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NSPA testifies on taxpayer rights.

The oral statement appearing below presents the highlights of NSPA's full written Statement for the Record on Taxpayer Rights. The full statement touched on such other matters as eliminating the interest differential between overpayments and underpayments, requiring the IRS to physically examine a return before a deficiency is determined, placing the burden of proof on the government in the case of information provided by third parties (i.e., 1099s, K-1s, et al.) and mandatory issuance of 30-day letters.

Good morning. My name is Bob Zaleski. I am a public accountant from Plymouth Meeting, Pennsylvania. I appear before you today as Vice Chairman of the Federal Taxation Committee of the National Society of Public Accountants. Our Chairman, Donny Woods of Nashville, Arkansas, asked me to express his regrets for being unable to attend today's hearings.

NSPA represents some 21,000 independent accountants who provide professional services to an estimated 4 million individuals and small businesses nationwide. We have reviewed each of the taxpayer rights proposals introduced by Chairman Pryor. We have also taken the liberty of addressing some of the other taxpayer rights problems our members encounter on a regular basis. In the balance of my allotted time, I would like to highlight some of the matters we have raised in our written statement. I refer you to that statement for our complete testimony.

Attorney-Client Privilege

NSPA supports the proposed reinforcement of the attorney-client privilege. We also recommend the expansion of the privilege to include all tax practitioners. The existing privilege applies only to attorneys.

Such a proposal has been championed in the past by (retired) Colorado Senator Bill Armstrong, and is currently included in legislation introduced by Senators Steve Symms (R-ID) and Alfonse D'Amato (R-NY). The tax preparer's privilege is an important safeguard in our democratic system and a long overdue addition to the taxpayer bill of rights. The National Society urges the Subcommittee to give the tax preparer's privilege every possible consideration.

Tax Preparation Fees

NSPA was deeply disturbed by a recent IRS private letter ruling ("PLR") which suggested that no portion of tax return preparation fees could be allocated to activities reported on Schedules C, E or F of Form 1040. We believe that both the PLR's policy and its technical analysis were in error. We strongly support a legislative clarification that reasonable allocations of tax return preparation fees among Schedules C, E and F should be permitted.

Notice of Examination by Written Notice

Surreptitious efforts by certain IRS employees to gather information from taxpayers via telephone contact have long been a source of difficulty for taxpayers and tax practitioners. In the hope that such a proposal will eliminate this unfortunate problem, NSPA supports the requirement that initial taxpayer contact occur in writing and not by telephone.

Tax Court Practice

House Budget Committee Chairman Leon Panetta has introduced legislation to allow certified public accountants and enrolled agents to represent taxpayers in small cases before the U.S. Tax Court. Taxpayers represented by EAs or CPAs, who are already authorized to practice before the IRS, are denied the most effective, least expensive representation before the Tax Court in such cases.

Moreover, the CPA or EA who prepared the return is already familiar with the taxpayer's case. Because the rules of evidence and procedure are waived in "small cases," he or she is the logical person to carry such a dispute on to the Tax Court.

More importantly, since the IRS is required to consider the hazards of litigation to both the taxpayer and the government in deciding whether or not to settle a case, Congressman Panetta's bill would essentially "level the playing field" for taxpayers in Appeals. In this respect, NSPA views H.R. 1485 as both a logical extension of CPA and EA practice rights as well as an important procedural safeguard for taxpayers. We urge its inclusion in your legislation.

Place of Audit

For many taxpayers, the insistence on the part of some IRS auditors to conduct a field audit at the practitioner's office continues to be a problem.

When the audit is conducted at the practitioner's office, he or she offers complete access to records, adequate space without disruption to any of the parties and the ability to mitigate the fees he or she must charge the taxpayer. While some IRS staff have shown increased sensitivity in this area, such attitudes are neither uniform nor codified. We believe that legitimate tax administration needs can still be satisfied without having to conduct entire audits at a taxpayer's home or place of business.

Honoring the Power of Attorney

Tax practitioners routinely experience difficulty in having IRS field personnel honor valid powers of attorney. All too often, IRS employees make direct contact with taxpayers even after receiving a power of attorney authorizing representation by an attorney, CPA or EA. NSPA recognizes that legitimate circumstances may on occasion necessitate a direct taxpayer interview. Nevertheless, where a power of attorney is on file, such an interview should be arranged through the authorized representative and conducted in that representative's presence. This improper disregard of a power of attorney compromises the rights of both practitioners and taxpayers. NSPA recommends that establishing some appropriate form of sanctions be considered to discourage this practice.

Before concluding, NSPA would like to emphasize that the comments it has presented herein are not intended in any way to detract from the fine efforts of IRS Commissioner Fred T. Goldberg, Jr., and his dedicated staff. Rather, it is NSPA's hope that the proposed changes will have a positive effect for all concerned. In closing, Mr. Chairman, I would like to again thank you for the invitation to appear before the Subcommittee today. The NSPA applauds your leadership and that of the members of this Subcommittee in addressing the important issue of taxpayer rights. We stand ready to assist you in your efforts in every way possible.
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Title Annotation:Capitol Corridors
Publication:The National Public Accountant
Article Type:Column
Date:Feb 1, 1992
Previous Article:NSPA's 1992 legislative strategy conferences.
Next Article:Closing the tax gap: alternatives to enforcement.

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