Practice & Procedures
Many CPAs are likely aware of the IRS's Volunteer Income Tax Assistance (VITA) program, but they might not be as familiar with another major IRS grant program, Low Income Taxpayer Clinics (LITCs). The IRS funds LITCs under a matching grant program authorized by Sec. 7526, which was passed as part of the Internal Revenue Service Restructuring and Reform Act of 1998, P.L. 105-206. LITCs are a valuable part of the Taxpayer Advocate Service's programs.
National Taxpayer Advocate Nina Olson, along with the late Janet Spragens, championed the legislation that created the grant program. Spragens was a tax professor at American University's Washington College of Law. Both were leaders in the establishment of tax clinics for low-income taxpayers.
As reported in IRS Publication 5066, Low Income Taxpayer Clinics Program Report (December 2014), representation efforts produce tangible results. According to the report:
During 2013, LITCs working controversy cases brought over 4,300 taxpayers into filing compliance and over 4,600 taxpayers into collection compliance. Moreover, clinics helped their low income clients to secure more than $5.2 million in tax refunds and to eliminate more than $51.3 million in proposed or outstanding tax liabilities, penalties, and interest. [p. 12]
Volunteering for an LITC pro bono panel gives a CPA a chance to provide valuable community service outside busy season and obtain additional experience in tax representation.
A CPA is likely to be approached by a VITA program to provide pro bono tax preparation assistance; however, many VITA programs operate only during tax season, and the demands on the CPA are too great to accept the request. On the other hand, LITCs operate year-round.
LITCs represent low-income taxpayers in IRS controversies and inform low-income individuals for whom English is a second language (ESL) about their rights and responsibilities. While there is no strict income limit on consultations and ESL outreach, at least 90% of cases accepted by a clinic for representation must be for taxpayers with incomes that do not exceed 250% of the federal poverty level. There is also a limit of $50,000 in dispute per tax period, unless there are extenuating circumstances. The focus is on IRS controversies, but the clinic can also address related state controversies.
LITCs do not prepare returns unless necessary to resolve a tax controversy. As a result, clinics look to VITA programs as well as CPAs and other practitioners to prepare such returns on a pro bono basis. A typical situation involves a taxpayer with a collection controversy. Before the collection issues can be resolved, all required returns must be filed. This could be one to six returns if there are any delinquencies. Note that IRS Policy Statement P-5-133 generally limits retroactive enforcement to six years unless a manager approves going beyond six years, which is unusual (see Internal Revenue Manual §1.2.14.1.18).
CPAs can also provide valuable service in representation and obtain additional experience in areas they might not be familiar with. Clinics often provide specific case guidance and free annual training to their pro bono panel members on topics such as compliance with Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10); clinic standards of operation; collection resolution, such as currently not collectible status and offers in compromise; and round-table discussions of current issues. One of the clinics' roles is to advocate with the IRS on systemic and procedural issues encountered by taxpayers and practitioners. Some clinics are academic clinics established at law schools. Students provide representation under supervision pursuant to an authorization for special appearances (see IRS Publication 947, Practice Before the IRS and Power of Attorney). Other clinics are legal aid and legal service programs, and some, such as the one this author directs at the Accounting Aid Society in Detroit, are independent nonprofits.
CPAs who are fluent in languages other than English can be valuable resources for clinics providing information on tax rights and responsibilities to ESL taxpayers. The emphasis is on taxpayer education, not tax preparation. Of course, the educational events can include individual consultations and can lead to representation by the clinic. With the possibilities of new rules affecting certain undocumented immigrants, the demand for tax information might be great in the next few months.
Clinic phone numbers are listed on an LITC interactive map and in IRS Publication 4134, Low Income Taxpayer Clinic List. Prospective volunteers may call their local clinic and ask for the clinic director.
| Contributors | |
| Valrie Chambers is an associate professor of accounting at Stetson University in Celebration, Fla. Marshall Hunt is director of Tax Policy and Advocacy with the Accounting Aid Society and director of the Low Income Taxpayer Clinic in Detroit. Mr. Hunt is a member of the AICPA Tax Practice & Procedures Committee. For more information about this column, contact Prof. Chambers at valrie.chambers@stetson.edu. |
