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Taxpayer Identity Theft — Part 10

I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name.

The IRS still has not processed Brian and Wendy’s final joint tax return for 2010.

Brian and Wendy were native Iowans. After Brian died, Wendy — a widow at age 29 — moved to Texas. The names are real and are used with Wendy’s permission.

You can read the other parts of this series here: 12345678, 9


(This is a continuation of Part 9, posted earlier today. I decided to break Part 9 into two segments, to make it easier to read.)

Friday Call, Part 2

At least on the second call we got through to a representative whose computer was working.

The rep told us that when we submitted the Form 14039 (affidavit of identity theft) to the IRS, we put the form in Wendy’s name. But the IRS thinks the form should have been in Brian’s name, because technically it was his identity that was stolen, not Wendy’s.

They are insistent that we send them another Form 14039, in Brian’s name this time, along with a copy of Brian’s Social Security Card.

Note that all we are trying to do is get the IRS to process Brian and Wendy’s 2010 tax return and have them send Wendy the refund she is owed from that return, so she can finally put a painful year (2010) to rest.

Common Sense Too Much To Ask

I pointed out that the IRS’s demands are ridiculous. It’s blatantly obvious that the 2010 tax return that we submitted in April 2011 is a “right and proper” return.

The return we submitted shows Brian and Wendy filing together under a filing status of married filing jointly, same as the prior 5 or 6 years. The income sources are the same as in prior years. I am listed as the paid preparer, same as in prior years. So can’t the IRS use common sense and just pay this poor widow her tax refund?

I then proceeded to point out that it’s been 33 months since Brian died, 18 months since we filed the tax return, and 12+ months since we sent the original Form 14039 to the IRS. Again, can’t they use common sense and wrap this up?

The answer was, no.

They must have the Form 14039 and Brian’s Social Security Card before they can proceed.

And then this fascinating tidbit came out of the rep’s mouth: “Once we receive the form, it could take up to 200 days to process.”

Apparently the awkward silence that followed (I was too angry to even force words out of my mouth) caused the rep to clarify by saying that it might “only” take 90 days, since they already had a lot of our information on file.

Right. Somehow I think 90 days will pass and the IRS will have no clue what’s happening.

I would like to point out: we sent the original Form 14039 last fall. The IRS decided in September 2012 that they needed the form to be in Brian’s name, not Wendy’s.

And they tried calling Wendy in September to tell her to send a revised form. But this was unsuccessful because they dialed an old, out-of-service number. And with that, they apparently gave up.


Paperwork More Important Than People

So I guess here’s the thing to know about the IRS’s opinion of “helping” people who have been the victim of identity theft: paperwork trumps common sense.

Paperwork is more important than people.

Taxpayer Identity Theft — Part 9

I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name.

The IRS still has not processed Brian and Wendy’s final joint tax return for 2010.

Brian and Wendy were native Iowans. After Brian died, Wendy — a widow at age 29 — moved to Texas. The names are real and are used with Wendy’s permission.

You can read the other parts of this series here: 1234567, 8


As documented in Part 8, the Identity Theft Unit won’t talk to practitioners, even under power of attorney. They told me Wendy would need to call. I didn’t really want to drag her into this, so I tried calling the IRS “practitioner hotline” to see if they could help.

Of course, they couldn’t.

They told me the same thing — Wendy would need to call the Identity Theft Unit. “Because there might be information that she hasn’t told you,” was the reason the representative on the practitioner line gave me.

The IRS’s logic on this escapes me. But whatever. I had to get Wendy involved.

Friday Call, Part 1

We got on a conference call and called the Identity Theft Unit on Friday morning.

What a fiasco.

The IRS representative took my information and Wendy’s information, and then put us on hold. After a lengthy delay, we had to give the rep information about Brian. This led to another lengthy wait on hold.

The rep finally came back and said her system was down and she was unable to access any information. We would need to call back and hope that our call got routed to a call center in a different location, where maybe the computers would be working.

It’s not like Wendy and I have anything better to do with our time than call the IRS, sit on hold forever listening to annoying piano music, deal with a rep who can’t help us and then have to call back and sit on hold forever again just to try to find answers about a tax return that was filed 18 months ago. So, sure, why not try calling again?

I’ll detail that call in Part 10, also set for publication today.

Taxpayer Identity Theft — Part 8

I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name. We’re still waiting for the IRS to sort this out.

