The IRS’s response to the COVID-19 pandemic has included focused relief from tax penalties, but taxpayers and tax professionals should not expect a “blanket” approach, IRS Commissioner Charles Rettig told CPAs on Tuesday.
Rettig addressed penalties, among other pandemic recovery and longer-term priorities for the Service, during his address to the AICPA National Tax & Sophisticated Tax Online Conference. He was joined by other top IRS officials who described the activities and outlook of their operating divisions and offices.
“We took a look at global relief,” Rettig said, both from the viewpoint of struggling taxpayers and practitioners and the IRS’s own responsibilities under the law, and concluded that the Service rather should focus on specific procedures already available to taxpayers, including reasonable-cause defenses and the first-time abatement of penalties.
“We get it that you would like to have blanket relief,” Rettig said. “It is not going to happen, and I think if you were sitting in my chair or Chief Counsel Mike Desmond’s chair or others’ chairs, you would be able to look at it as we do.”
In a Nov. 5 letter to Rettig and David Kautter, Treasury assistant secretary for tax policy, the AICPA did not request “blanket relief” but rather advocated expedited and streamlined reasonable-cause penalty abatement processes for taxpayers affected by the coronavirus and for the IRS to provide specific examples of qualifying reasonable-cause abatement situations and a dedicated telephone line for taxpayers or their advisers to request coronavirus-related penalty relief. Edward Karl, AICPA vice president–Taxation, remarked: “This year, of all years, the IRS should provide relief for uncontrollable COVID-19 impacts. We are greatly disappointed to not have a favorable resolution at this time that could help unburden taxpayers.”
Rettig also described how the pandemic forced the IRS to rapidly modernize its ways of interacting with practitioners and taxpayers. In large part, this was due to having to distribute more than 160 million economic impact payment (EIP) checks to eligible taxpayers, while processing tax returns in the middle of the pandemic, all in the midst of closing down its campuses and other in-person sites nationwide. Now those campuses and other locations have, for the most part, reopened, and with greater experience and confidence in the use of electronic communications and filings.
“We have come 15 years in six months,” he said, noting that the Treasury Inspector General for Tax Administration found the EIP remittances were 98% accurate, which Rettig called “phenomenal.” Rettig praised all IRS personnel for rising to the challenges of the pandemic in other ways as well.
He also sounded other themes, including appreciation for the role CPAs play in aiding tax administration and making sure the IRS’s communications are available in as wide a range of languages as possible. In connection with the latter priority, he noted that EIP communications were made available in 35 languages.
After Rettig’s brief remarks, a virtual panel of IRS officials was chaired by Sunita Lough, deputy commissioner for services and enforcement, joined by Desmond; Sharyn Fisk, director of the IRS’s Office of Professional Responsibility; De Lon Harris, deputy commissioner for examination in the Small Business/Self-Employed Division; and David Alito, deputy commissioner of the Wage and Investment Division.
Desmond, who oversees the Office of Chief Counsel’s 1,500 attorneys, described the office’s work in promulgating guidance on COVID-19-related new-law provisions in 2020 — reflected in some 40 IRS notices and revenue procedures and dozens of sets of frequently asked questions, and fashioning policy governing the EIPs. This came amid ongoing work of implementing provisions of the law known as the Tax Cuts and Jobs Act, P.L. 115-97, the “finishing touches” of which Desmond said he hopes will be completed by the law’s third anniversary near the end of this year. That project has engendered roughly 50 sets of proposed regulations, drawing more than 10,000 comments. The Chief Counsel’s office will then be moving more into enforcing provisions of the TCJA through examination support and litigation, he said.
Desmond and the other officials also outlined recent enforcement priorities, chiefly abusive syndicated conservation easement deductions, abusive microcaptive insurance arrangements, and, more broadly, increased examination rates of partnerships. Desmond said his office also is expecting to concentrate on some partnership transactions and international partnership reporting. Beyond syndicated and structured transactions, the office will be looking at “regular partnership planning that deserves closer scrutiny from the IRS,” he said.
Harris mentioned that the IRS is also looking at increasing the use of preparer penalties in its conservation easement examinations.
In keeping with the agencywide emphasis on outreach, Fisk, the OPR director, described how some of that office’s forms and Treasury Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10), are now offered in Spanish.
Now that the IRS has adapted to online interactions, some remote activities traditionally conducted in person have improved in some limited ways, the officials reported. Examinations have achieved a shorter timeline on average, with remote interactions reducing cycle time to 53 days, Harris said.
And the convenience of U.S. Tax Court hearings held virtually have been a boon in certain cases, Desmond said, adding an observation he said was made recently by the Tax Court’s Chief Judge Maurice B. Foley:
“Our lower-income, unrepresented, and Low Income Taxpayer Clinic population has embraced the Zoom platform much more than our large corporate, large law firm population has, which is an interesting dynamic.”
— Paul Bonner (Paul.Bonner@aicpa-cima.com) is a Tax Adviser senior editor.