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A recent article from Bloomberg’s Daily Tax Report® says that the House Ways and Means Committee is advancing a legislative package to retool the IRS – but will it work? The House Ways and Means Committee voted 38-0 to advance a package of 12 bills aimed at retooling the IRS.
The package, released April 10 by Oversight Subcommittee Chairman Lynn Jenkins (R-Kan.) and ranking member John Lewis (D-Ga.), would create a new independent Internal Revenue Service Office of Appeals and establish an income threshold for referring taxpayers to the agency’s controversial private debt collection program. Provisions include measures to enhance cybersecurity and prevent identity fraud, modernize the agency’s information technology systems, and improve customer service.
“It’s been 20 years since Congress and the Ways & Means Committee last considered major legislation to overhaul the IRS,” Committee Chairman Kevin Brady (R-Texas) said April 11 in his opening statement at the markup of the legislation. “During that time much has changed, and the IRS must change with it.”
Unlike the IRS Restructuring and Reform Act of 1998, the legislative package wouldn’t require any major shifts in the agency’s organizational structure. The package would, however, require the IRS to send Congress by Sept. 30, 2020, a comprehensive written plan for reorganizing the agency, incorporating priorities laid out by lawmakers—including emphasis on taxpayer services and streamlining of the agency’s structure. Brady told reporters April 10 that this long-term approach stemmed partially from Congress’s desire to give the IRS a buffer between implementing the new tax law and considering a major overhaul of its structure. Brady offered 12 amendments—one for each bill—that were primarily administrative and clarifying in nature, all of which were adopted.
Here are the 12 proposals the committee approved: • H.R. 5444: The bill, titled the “Taxpayer First Act,” would establish a new IRS Independent Office of Appeals. The bill also proposes a number of “organizational modernization” measures, including eliminating the IRS Oversight Board and reforms to the Office of the National Taxpayer Advocate. The bill also requires the IRS to bring Congress a reorganization plan by Sept. 30, 2020. • H.R. 5445: The bill, titled the “21st Century IRS Act,” would require the Secretary of Treasury to work with public and private sector partners to address identity theft refund fraud. The bill would also require the IRS to appoint an IRS chief information officer who would be responsible for the development and maintenance of information technology at the agency. • H.R. 2901: The bill, titled the “Volunteer Income Tax Assistance Permanence Act of 2017,” would codify the Volunteer Income Tax Assistance program— a program created by the IRS in 1969 that provides matching grants to fund tax return preparation and filing services for low-income taxpayers—and allow the Secretary of Treasury to allocate up to $30 million in matching grants for low-income tax return preparation programs. • H.R. 5440: The bill requires the IRS to provide a 90-day notice in advance of closing a taxpayer assistance center and provide a report to Congress explaining the reasons for a proposed closure. • H.R. 5438: The bill allows Treasury Department officials and employees to refer taxpayers to qualified low-income taxpayer clinics for advice and assistance. • H.R. 5446: The bill would amend the tax code rules for streamlined seizure and sale of perishable goods. • H.R. 5437: The bill would require the IRS to establish a program that would require the IRS to issue an identity protection personal identification number to any taxpayer within five years. The proposal is modeled after a pilot program launched by the IRS in 2011, which allowed the agency to issue personal identification numbers to verify taxpayer identities on filed tax returns. • H.R. 5439: The bill would require the IRS to create a centralized team of specially trained employees that would manage taxpayer identity theft cases to completion. • H.R. 5443: The bill would require all tax-exempt organizations to electronically file their Form 990 or Form 8872 tax returns and statements and instructs the IRS to make the information on the returns publicly available. Under current law, only tax exempts that file at least 250 returns in a given tax year and have $10 million or more in total assets are required to file Forms 990 electronically. The draft bill text also provides “transition relief” for “certain small organizations,” allowing the IRS to delay this requirement for those organizations for up to two years. • H.R. 4403: The bill, titled the “Moving Americans Privacy Protection Act,” would amend the Tariff Act of 1930 by U.S. Customs and Border Protection to ensure Social Security numbers, passport numbers, and residential addresses are removed from the manifest of vessels or aircraft before being publicly disclosed. • H.R. 1512: The bill, titled the “Social Security Child Protection Act of 2017,” would amend Title II of the Social Security Act and allow new Social Security account numbers to be reissued to young children “in cases where confidentiality has been compromised” due to identity theft. • H.R. 5192: The bill, titled the “Protecting Children from Identity Theft Act,” would authorize the commissioner of Social Security to provide fraud protection data, including the names, birth dates, and Social Security numbers of individuals, to certain financial institutions or service providers for the purposes of addressing identity fraud.