Brian and Wendy were native Iowans. After Brian died, Wendy — a widow at age 29 — moved to Texas. The names are real and are used with Wendy’s permission.

You can read the other parts of this series here: 123456, 7

Mid-October rolled around, and it was time for my “every 60 days” call with the IRS. Hooray!

There was good news and bad news on this call.

The good news is, the IRS has finally gotten its systems coded correctly to show that Wendy did file a 2010 tax return. They won’t be sending any more “collection” notices to her, and I don’t have to call the collections department every 60 days.

The bad news is, I now have to figure out how to deal with the IRS Identity Theft Unit.

The collections department told me that there was a note in Wendy’s file that the ID Theft Unit had tried calling Wendy recently. Apparently the paperwork we sent to them last fall (that would be, 12 months ago) was missing some information, so they had called Wendy in September of this year — on an old, no-longer-in-service number — to ask her to send that information. The collections department said I should call the ID Theft Unit to find out what was going on.

So I called.

The IRS representative who answered the phone took my information, and then abruptly interrupted me when I started talking about Wendy. She said she had to put me on hold so she could “review the rules about power of attorney.”

I waited on hold for more than 15 minutes before the representative finally came back and told me that the Identity Theft Unit will not, “under any circumstances,” talk to a representative of a taxpayer, even under power of attorney.

I asked what we needed to do to get this wrapped up. I was told that Wendy would need to call. They will only talk to her.

This is utterly ridiculous. I am not dragging my client into this. Wendy is paying ME to handle this. She should not have to make calls. This is an emotional issue for her. It involves her deceased husband – who died 33 months ago. The tax return in question was filed 18 months ago. The information that the ID Theft Unit says is incomplete was sent to them 12+ months ago.

Rather than making my client call the IRS, I am spending this week making phone calls myself and seeing if I can work around the ID Theft Unit and get this resolved.

More updates to come as this ridiculous saga continues to unfold.

Small Business Health Insurance Credit — Nice in Theory But Not in Execution

Like a lot of tax credits, the credit available to small businesses that provide health insurance is nice in theory but is horribly executed.

That may be why less than 12% of eligible businesses are claiming the credit.

Who is Eligible for the Credit

Small businesses, defined as those employing less than 25 full-time employees, may be eligible to claim a credit for providing health insurance to their employees. Specifically, the credit is available to companies:

  1. That employ less than 25 employees AND
  2. Pay those employees less than $50,000 of average annual wages AND
  3. Pay more than 50% of the insurance premiums for their employees.

The credit is 35% of premiums paid in 2012 and 2013. The credit increases to 50% of premiums paid starting in 2014.

Sounds great, right? Well … not so fast.

There are many, many problems with this credit. One,  it’s quite possible that a business might be better off NOT taking the credit and instead just taking a deduction for the premiums paid. In other words, some businesses might owe more tax by claiming the credit! (I have run the numbers on this, and it’s true.)

In addition, the credit has unfriendly phaseouts: as soon as your employee count gets above 10 or average wages tick above $25,000, the credit starts to phase out. Plus, the calculation of full-time employees, and the calculation of the credit in general, is cumbersome.

With these things in mind, it’s no wonder that most businesses aren’t taking the credit.

I sense that this blog post will get lengthy, so I am going to break it up into several parts, which I’ll post over the next few weeks. I’ll be mixing in other stories along the way, though, so that this blog doesn’t get bogged down in talking about multiple parts of this story for weeks on end.

Would a Name Change Help Enrolled Agents? Part 3

I’ve been writing about a possible name change for enrolled agents. Today I conclude my thoughts by examining whether a name change would really help EAs.

The short answer is, I don’t think a name change would change much of anything.

Yes, I have written before that the word “agent” is problematic because it creates an automatic assumption that we work for the IRS, and doesn’t really tell people what it is that we do.

But the name isn’t the problem. The problem is that no one has heard of us! Like I wrote in Part 2, 87% of the population has never heard of an enrolled agent.

Enrolled agents have never had a centralized effort to get the EA “brand” out there.

The National Association of Enrolled Agents is a great organization and I am a proud member. Their bi-monthly publication, The EA Journal, is a fine publication. They also offer a the best training out there on audit defense and representation issues at their “National Tax Practice Institute.”

But NAEA has done little to push the EA brand.

