISSUE FIVE: COMMENTS ON PROPOSED REVISED COLLECTION NOTICES ...................................................................................................................90 OFFICE OF PROFESSIONAL RESPONSIBILITY SUBGROUP REPORT ..........99 ISSUE ONE: THE NEED FOR EXPRESS STATUTORY AUTHORITY TO CONFIRM THE TREASURY DEPARTMENT’S ABILITY TO ESTABLISH, ENFORCE, AND REQUIRE MINIMUM STANDARDS OF COMPETENCE FOR ALL TAX PRACTITIONERS, INCLUDING TAX RETURN PREPARERS ......104 ISSUE TWO: EDUCATING PRACTITIONERS AND PREPARERS ABOUT THEIR RESPONSIBILITIES UNDER THE INTERNAL REVENUE CODE’S PENALTY PROVISIONS AND THE TREASURY DEPARTMENT’S PRACTICE STANDARDS CONTAINED IN CIRCULAR 23O .........................111 ISSUE THREE: GENERALLY ACCEPTED APPRAISAL STANDARDS IN IRS VALUATIONS................................................................................................118 APPENDIX .....................................................................................................................131 IRSAC MEMBER BIOGRAPHIES ............................................................................145 2 INTERNAL REVENUE SERVICE ADVISORY COUNCIL GENERAL REPORT TIMOTHY J. McCORMALLY, Chair DENNIS J. VENTRY, JR., Vice-Chair PATRICIA H. ATWOOD BRENDA M. BIANCULLI EUNKYONG CHOI THOMAS A. CULLINAN ESTARRE (STAR) FISCHER NEIL H. FISHMAN SHARYN M. FISK KATHY R. HETTICK STUART M. HURWITZ SHELDON M. KAY PHYLLIS JO KUBEY CHARLES (SANDY) MACFARLANE JOHN F. McDERMOTT SHAWN R. O’BRIEN WALTER PAGANO DONALD H. READ KEVIN A. RICHARDS STEPHANIE SALAVEJUS DAVE THOMPSON, JR. NOVEMBER 15, 2017 3 General Report of the Internal Revenue Service Advisory Council The predecessor to the current Internal Revenue Service Advisory Council—which was originally called the Commissioner’s Advisory Group—was first established in 1953, a year before the enactment of the Internal Revenue Code of 1954 and the reorganization of the “Bureau of Internal Revenue” into the “Internal Revenue Service.” The IRSAC’s operations are now governed by the Federal Advisory Committee Act (FACA), a “government in the sunshine” law enacted in 1972, which requires that advisory groups’ advice be made public. As a Federal Advisory Committee, the IRSAC’s purpose is to serve as an advisory body to the Commissioner of Internal Revenue. According to its charter, the IRSAC was formed to provide an organized public forum between IRS officials and representatives of the public for discussing relevant tax administration issues. Because a central purpose of the FACA is to ensure transparency in the work of government agencies and to keep Congress—and the public—informed of the activities of various advisory bodies, the IRSAC is required to hold a public meeting each year and to memorialize its advice in at least one written, public report during the year. This report summarizes the IRSAC’s work during 2017 and presents our recommendations to the Commissioner and other IRS leaders. The IRSAC membership is balanced to include representation from the taxpaying public, the tax professional community, small and large businesses, academia, and the payroll community. The IRSAC currently consists of 21 members with substantial experience and diverse tax backgrounds, many active in professional organizations but all selected in their individual capacities because of their expertise, interest in, and 4 commitment to improving federal tax administration. Specific subject matter and technical expertise in federal tax administration issues is generally required to help members advance the IRSAC’s mission. This year’s IRSAC includes enrolled agents, certified public accountants, and lawyers. These members, who come from firms of varying sizes, help taxpayers prepare and file their tax returns and otherwise comply with the law, and they represent taxpayers in disputes with the IRS, both administratively and in court. The group also includes law and accounting professors, a state revenue official, a large city taxpayer advocate, a corporate tax executive, an appraiser, and a software developer. In sum, the IRSAC members interact with all operating divisions of the IRS, including Appeals and the Office of Chief Counsel, as well as with taxpayers of all sizes and types (from low-income families, trusts, and estates to multinational corporations, passthrough entities, and nonprofit organizations). Collectively, they represent the agency’s major stakeholders, customer segments, and a broad cross-section of the taxpaying public. The members of the IRSAC are volunteers, are bound by a duty of confidentiality, and receive no compensation for their service. They eschew conflicts of interest and fully subscribe to the principle that the tax system will operate most effectively when the IRS, taxpayers, their representatives, and other stakeholders work together collaboratively. As a group, the IRSAC adheres to a consensus model of decision-making. Working with IRS leadership, the IRSAC reviews existing practices and procedures, and makes recommendations on both existing and emerging tax administration issues. In addition, the IRSAC suggests operational improvements, conveys the public’s views on professional standards and best practices for tax professionals and IRS activities, 5 offers constructive observations regarding current or proposed IRS policies, programs, and procedures, and advises the Commissioner and senior IRS executives on substantive tax administration issues. The members appreciate the assistance and support provided by personnel from the IRS Office of National Public Liaison (NPL) and the operating divisions, specifically including Melvin Hardy, Director, Office of National Public Liaison; John Lipold, Chief, Relationship Management, NPL; Anna Millikan, NPL Program Manager; Maria Jaramillo, NPL; Brian Ward, NPL; Johnnie Beale, Wage & Investment; Rose Smith, Online Services; and Mary (Maggie) Monahan, Large Business & International. The Council is grateful for the support provided by IRS executives and Operating Division personnel throughout the year and we thank them for their commitment to the IRS’s mission and for engaging in the meaningful discussions and dialogue that each subgroup held on numerous important issues. Knowing the demands on IRS executives and other IRS representatives, the IRSAC sincerely appreciates the time and effort devoted by them to the Council. Finally, we note that the fixed duration of the term of the Commissioner of Internal Revenue means that John A. Koskinen’s service as the head of the Internal Revenue Service will end before this report is released in conjunction with the IRSAC’s public meeting on November 15, 2017. The members of the IRSAC, individually and as a group, express their appreciation to Mr. Koskinen for his service to the nation as Commissioner. The group’s sentiments were conveyed directly to the Commissioner before his departure in a letter that reads, in part: The daunting challenges confronting the agency—including budget constraints, antiquated IT systems, identity theft efforts, and mandates to 6 implement new legislation as complicated, capacious,