There’s good news and bad news, according to the article. While it’s good to see Democrats and Republicans working together on anything, budget cuts to the IRS over the years have hurt the agency’s ability to modernize its information technology systems.
Rep. Suzan DelBene (D-Wash.) said, “After hearing from IRS administrators and others over the past couple of years, I think we may be in or approaching the red zone of becoming too broken to fix,” she said. “We need to be making smart investments in IRS technology today before they become increasingly insurmountable and expensive tomorrow.”
A Department of Labor (DOL) rule intended to protect unsophisticated investors from brokers, dealers and insurance professionals who sell IRAs as part of employee benefits packages has been vacated by the Fifth Circuit Court of Appeals, overturning a Dallas district court that had supported its application. A recent article in Forbes, “Impact On IRAs From Appeals Court Striking Down Department Of Labor's Fiduciary Rule,” explains what this means for the investment community and for employees.
The Fiduciary Rule is actually a group of seven rules that reinterpret the term “investment advice fiduciary” and redefine exemptions to provisions about fiduciaries under ERISA (Employee Retirement Income Security Act). ERISA was put into place originally to protect employee benefits from unscrupulous employers, including IRAs and disability insurance policies, among others.
The Obama administration wanted to put this rule into effect based on the apparent conflict of interest of a broker, dealer or insurance professional whose interest could conflict with the best interests and needs of employees.
From the start there had been tremendous push-back by the financial services industry on the DOL rule. This lawsuit was brought by several industry groups that oppose the rule, including the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute. In 2017, a Dallas district court upheld the DOL rule. On March 15, 2018, the industry conclusively won in their appeal.
The new Fiduciary rules offered retail IRA investors a higher level of financial advisory services. However, the Appeals Court ruled that the DOL overstepped its authority in applying the fiduciary rule to IRAs. The court said if it wanted to expand the DOL regulation, it must be authorized by ERISA.
In plain English, the appeals court said that just because the DOL sees this as a need to protect employees does not mean it may change the law.
The DOL rule, circulated during the Obama years, has been partially applied but based on this ruling and the position of the current administration, it is not likely to survive.
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We might meet with a client in the morning with $100,000 in assets who needs help with a Medicaid application, followed by a three-hour session focused on tax planning for a client whose net worth is over $200 million.
Elder Law is more than planning for Medicaid. Elder Law spans more than dozen different fields of law, and no single Elder Law attorney does everything.
We have a strong background in tax planning, so we are frequently asked to consult with Elder Lawyers and estate planning attorneys.
Estate Planning is more than drafting wills, medical directives, and power of attorney forms.
We work with clients to make sure that their assets are distributed as they want and that their family is protected.
We deal with people, and people have problems. We help people solve these problems. We do it with legal knowledge and compassion.
The cost of long-term care sends many family’s finances into a tailspin. Even if they have long-term care insurance, not everything is covered, and a lifetime of savings can be decimated quickly, leaving a well spouse in a precarious position. Working with an Elder Law attorney to strategize and structure and estate so a couple can access Medicaid resources without destroying the family’s financial picture is a necessary step, and it’s one we Elder Lawyers help families with routinely.
The New York Times recently reported on how Washington State tried to put a payroll tax in place to help cover long-term care in a nursing home, a personal residence or elsewhere (“One State’s Quest to Introduce Long-Term Care Benefits”). Unfortunately, AARP came out against it, and the proposal did not become law.
As boomers increasingly swell the ranks of Medicare, Social Security, and Medicaid, paying for long-term care will become more of a challenge for state and federal governments. Public policy must address this issue and sooner would be better than later.