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National Taxpayer Advocate Reminds Congress of IRS Deficiencies

On April 17, 2018, the Taxpayer Advocate, Nina E. Olson, testified before a Congressional Oversight Committee regarding on-going challenges to the administration of an efficient and effective tax system. Ms. Olson runs the Taxpayer Advocate Service (TAS), an independent office within the Internal Revenue Service (IRS). The Taxpayer Advocate is appointed by and reports directly to the Commissioner of Internal Revenue. The office was created under the Taxpayer Bill of Rights, which became law on July 30, 1996. The office replaced the IRS Office of the Ombudsman. In her testimony, Ms. Olson reviewed the substantial issues facing the IRS. The main issues she commented on include: Since 2010, the IRS has lost approximately 20 percent of its funding and personnel. These reductions have led to systematic cuts to the service level and have prevented the IRS from deploying new technology and improving the efficient and effective administration of the tax law. The...

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Expect Controversy in the Wake of Tax Reform

Tax reform is here to stay (at least for the foreseeable future). The Internal Revenue Service (IRS) may receive additional funds to implement the new tax law. With lowered tax rates, accelerated expensing and forced repatriation of foreign earnings comes an increased risk of an IRS audit. This brave new tax world has left so many questions that tax advisors’ phones have been ringing off the hooks! But as the end of the 2017 year and first quarter of 2018 dust settles, be mindful of the IRS audit to come. The first round of examinations will focus on what taxpayers did in 2017 in expectation of tax reform. Given the 14 percentage point corporate rate differential between 2017 and 2018, there was an incentive to accelerate deductions and defer income last year. Atypical activity may serve as a red flag and trigger IRS scrutiny. For example, numerous taxpayers accelerated their deductions for bonus compensation to ensure that the liability to pay bonuses in...

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