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Did you know that Bryson Law Firm, LLC and Bryson Accounting and Tax Service, LLC have several IRS Enrolled Agents on the Team here at Bryson Law Firm, LLC?  We frequently get the question – “what is an Enrolled Agent?” – so here’s what you need to know. 

An Enrolled Agent is a Tax Professional who has been federally authorized to practice before the IRS on issues such as audits, collections, and appeals.  There are a few ways to become an Enrolled Agent – complete a 3-part IRS exam OR through experience as a former IRS employee.  The exam covers items located in the Internal Revenue Code, forms and publications, IRS tax forms and their accompanying instructions, and the Treasury Department Circular 230.  The 3 parts are personal tax issues, business tax issues, and procedural issues and representing clients.  If an Enrolled Agent becomes one through their previous experience in working for the IRS, it requires 5 years in a position that required extensive knowledge of the tax code and its applications.  Enrolled Agents also must pass a “suitability check” which includes tax compliance and a criminal background check. 

The IRS states that “Enrolled Agent status is the highest credential the IRS awards.  Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every 3 years.” 

As mentioned previously, Enrolled Agents can handle all different kinds of tax matters and can represent Taxpayers before the IRS.  Like Tax Attorneys and Certified Public Accountants, Enrolled Agents can appear in place of Taxpayers that they represent.  The IRS Restructuring and Reform Act of 1998 offers a limited client privilege for confidentiality between the Enrolled Agent and clients on audit and collections matters. 

We have Enrolled Agents who have sat for and passed the 3-part exam and also have Enrolled Agents who gained this certification via IRS employment.  Together, they bring to our office an insider perspective, applying their experience and knowledge gained as a former IRS employee or through extensive study of the IRS’ code, rules, and regulations to our Clients’ tax resolution matters. 

Here is what Enrolled Agents Kayla Lettow and Robert Lettow have to say about working with Bryson:

Interested in working with an IRS Enrolled Agent on your tax matters?  Contact our office today for a free, initial consultation.    

The IRS announced last week that they will be handling a greater volume of inbound calls by automation in an effort to free up their Call Center employees for more complex requests.  The call will be with an artificial intelligence bot.  This bot is to be able to authenticate a taxpayer’s identity and assist taxpayers in setting up a payment plan for tax balances below $25,000 without having to speak with an IRS employee.

The IRS faced significant struggles over the last few years keeping up with return and tax correspondence processing after the backlog they returned to work to after the COVID-19 pandemic shutdowns.  The TIGTA report states that it’s this backlog and the IRS’ inability to catch up that ultimately led to the decision to destroy documents.  Another explanation provided was that “antiquated technology” forced the IRS to dispose of these paper documents due to a “software limitation”.  One final reason provided – to make room for new documents relevant to the 2021 return filings. 

The Internal Revenue Service recently released a report which indicates that they are auditing tax returns for high-earning Taxpayers much more aggressively than they have in the past several years. 

Every year, the IRS releases its “Dirty Dozen” list of the biggest potentially abusive arrangements that they recommend taxpayers avoid. This week, they released the first four of this year’s twelve transactions that taxpayers should look out for.

These four items have to do with tax schemes some taxpayers fall prey to in an effort to reduce their tax liability.

"Taxpayers should stop and think twice before including these questionable arrangements on their tax returns," said IRS Commissioner Chuck Rettig. "Taxpayers are legally responsible for what's on their return, not a promoter making promises and charging high fees. Taxpayers can help stop these arrangements by relying on reputable tax professionals they know they can trust."

The first four on the “dirty dozen” list are:

• Using Charitable Remainder Annuity Trusts (CRAT) to Eliminate Taxable Gain

During this arrangement, appreciated property is transferred to a Charitable Remainder Annuity Trust (CRAT). Taxpayers improperly claiming the transfer of assets to the CRAT gives those assets a step-up in basis to fair market value as if they had been sold to the trust. The CRAT then sells the property but does not recognize gain due to the claimed step-up in basis.

The CRAT then uses the proceeds to purchase a single premium immediate annuity (SPIA). The beneficiary reports, as income, only a small portion of the annuity received from the SPIA. Through a misapplication of the law relating to CRATs, the beneficiary treats the remaining payment as an excluded portion representing a return of investment for which no tax is due. Taxpayers seek to achieve this inaccurate result by misapplying the rules under sections 72 and 664.

• Maltese (or other Foreign) Pension Arrangements Misusing Treaty

For this questionable arrangement, U.S. taxpayers attempt to avoid federal tax by making contributions to certain foreign individual retirement arrangements in Malta (or possibly other foreign countries).

Typically, taxpayers lack a local connection, and local law allows contributions in a form other than cash or does not limit the amount of contributions by reference to income earned from employment or self-employment activities. By improperly labeling this arrangement as a "pension fund" for U.S. tax treaty purposes, the U.S. taxpayer misconstrues the relevant treaty to improperly claim an exemption from U.S. income tax on earnings in, and distributions from, the foreign arrangement.

• Puerto Rican and Other Foreign Captive Insurance

This arrangement occurs when U.S owners of closely held entities participate in a purported insurance arrangement with a Puerto Rican or other foreign corporation with cell arrangements or segregated asset plans in which the U.S. owner has a financial interest. The U.S. based individual, or entity, claims deductions for the cost of "insurance coverage" provided by a fronting carrier, which reinsures the "coverage" with the foreign corporation.

The characteristics of the purported insurance arrangements typically will include one or more of the following:

• • • implausible risks covered
    • non-arm's-length pricing
    • lack of business purpose for entering the arrangement.

• Monetized Installment Sales

These transactions involve the inappropriate use of the installment sale rules under section 453 by a seller who, in the year of a sale of property, effectively receives the sales proceeds through purported loans.
Typically, the seller enters into a contract to sell appreciated property to a buyer for cash and then purports to sell the same property to an intermediary in return for an installment note. The intermediary then purports to sell the property to the buyer and receives the cash purchase price. Through a series of related steps, the seller receives an amount equivalent to the sales price, less various transactional fees, in the form of a purported loan that is nonrecourse and unsecured.

If you have been presented with one of these “tax benefits” as an way of reducing your tax bill, be sure that you have competent legal representation to review the underlying legal requirements of these actions. If you have already engaged in any of these arrangements, consult an attorney today to explore the corrective steps that you should take immediately. If it is not voluntarily corrected, the IRS can assess accuracy-related penalties ranging from 20% to 40%, or a civil fraud penalty of 75% of any underpayment of tax, not to mention criminal prosecution for tax evasion and/or tax fraud.

Stay up to date on the latest IRS and tax news with our weekly blog posts and social media accounts. We have offices in Lafayette, Shreveport, Baton Rouge, New Orleans, Covington, Metairie, Houston, and Austin. Give us a call today to schedule your FREE consultation.

As part of National Small Business Week, the IRS highlighted to business owners that although we are in a tight job market, there are special tax credits that can help employers hire workers.

COVID-19 has shifted many work environments into hybrid and remote work, causing potential state withholding tax consequences. Since an employee’s home may not always be in the same state as the company that employs them, these businesses could be subject to multi-state tax obligations. 

The IRS has temporarily revised their process for reviewing applications for US Residency Certification, Form 8802. The revised procedures will apply when the IRS has not yet completed processing the applicant’s most recently filed tax return.

Scams and schemes are ongoing, and you need to stay vigilant about securing your computers, phones, and other devices. Having strong cybersecurity and scam recognition is necessary to reduce the threat of identity theft.

If you make contributions to your Individual Retirement Arrangement (IRA) up until April 18, 2022, it can be claimed for a deduction on your 2021 tax return.