AICPA urges IRS to reconsider plans for taxpayer transcript processing changes and proposes solution

The American Institute of CPAs (AICPA) has urged the Internal Revenue Service (IRS) to reconsider plans for transcript processing changes and recommended a solution. 

Annette Nellen, CPA, CGMA, Esq., chair of the AICPA Tax Executive Committee, wrote in the November 20 letter, “The AICPA is concerned about the planned changes to the transcript process and potential delays it would cause in a tax preparer’s ability to obtain transcripts and timely assist taxpayers.  We appreciate your efforts to protect taxpayer data from cybercriminals; however, these changes will unnecessarily delay the process for obtaining transcripts.” 

Nellen explained that the IRS announced the tax transcript processing changes in August as a three-phase plan.  Phase I, started September 23, redacts individual and business identifying information (e.g., social security number, taxpayer identification number, employer identification number, account numbers, name, telephone number, address, etc.) listed on the individual tax transcript.  Phase II, starting sometime in January 2019, will end the faxing of transcripts to taxpayers (individual and business) and their representatives.  Phase III, starting around May 2019, will stop the mailing of transcripts to third parties and will only mail transcripts to the taxpayer’s address of record. 

“The ability to timely obtain copies of transcripts is crucial to both taxpayers and their representatives,” Nellen stated.  Tax transcripts are most often used by taxpayers to understand their status with the IRS (such as an IRS audit), complete accurate tax returns, resolve tax notices or discrepancies, and verify tax return information for legal purposes (e.g., child support, obtaining a mortgage, etc.).  In each of these circumstances, there is a deadline for submission of information and it is challenging, if not impractical, for the taxpayer to request an extension of time (from tax courts, the IRS, government agencies, or mortgage lenders), she explained.

“Tax practitioners heavily rely on tax transcripts to help resolve their clients’ issues,” Nellen wrote.  

Furthermore, she stated, “Refusing to send transcripts to third parties, such as practitioners, negates the purpose of a valid Form 8821, Tax Information Authorization, or Form 2848, Power of Attorney and Declaration of Representative, authorizing the practitioner to assist taxpayers in complying with their tax obligations.” 

Nellen offered a solution that would resolve practitioners’ need for immediate access to taxpayer transcripts.  “Practitioners should have the ability to provide a valid Form 8821 or Form 2848 to an IRS employee, which would then authorize the employee to immediately send a transcript to the practitioner’s secure e-Service mailbox,” Nellen stated.  She explained that practitioners with an e-Service account were previously authorized through an extensive IRS authentication process.  In addition, before starting the conversation with a practitioner, an IRS employee will have authenticated the practitioner’s identity.  

“Though it is not a perfect solution, this recommendation balances the demand for security and the practitioner’s ability to effectively assist taxpayers,” Nellen wrote.