June 2002

The Arkansas Public Accountant is the monthly publication of the Arkansas Society of Public Accountants.  The society is a professional organization composed of Licensed Public Accountants, Enrolled agents and persons holding out to be accountants or tax preparers with their services available to the public.  This organization is dedicated to helping our members give the best possible service to their clients.  We are happy to accept articles and/or advertising that would be of interest to our members and ask that you submit any thing for publication by the 25th of the month to be included in the next month’s publication.    Please send to: LaVERNE LONG, Editor P.O. BOX 725 NEWPORT, AR 72112-0725 llonga@ipa.net

The Arkansas Public Accountant

OFFICERS & GOVERNORS 2001 - 2002

OFFICERS

BOARD OF GOVERNORS

District I District II District III District IV District V District VI

Suzanne Baltz Donna Gowan Lonnie Taylor George Simpson Carl Dalrymple Jr Ronny K. Woods

Pocahontas Searcy West Memphis Little Rock Prescott Nashville

FROM THE PRESIDENT’S PEN

Dear Members:

It seems each year that it becomes more difficult to get back into the normal day to day routine of the office after tax season is over, but I have managed to complete a couple of returns and catch up on a few clients' financials since April 15.

Did any of you let the rate reduction credit slip by on any returns?  I have to admit that I did early in the season, but the clients who received additional refunds were very pleased, they even said some nice things about the Internal Revenue Service.

Janice and I just returned from a much needed weeks rest.  But as tourist do, we didn't  rest very much.  We spent our week the Houston area, and I thank God that we live in a small town in rural Arkansas.  I'm afraid I would not cope for long if I had to drive in that rat race on a daily basis.

We have just finished our annual accounting seminar with Gear Up and now it is time to look ahead to our next seminar.  July 25 and 26 at the Holiday Inn Select in Little Rock.  We will be having a seminar on Quickbooks.  This will be the new version of Quickbooks for Accountants.  Phill Gomez will again be the instructor for this seminar.  If you have never seen or heard Phill's presentation on Quickbooks, you should attend this seminar, he can make this program almost sing.  I don't know about your practice, but I have more and more clients trying to computerize, and the first thing they do is buy Quicken or Quickbooks and think they can do their own accounting.

Hope to see you next month in Little Rock.

Sincerely,

James C. Hodge, President

Arkansas Society of Public Accountants

TAX INFORMATION FROM THE IRS

IRS announces more taxpayer assistance; 400 new local phone numbers offer faster access to in-person help to solve problems.

Washington - The Internal Revenue Service today announced steps to expand customer service for taxpayers.  Through the agency's Everyday Tax Solutions service, a taxpayer or tax preparer now can call a local number to set up a personal appointment at the most convenient Taxpayer Assistance Center, on the most convenient business day.

The 400 new numbers across the nation are dedicated to scheduling face-to-face meetings to help solve tax problems.  All other calls should be directed to the regular help number: 1-800-829-1040.

"Our new Everyday Tax Solutions service offers in-person assistance on the taxpayer's schedule, not ours," said IRS Commissioner Charles O. Rossotti.  "Taxpayers and tax professionals tell us they want our help with tax problems early and conveniently."

Appointments are not required for Everyday Tax Solutions; taxpayers can also walk in during regular business hours.  To make an appointment, the taxpayer simply calls the local number and, at the prompt, leaves a message requesting  Everyday Tax Solutions help.  A representative will call back within two business days to schedule an appointment at the taxpayer's convenience.  IRS Taxpayer Assistance Center telephone numbers are listed through local directory assistance and on the IRS Website at www.irs.gov under the "individuals" section.

Many situations do not require a face-to-face meeting.  To discuss a problem by phone or letter, taxpayers should call the IRS at 1-800-829-1040 or write to the address on their IRS correspondence.

Everyday Tax Solutions' face-to-face service addresses problems such as:

• Resolving IRS account and notice issues.
• Making Installment Agreements to pay tax liabilities.
• Requesting release of federal tax liens and levies.
• Filing Innocent Spouse claims for taxpayers who may not be liable for a spouse's share of joint tax liabilities.

"We may not be able to resolve some problems on the spot, but we can get the ball rolling to help taxpayers," Rossotti said.

IRS PROVIDES SIMPLIFIED ACCOUNTABLE PLAN RULES FOR CERTAIN EMPLOYERS.