When I’ve brought this up, I’ve been told that NAEA is primarily a lobbying organization. And I do think NAEA does a great job of protecting EA interests to the IRS and Congress.

But EAs need a voice to the public, too.

And yes, EAs ourselves bear some responsibility. We need to be less crabby and resentful of CPAs and embrace the uniqueness of our designation.

When I give presentations, I always include a slide at the beginning where I talk about my designation. One of the bullet points on the slide says, in bold words: “I don’t work for the IRS!” This helps break the ice and often draws chuckles from the audience.

But, most EAs operate solo (or at least very small) practices. There’s only so much we can do ourselves.

Yes, we can try changing our little corner of the world. But that has its limitations. It would be much more efficient to have a national group that could push the EA brand, too.

Think about it this way: say you change the EA name to something like “Licensed Tax Practitioner.” That’s a nice, concise name that accurately conveys what it is that EAs do.

But unless there’s a National Association of Licensed Tax Practitioners pushing public awareness of the designation, the “LTP” would remain as anonymous as the current EA designation.

Sure, we wouldn’t have to spend as much time explaining the designation to people, but chances are, the public’s reaction to seeing the “LTP” (or whatever the new designation would be called) would be to say “what the hell is that?”.

Just like they say with the EA designation now.

Connecting Strange Baseball Rules to Taxes

I can find connections to taxes in strange places, such as baseball.

I’m a fan of the St. Louis Cardinals, so I watched their one-game, winner-take-all, postseason matchup with Atlanta on Friday night. In the 8th inning of that game, there was a play where it appeared that the Cardinals had bungled a popup and left Atlanta with the bases loaded.

But the umpires ruled that the Atlanta batter was out on the “infield fly rule.” After a lengthy delay, the call stood and the Cardinals held on to win the game. You can read more, and watch a video of the play, here.

St. Louis fans will say the umps got it right. Atlanta fans will say the umps got it wrong.

And it’s entirely possible that both groups are right.

I won’t get into a deep discussion of the infield fly rule here. It took me 5 to 10 minutes to explain it to my wife, and while she eventually said she understood, I’m not sure if she really understood or if she just said that to get me to stop talking.

The issue at debate on this call is: the baseball rulebook says an umpire can only call an infield fly on a popup that “can be caught by an infielder with ordinary effort.” The rulebook goes on to say that, as soon as the umpire determines that the infield fly rule will apply, he must “immediately declare ‘infield fly’”.

Atlanta fans could make a solid argument that, because the shortstop had to run into the outfield to get under the ball, the play was not routine, and thus not “ordinary.” They could also argue that the umpire did not “immediately” make the call.

St. Louis fans could counter that the play was ordinary because such plays occur routinely at least once in almost every game all year long. They could also argue that the rulebook says the umpire must make the call as soon as it becomes apparent to him that the infield fly rule will apply — in this case, that happened when the shortstop ran to the outfield and waved his arms as if to indicate that he was going to make the play. At that point, the umpire made the “infield fly” call.

What in the world does this have to do with taxes? Well, the oddities of the infield fly rule remind me of navigating tax law.

Five-thousand pages of tax code, 20,000 pages of regulations, and tens of thousands (or maybe even hundreds of thousands) of pages of IRS revenue rulings and procedures, IRS notices, court cases, etc. make some tax situations more complicated than the infield-fly rule could ever be.

Two competent, ethical tax pros can look at the same situation and reach two different conclusions. And if audited, different IRS auditors may have different viewpoints on the situation.

Now that I think about it, a good project would be to compile a list of all the different parts of tax law where a person could make multiple compelling arguments over how a particular item should be treated for tax purposes and make a series of blog posts about that topic. Hmm….

That’s just my (lengthy) takeaway from a strange baseball play.

Jason Dinesen Interviewed on The Wandering Tax Pro Blog

Robert Flach at The Wandering Tax Pro blog recently interviewed me as part of his “Tax Blogosphere Buddies” series. The interview covered a range of topics, including my background and history, as well as thoughts on the tax industry (and even a brief discussion of musicals!).

Robert and I often debate — and disagree — about the merits of enrolled agents vs. CPAs vs. registered tax return preparers. Those back-and-forth debates often make their way into blog posts on my site and on his site. What I appreciate about Robert is that we can disagree but the discussion always remains respectful. Robert has been preparing tax returns longer than I have been alive, and I have nothing but respect for him and his viewpoints.

