2021: Craziness in Action

While it certainly would be hard to top 2020, the year 2021 was quite the roller coaster ride at the federal and state levels for tax professionals, especially enrolled agents. The year began with a new Congress being sworn in and two runoff Senate races in Georgia that led to a 50-50 Senate. The historically close margins in Congress, combined with President Biden’s inauguration and aggressive legislative agenda, kicked off a year of numerous legislative battles and policy negotiations. Federal and state governments continued to grapple with the effects of COVID-19 – which impacted agency operations, regulatory agendas, and brought unprecedented levels of complexity to the tax system. The Internal Revenue Service (IRS) struggled to keep pace as it sought to dig out from mounds of paper while implementing Covid-related tax changes and credits. Throughout the year, despite the uncertainty, the National Association of Enrolled Agents’ (NAEA) advocacy shaped new pathways for significant improvements in tax policy and tax administration including:

• IRS Taxpayer First Act Report to Congress includes NAEA recommendations
• Advocating to extend the 2020 filing season deadline
• Taking the lead on advocating for regulating unenrolled tax return preparers
• Making a case for increased IRS funding
• Ensuring the success of Tax Pro Accounts to deploy real-time processing of power of attorneys (POAs) and Form 8821
• Fixing the phone lines, transcripts, and more
• Ultimately making the hard call that the “IRS is broken”
• State regulation of enrolled agents
• Providing input to Congress and advocating for more IRS funding and accountability in both the bipartisan infrastructure legislation and the Build Back Better Act, two of President Biden’s signature priorities.

2021 Advocacy Successes

IRS Taxpayer First Act Report to Congress with NAEA Recommendations
The IRS in January 2021 sent its Taxpayer First Act Report to Congress with a comprehensive set of recommendations that will reimagine the taxpayer experience, enhance employee training, and restructure the organization to increase collaboration and innovation. The IRS will continue conversations with key stakeholders and congressional committees to secure funding and begin to work toward implementation of these recommendations over the next several years.

The IRS report included NAEA recommendations on Tax Pro Accounts and a so-called IRS University for training and educating IRS personnel, as well as other recommendations from NAEA’s Taxpayer First Act white paper submitted in January 2020. We anticipate working with the IRS and Congress to implement the recommendations and ensure IRS funding for these efforts.

Taking the Lead on Advocating the Regulation of Unenrolled Tax Return Preparers
The NAEA wrote to Treasury Secretary Janet Yellen in February 2021 asking that the Biden administration include authority for the IRS to regulate unlicensed tax return preparers, effectively overruling the Loving case. The letter asked specifically that the legislative authority require unenrolled tax return preparers to demonstrate competency by:

• Obtaining a Preparer Tax Identification Number (PTIN)
• Passing an exam covering basic Form 1040 tax questions (including earned income tax credit and ethics standards)
• Fulfilling annual continuing education requirements
• Completing a background check
• Granting the secretary of the Treasury the authority to rescind a PTIN after notice and a hearing if a preparer is shown to be incompetent or
  disreputable.

President Biden’s American Families Plan, announced in April, included NAEA’s proposal to give the IRS the authority to regulate unenrolled tax return preparers. While the size and scope of the president’s initial plan was reduced as it made its way through the legislative process, the NAEA continued to engage with the relevant congressional committees and educate Congress on the importance of the issue from both a tax collection and consumer perspective. As we enter 2022, the regulation of tax preparers remains one of NAEA’s top legislative priorities.

Making a Case for More IRS Funding
The NAEA made IRS funding a top priority in the first session of the 117th Congress. In a letter to policymakers in both the executive and legislative branches of the federal government, the NAEA called for a one-time COVID-19 emergency fund as well as long-term investments in the IRS.

The letter cited two years of paralyzing shutdowns (the 2019 budget impasse and the 2020 COVID-19 pandemic) on top of a decade of constantly shrinking budgets and argued that by every measure of basic customer service, key elements of the agency are simply not functioning for taxpayers and their representatives. The NAEA stated that once the backlogs brought on mostly by the pandemic are cleared, the agency needs long-term funding to move them away from their heavy reliance on paper both at returns processing and for correspondence audits. Only in this way can the IRS avoid future calamities.