Washington - Using the Industry Issue Resolution (IIR) program, Internal Revenue Service today issued guidance that provides employers in the pipeline construction industry an optional deemed substantiation method for reimbursing certain employee business expenses.  Under Revenue Procedure 2002-41, payments by pipeline construction employers to employees who are required to use their own welding or mechanics rigs as a condition of employment are deemed substantiated at up to $13 per hour.

Along with the revenue procedure, the IRS today issued Revenue Ruling 2002-35, which clarifies that payments to employees for equipment they are required to provide as a condition of employment are wages for federal employment tax purposes, unless such amounts are paid under an accountable plan.  Today's ruling also revokes Revenue Ruling 68-624.

The new revenue procedure and revenue ruling do not apply to independent contractors.

The IIR program, launched in 2001 by IRS, tackles tax issues submitted by taxpayers, associations and other groups representing businesses.  The objective is to resolve frequently disputed or burdensome tax issues.

Revenue Procedure 2002-41 also requests comments from other industries facing similar issues in implementing accountable plans, especially where the nature of the industry results in employees working for multiple employers during the year.

Revenue Ruling 2002-35 and Revenue Procedure 2002-41 will be in Internal Revenue Bulletin 2002-23m dated June 10, 2002, and will be posted on the IRS Web site, www.irs.gov <http://www.irs.gov/>.  Information on the Industry Issue Resolution program may be found in Notice 2002-20 and in Internal Revenue Bulletin 2002-17, also available at the Web site.

Phony IRS  forms part of scam

Con artists are hoping you fall for their phony Internal Revenue Service forms and send them the information they need to steal your identity.

The fake form and letter are making the rounds all around the country.

The letter says the bank is updating its records to exempt the taxpayer from paying taxes on interest.

The personal information requested includes your mother's maiden name, passport number, bank account numbers and any pins and passwords to those accounts.

"Nobody would need as much information to process your tax return or anything as is on this current form.  Your bank should already have this information so that should be a red flag too," Harris said.

The fake form and letter are being sent to people all over the country.  People who fill it out could lose their money and their identity.

FAST TRACK MEDIATION

A process for prompt resolution of tax issues

Qualifications: The Internal Revenue Service now offers tax track mediation services to help taxpayers resolve many disputes resulting from:

• examinations
• offers in compromise
• trust fund recovery penalties
• other collection actions

Most cases that are not docketed in any court qualify for fast track mediation.

Advantages

• an expedited process
• a trained mediator
• a neutral setting
• You don't have to file a written protest to request fast track mediation.

Excluded Cases/Issues

Certain cases are excluded from fast track mediation.  They include:

• Issues for which there is no legal precedent.
• Issues where the courts have rendered opposing
•   or differing decisions in different jurisdictions.
• Industry Specialization Program issues.
• An issue for which the taxpayer has filed a request
•   for competent authority assistance.
• Service Center penalty appeals cases
• Service Center Offer in Compromise cases.
• Collection Appeals Program cases.
• Automated Collection System cases.
• Constitutional issues.
• Effective Tax Administration issues.

Starting the Process

• If you don't agree with any or all of the IRS findings, you have the right to request a conference with the manager of the person who issued the findings.
• Mediation can take the place at the conference with the manager, or afterwards. In either situation, you and the IRS representative must sign an agreement to mediate prior to attending the mediation session.
• Generally within a week of receiving the signed agreement to mediate, the mediator will contact you and the IRS representative to schedule the meeting.  The mediator will provide a brief explanation of the process and discuss with you when and where to hold the mediation session.

Mediation

• The process involves an Appeals Officer who has been trained in mediation.  The goal of mediation is to help you and the IRS to resolve the dispute.
• The mediator's role is to facilitate communication.  The mediator will work with you and the IRS to obtain the information necessary to understand the nature of the dispute.  This includes the issues involved and the positions of both parties.
• The mediator may conduct both separate and joint discussions with you and the Internal Revenue Service representative.  The purpose is to help the two of you reach a mutually satisfactory resolution that is consistent with the applicable law.  The mediator has no authority to require either party to accept any resolution.

Representation

• You may represent yourself at the mediation session, or someone else can act as your representative.
• For mediation to succeed, those who have the authority to make a decision must be present.  If you decide to have someone represent you, that person must have the proper authorization to act on your behalf and to receive confidential information.  You may use Form 2848, Power of Attorney and Declaration of Representative for this purpose.
• You can bring anyone else you choose with you to support your position.

Appeals

• You may withdraw from the mediation process anytime.
• If any issues remain unresolved, you will retain all the usual appeal rights as explained in Publication 5, Your Appeal Rights and How to Prepare a Protest if You Don't Agree.