You can find the complete interview here.

A New Logo for Dinesen Tax

Regular visitors to may have noticed a new logo in the upper left-hand corner. I wanted to take a moment to mention the new logo in a blog post, mainly to say thank you to Mike Sansone at ConverStations for designing it.

I first called on Mike one year ago to evaluate my web presence. It’s been a highly productive year.

Mike has helped re-design the look of my home page, integrate my blog into the home page, and clean up and “professionalize” the language on some of the sub-pages of this site. He’s also helped me with blogging strategy and social media strategy, and he’s done a lot of “behind the scenes” things for me.

If this sounds like a post mainly to endorse Mike Sansone … well, it is! If you are a small business owner trying to find your legs with blogging and social media, I would encourage you to check out his website and see if there are things Mike can help you with.

Would a New Name Help Enrolled Agents?

At one time, the National Association of Enrolled Agents thought about changing the name of the “enrolled agent” designation  to something else. After a survey of the general public and of enrolled agents, NAEA ultimately decided to keep the enrolled agent name.

I have some opinions on this topic, and here they are….

As I was writing, I had thought that I could squeeze all of my comments into one blog post. But as regular readers know, I have a tendency to get long-winded and travel down side roads on the way to my main point. So this will be a two- three-part commentary.

Now to my thoughts….

I have written before that

 EAs are saddled with a designation that includes the word “agent” (automatic code word for “Works for the IRS, flee for your lives!”).

(From my article, “Why Are Enrolled Agents So Crabby?”

I have also written that enrolled agents are the “Lichstenstein of the tax world.”

So you would think that I would be in favor of a name change.

But actually, I’m on the fence.

In early 2011, NAEA conducted a member survey in which it asked what alternative names members would find acceptable. I honestly can’t remember what I chose. I think I chose “certified tax practitioner” but I don’t remember for sure.

With the passage of time, I have come to believe that, while the EA designation is not necessarily consumer-friendly (because of the word “agent”), I’m not sure the name is really the problem.

The problem is, no one has heard of us!

I’ll dive into that more deeply in parts 2 and 3. (Part 2 will appear on October 17th 10th.*)

*-I had originally had a different post scheduled for October 10th, with Part 2 set to appear on the 17th. But since this post has proven so popular and gotten so much response, I am moving Part 2 up to October 10th and bumping the “other story” to some other time.

Image courtesy of sixninepixels /

The Difficulties of Tax Planning with an Inept Congress

How does the lack of clear tax provisions hurt tax planning? Here’s an example from one of my clients.

The client is a small business owner. His business is growing and he hired his first employee this year. In prior years, this hire would have qualified the business owner for the “Work Opportunity Credit” (abbreviated as “WOC”).

But the WOC expired 12/31/11 and is no longer available for most categories of new hires, except for hires of veterans. The employee is not a veteran but belongs to one of the other categories of new hires that used to qualify for the credit.

So my client is out of luck.

Or is he?

It’s possible that Congress will extend the WOC, retroactively for all of 2012, for all classifications of new hires. Because of that, we submitted the necessary paperwork to Iowa Workforce Development to get the pre-approval certification, even though we don’t know if the credit will even be available.

(Side note: the way the WOC works is, you send a stack of paperwork to your state workforce agency [in Iowa, it's Iowa Workforce Development], which reviews the paperwork and hopefully sends you a certificate saying you qualify. With the certificate in hand, you can then claim the credit on your tax return.)

Because of the rapid expansion of his business, the business owner’s net income has spiked this year. The WOC would be a huge, huge help on his tax return.

But we can’t assume the credit will be extended. So we’re at an impasse. Does the client make estimated payments to the tune of several-thousand dollars? It’s been a banner year, but the company is still in start-up mode. Several-thousand dollars is a big deal.

Or does the client hold out in hopes that the credit is extended for 2012? If the credit is extended, he would qualify for a large enough WOC to wipe out his entire tax liability.

The last time a batch of tax provisions expired, Congress waited until shortly before Christmas to extend the provisions retroactively to the beginning of the year. Not exactly convenient for planning purposes.

The real shame is, small businesses that are growing, hiring employees and trying to do the right thing are caught in the middle of the political wrangling.

Further Reading

Over the summer, I posted an article about tax planning for alternative minimum tax when we don’t know what the AMT exemption is for 2012.

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