The Internal Revenue Service is sharing best practices on how to handle a tax practitioner’s eventual demise, according to the National Conference of CPA Practitioners.
The advice is especially relevant to smaller practitioners, according to Stephen Mankowski, tax chair at NCCPAP. “If it’s a five-member firm or larger, it’s almost a non-factor. But in a one-to-two person firm, it’s more of an issue,” he said. “The IRS has come out with certain steps that need to be taken. I give them credit for it — it’s not an uncommon issue.”
“In the past several weeks, people have reached out to me due to the death of their practitioner, ” Mankowski said. “This will become more and more prevalent as the profession ages.”
Mankowski told of a preparer who was in an induced coma: “Her mother reached out to us, and members of NCCPAP stepped up and prepared a lot of the returns she wasn’t able to work on.”
The IRS advises practitioners to have an arrangement in place with another practitioner in their region in the event of incapacitation to continue to operate the practice until it can be properly closed down or transitioned to another owner.
“An updated inventory of open and ongoing client matters is also encouraged. It should have enough details so that an assisting practitioner would be able to quickly assess the statue and work toward handling them,” said Mankowski. “Clients should also be made aware of the contingency plans via some form of communication program. Once the succession plan is developed, the practitioner should share it with their family members so that they are aware of its existence and any involvement needed with the implementation.”
Mankowski shared a number of other major developments going on at the IRS.
The service continues to hire at many levels, he said. Currently, 4,000 mid-level positions are open, and the agency is looking for the best possible talent to bolster its ranks.
“To help speed up the process, the IRS is able to use ‘direct hire authority’ to allow quicker hiring — in an average of 87 days. The GS-13 average salary is approximately $125,000 per year, plus benefits, making total compensation closer to $170,000 a year. Once involved in a career at the IRS, there are many areas to move ahead. The IRS will be at the 90,000-employee mark with the next pay period and is looking to grow. This is the first time in a number of years that the total has been that high,” he said.
Not all those employees are walking around carrying firearms with a “‘license to kill,’ although that’s what the news was to the general public,” he noted. “Fewer than 9,000 employees are revenue agents, and they are looking to increase those ranks as well. We can take comfort in the fact that when they’re looking to hire, they’re not just hiring anybody. They’re still going through the hiring process and doing due diligence. And even if they could hire 5,000 new workers by October 15, that doesn’t mean they’ll be immediately ready — they have a significant amount of training to complete.”
IRS Commissioner Danny Werfel has many long-term goals but realizes that they cannot do it alone and desires stronger engagement with stakeholders, according to Mankowski.
“Between 2010 and 2022, the IRS budget was cut every year,” he explained. “During that same period, more tasks were assigned to the IRS to support how the worldwide economy flows. By 2022, more funding became available to restructure the IRS, and with funding came a new plan with the desire to make sure that the words that are released are accurate, and that availability and communications are improved. If someone wants to reach the IRS, they should be able to reach them.”
Scams and schemes affect the mindset of honest taxpayers, Mankowski noted — and the IRS feels that the exploitation of innocent taxpayers is a consequence of underfunding. When funded, the agency is able to act quickly: The ERC was one way to show this — there are 600,000 ERC claims in the queue and under review — and there is talk of resuming the ERC in 2024 with improved rules and regulations.
Mankowski also highlighted a number of other developments at the IRS:
- Small Business/Self-Employed Division updates. Maha Williams will be expanding her role of deputy commissioner of SB/SE, as Darren Guillot recently retired from the IRS. Revenue officers will once again be performing unannounced visits, and employee safety is a major concern.
- Notice redesign — Taxpayer-Centric Notices Initiative 2.3. The IRS is updating notices based on the overall needs. The taxpayer will be able to respond to notices electronically by the end of 2023 via secure messaging and/or efax. When submitting questions and suggestions, taxpayers should include notice numbers. All submissions will be reviewed, but not necessarily replied to.
- Digital Assets Team. The service feels that it needs a single voice across the agency to develop strategies across its digital assets. A team was organized to address several areas of focus: communication, training, guidance, data & technology, and stakeholder engagement. The current team has eight subject matter experts from a variety of business units.
- Alerts. The IRS has issued chief counsel alerts on how to treat losses, charitable contribution, staking, and non-fungible tokens. They are working on official guidance and continue training the IRS workforces based on their positions.
- Form 1099-DA. Regulations for digital assets are in the Federal Register as of August, There is a 60-day comment period on the proposed regulations. Comments can be posted on Regulations.gov.