Senator Kerrey, Commissioners, and distinguished guests, my name is Joan Shuminski and I am an Enrolled Agent engaged in private practice here in Omaha, Nebraska.
I received my Enrolled Agent card fourteen years ago. I am proud to be able to say that I passed the rigorous two-day IRS examination to become an Enrolled Agent on the first try. For many years I was in business as part of a franchise, but now I am an independent tax practitioner specializing in small business tax and accounting..
I am very pleased to have this opportunity to present testimony on behalf of Enrolled Agents in Omaha who are members of the National Association of Enrolled Agents. This organization receives no federal grants or contracts.
As you know, Enrolled Agents are licensed by Treasury to represent taxpayers before the Internal Revenue Service. Enrolled Agents were created by legislation signed into law by President Chester Arthur in 1884 to remedy problems arising from claims brought to the Treasury after the Civil War. We represent taxpayers at all administrative levels of the IRS. Since we collectively work with more than 4 million taxpayers and small businesses each year, Enrolled Agents are on the front-lines of tax administration.
The Local Perspective
I know that you are looking for the perspective of local tax practitioners so I will address a variety of issues affecting both taxpayers and tax practitioners here in Omaha.
Until recently, Omaha had a District IRS Office. This is no longer true as a result of the IRS consolidation which was announced in May 1995. This has made us seem a little isolated, however, the Problem Resolution Officers (PROs) who have remained posted in Omaha are doing a fine job.
According to my colleagues, filing season is going very well. We do, however, have problems obtaining IRS forms and publications. Prior to the consolidation of offices, Omaha had two IRS offices. Now that one has been eliminated, you must go to a downtown office building and go through metal detectors to get forms and publications. It's inconvenient to say the least. Also, as a result of the downsizing, there are fewer people to answer the telephones and fewer people to answer questions.
We have not had a District Director's newsletter in some months. I did receive a Midwest Regional Commissioner's newsletter last September. In May 1996, I received a newsletter from the Director of the Ogden Service Center. These are important resources for many practitioners. I keep a file on them which I look at from time to time as needed. Many of my colleagues do likewise. The IRS budget cuts may sound good politically, but they have gone too far. Many practitioners are not getting information they need. I know that the IRS is justifiably proud of its Web site, but many practitioners are not using electronic mail so the Internet is not accessible for them.
Some of us do not participate in the electronic filing program. In my case, I'm working with small business owners who rarely receive refunds. However, one of my colleagues here in Omaha reports that electronic filing is going smoothly this year. She has had no major problems. The only problem -- and it's a minor one -- has been with female clients who have not yet notified the Social Security Administration of their name change since they married. If their returns are filed electronically using their married name with their proper Social Security number, their return is rejected. My colleague had hoped the problem would have been straightened out by now, but she is still seeing taxpayers who have not yet notified Social Security of their name change. Perhaps IRS needs to better educate taxpayers about this, particularly if IRS wants more electronically filed returns.
On the Electronic Federal Tax Payment System or EFTPS, I have requested that my clients use a payroll service if they are mandated to come into the system by July 1. I understand that many local banks do not yet understand the system. Perhaps this is where IRS needs to begin the training process. When the banks know what to do, taxpayers will have few problems implementing the program. I might ask the question -- are banks being compensated for their efforts in this endeavor? If this is such a cost effective idea for IRS, they certainly should be able to pay the middleman for their additional services. I think it's a good system but IRS will need to be patient while bringing the system on line. Penalty relief may be required for those businesses which have enrolled but not completely adjusted to the system.
On the issue of compliance, economic reality audits are necessary. I believe that there is a good deal of noncompliance and IRS needs to do more auditing. There are many situations where these audits are appropriate investigative tools for IRS. I'm even sometimes surprised at how nicely people live on the minimum income that they present to me at tax time. I must repeat the earlier statement that in my opinion, there is a great deal of tax noncompliance in this country.
Although good in theory, the alternative minimum tax (AMT) is complicated and burdensome. The complications and burdens balloon as the States come into play and particularly when the taxpayer has multiple states with which to deal. When tax laws are passed, there must be a conscientious effort to consider the repercussions at the State level.
States are going to present our biggest tax preparation problems in the future. We already have revenue-needy States making more and more demands on taxpayers. We need to have some continuity in thinking between Federal tax law changes and State tax law changes because undoubtedly Federal changes result in State changes. I would suggest closer collaboration between federal and state lawmakers, or at least some consideration of the impact federal laws will have when combined with state tax laws.
Another issue that concerns me is retirement savings. We must do more to encourage working people to save for retirement annually throughout their working lives. Last year, Congress extended a separate IRA to nonworking spouses. That was a good start, but it is still not enough. There is a need to increase the annual contribution to an IRA. It has not been increased in years and is still at $2,000. For those taxpayers covered by a retirement plan, the threshold for deductible IRA contributions must also increase. I have clients whose incomes have increased modestly over time and who started out with deductible IRAs but whose contributions are no longer deductible. That's a disincentive which needs to be eliminated.
Congress must ensure that the IRS has the funds it needs to be adequately staffed, and the staff must be adequately trained and supplied. IRS must be able to provide the basic services taxpayers need in order to fulfill their legal obligations. I cannot state strongly enough that the first simple priority must be answering the telephone.
On behalf of Nebraska's Enrolled Agents, I would like to express our appreciation to you, Senator Kerrey, and to the other Commissioners, and the Commission staff for taking time to visit us here in Omaha. Since it is now the height of the tax filing season, we cannot get to Washington. It means a great deal to us that you have brought the Commission to us.
I will now answer any questions you may have.