While the $80 billion for the IRS included in the Build Back Better Act is a significant step in the right direction, it will require the IRS spending it wisely with the appropriate hiring strategy, investments in technology, and concrete measures. The NAEA continues to push for strong oversight and goals to be directly tied to the funding. We also continue to push for increases in annual funding through the appropriations process.

Fixing IRS Phone Lines, Transcripts, and More
The NAEA, again, led the charge to correct an IRS policy misstep. In the middle of an already messy filing season, the agency sent an informal email to its Practitioner Priority Service (PPS) and general line assistors that they were to send all inquiries about balance due accounts to the Automated Collection System (ACS).

Unfortunately, this resulted in all phone calls supported by a valid Form 8821 with any outstanding issues, such as unfiled tax returns or balance due payments, to be sent to the ACS.

Automated Collection System assistors then immediately informed the holder of said valid Form 8821 that they were not authorized to talk to any enrolled agent or employee of an enrolled agent that did not possess a power of attorney Form 2848. Suddenly, enrolled agents and their employees were forced to make multiple calls to an overworked phone system just to pull the transcripts for one taxpayer.

The NAEA sprang into action, contacted the IRS, and dug in our heels until someone at the IRS headquarters took the time to listen. For now, most of the lines have begun properly responding to Form 8821 transcript requests. Additionally, they have once again set up a monthly small tax practitioner meeting led by the NAEA regarding the Centralized Authorization File (CAF), the phone lines, and e-Services.

We also took on the fight to pull transcripts from the PPS and forged agreements to increase the number per client transcripts request from 10 to 30. Certified public accountants (CPAs) and attorneys were part of these discussions, but it is important to note that without NAEA leadership, these discussions would not have happened.

Making the Hard Call: “The IRS Is Broken”
National Association of Enrolled Agents President David Tolleth, EA, called attention to the plight of tax practitioners and taxpayers alike in a letter to Treasury Secretary Janet Yellen and all 535 members of Congress, asserting that the IRS “should be considered broken and does not seem to be on track to be fixed any time soon.” President Tolleth addressed the underlying issues that have “chipped away at the foundation of our tax administration system,” citing chronic underfunding, attacks from policymakers, and recent congressional mandates to administer complex social service policies through the IRS. He concluded that while more funding is the first solution needed to fix the broken tax administration system, he said a concerted effort on the part of policymakers, IRS leadership, and oversight groups, “is needed to help steer the agency back on track.”

State Regulation of Enrolled Agents
Under NAEA’s leadership, debt settlement service legislation was introduced in the Minnesota Legislature and passed by the Senate Commerce Committee. The NAEA initiated and engaged in lobbying efforts with the Minnesota Legislature throughout 2021 to amend the Minnesota Debt Settlement Services Statute 332B to exempt enrolled agents from the statute’s strict registration and compliance requirements. While the Minnesota Legislature adjourned before a final vote could be taken on the debt settlement legislation, the bill’s sponsor and the Minnesota Commerce Department agreed on July 31, 2021, to amend the language in the statute to exempt “an enrolled agent or enrolled agent firm.”

National Association of Enrolled Agents members generously donated nearly $60,000 to the Minnesota Defense effort. When the Minnesota Legislature convenes in January 2022, we expect debt settlement legislation to be reintroduced, voted on, and passed.

Moving Forward
Increasingly, the NAEA is viewed as a thought leader in tax policy, tax administration, and a champion for enrolled agents brought about by years of work by staff, the Government Relations Committee, member volunteers participating in advocacy efforts, and support for the NAEA PAC. This reality is evidenced by increasing calls from members of Congress to advise in the development of legislation such as regulating unenrolled tax preparers and assisting congressional appropriators in drafting legislation for controls and pressure on the IRS to perform.

National Association of Enrolled Agents advocacy successes continue to demonstrate the long way that the association has come from the days when no one on Capitol Hill had ever heard of enrolled agents.

Our advocacy continues as we look to the 2022 midterm elections to ensure that future members of Congress understand the importance of enrolled agents to our tax system, while also encouraging the increasing numbers of NAEA members to develop relationships with their elected officials and engage in NAEA advocacy efforts.

In 2022, we will continue to advocate for many of the policies that we have made progress on over this past year. Our top policy priorities include the regulation of tax preparers, funding the IRS, fixing the IRS’s broken system, and state regulation of enrolled agents.