For further information, see the Appeals Internet Web site at http://www.irs.gov/appeals.

NSA District Governor's Column

BOARD MEETING ACTIONS

Now that one more tax season is history, it's time to look to our professional societies to see what is being offered to help us hone our skills and market our practices.  The pace of the National Society of Accountants has quickened, as has that of its affiliated state societies, and we find ourselves checking out available programs and activities.

The board of NSA met May 17-19, 2002, and exciting plans were presented, announcements made, and needed decisions reached.   A few of the highlights include:

•  The Horizon Plan was approved - finally emerging from the formulative and discovery stages, it   presents a stimulating approach to long-range and strategic planning that focuses on a shift in outlook to attract new members and an adjustment of benefits to better meet needs of accounting and tax practitioners in a technologically-changed world.
• A Membership Program was presented that includes a proposed bylaw amendment that will be presented at the next convention to extend membership to employees of member firms.  Among other plans, June 1 will kick off a whole month of emphasis on membership efforts.  You'll be hearing more about this program soon.
• The Peer Review Program , although in existence for some time, it coming into its own and interest is growing.  It's an excellent benefit, especially for certified members.  The convention will include a personal consultation with a peer reviewer for those who are interested in a review of their work product.
• In the legislative area, a new 50 state Synopsis of state accountancy statutes is now available, updated and current.  It's a helpful and necessary resource for those involved in legislative and regulatory programs at the state society level.
• The board buckled down and asserted fiscal responsibility.  Several tough decisions were made and policies determined that will serve NSA well, both this year and in the future.

The meeting was preceded by a day of brainstorming, requested by the governors in order to candidly discuss pertinent topics, define issues, align priorities and establish lines of authority and responsibility.  It was enlighting, educational and highly productive.       

No place on earth sounds more welcoming than Hawaii, and that will be the setting for the NSA Convention to take place August 20-23, 2002.   It will be held in the beautiful Hilton Hawaiian Village Hotel.  If you haven't made plans to attend yet, please do so quickly because reserved space is quickly being claimed.  Be sure to send in your delegate card promptly (found is the latest issue of the Practitioner).

Wanda Samek, Governor

NSA District VIII

NSA Gets Stonewalled by IRS

We (nsa) recently asked our members to give us information about a possible problem regarding large refund efiled returns being held up for examination.  We (NSA) wrote Commissioner Rossotti to make him aware of this problem.  Here is a partial response to the letter.

"In processing refunds on electronically filed returns, the  IRS does not guarantee a specific date that we will deposit a refund into a taxpayer's financial institution account or mail it to them.  Based on experience, taxpayers normally receive their refunds within 10 days from the time we acknowledge the electronic return data.  However, we do advise taxpayers that it can take up to 3 weeks to process their electronic return.

We do not subject electronic returns to more review criteria than a paper return.  All returns go through the same validation and posting process.  During this period, if we identify a programming problem, electronic filing procedures require us to notify software developers and transmitters of potential refund delays through a system known as "Quick Alerts."

NSA had inside information on the problem, but the IRS is denying the problem.  If you continue to have these problems, we want to know about it.  Send information to bphillips@nsacct.org.

IRS PROBLEM AREAS

Ms. Nina Olson, IRS National Taxpayer Advocate (NTA), recently appraised Congress of 23 problem areas.

The top 10 problem areas are:

• Access to customer service toll-free telephone assistance;
• Multiple definitions of "qualifying child";
• Determining earned income tax credit (EITC) eligibility;
• Answers to questions given by customer service representatives;
• Documenting EITC eligibility;
• Refund inquires;
• EITC examinations;
• Understanding estimated tax payments;
• Explanations of math error notices; and
• Processing refund claims.

The NTA reported there is increased experience with incorrect or changing telephone numbers.  This results in continuing poor customer service.  Many callers had long waiting time before speaking with an IRS employee.  Many times callers hear a message to call back later.

There is a 25% error rate for accurate information given by IRS employees, according to the NTA report.  If the answers to questions by IRS employees don't agree with your research, be wary of relying on IRS information.  Better to research before calling the IRS for clarification.

The NTA report also included the most litigated issues in 2001.

The top 10 included:

• Unreported or under reported income;
• Trade or business expenses;
• Personal and dependency exemptions;
• Accuracy-related penalties;
• Delinquency penalty;
• Collection due process;
• Earned income tax credit;
• Innocent spouse;
• Entertainment expenses; and
• Sham trusts.

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