On August 30, The National Taxpayer Advocate Nina Olson held a public hearing in San Antonio, Texas. CPA Jim Oliver spoke on behalf of the San Antonio Chapter of the Texas Society of Certified Public Accountants.

Oliver highlighted three major areas for potential IRS improvement.

1. Inadequate Staffing – The IRS office in San Antonio has too few staff in order to provide good service. There is particularly a shortfall for assisting low-income taxpayers and senior citizens. Taxpayers who call by phone can anticipate being on hold for long periods of time. There is no “walk in” capability. Taxpayers must make appointments that are difficult to schedule for those who are working full time. There is often a two to four week delay before an appointment is available.

Oliver observes that many tax issues could be resolved in a one hour face-to-face meeting. The current system tends to lead to multiple letters, with frequent IRS letters threatening severe action against taxpayers.

In addition, many correspondence audits lead to frustration. Taxpayers are unable to get a timely IRS response. The IRS offices need more complete staffing so that issues can be quickly and more conveniently resolved.

2. Website Improvements – www.irs.gov can become much more user friendly. Taxpayers who have specific issues find it very difficult to do research on the IRS website. The searches and responses to taxpayer questions are not well-targeted. Many commercial websites have a far superior natural language capability. The commercial sites answer questions correctly more often. Other commercial options including staff responses or chat windows. The IRS could adopt some of these strategies to improve taxpayer service.

3. Electronic Communications – CPAs are often frustrated in attempting to represent their clients. There must be improvements in the method for CPAs to submit tax information and resolve issues electronically with the IRS. The IRS should start accepting electronic signatures. Many taxpayers no longer have access to fax machines and the IRS needs to have a more efficient way to handle document signatures.

Editor’s Note: National Taxpayer Advocate Nina Olson conducts regular taxpayer forums in different locations. During the past three months, she has conducted forums in Los Angeles, California; Portland, Oregon; Parma, Ohio and Red Oak, Iowa. All of the forums include area speakers and questions and answers from the public.

Commissioner Koskinen Pledges no BOLO List

In an August 18 letter to Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), IRS Commissioner John Koskinen pledged to permanently eliminate the “Be on the Lookout” list. IRS staff commonly called this the “BOLO” list.

Koskinen stated, “I want to emphasize in clear terms that the IRS Exempt Organizations area stopped the use of the BOLO list over three years ago. I have repeatedly stated this point in congressional testimony and in public speeches. Other independent parties, including the Treasury Inspector General for Tax Administration in its March 2015 report, have also confirmed this point. Since the initial TIGTA report on this issue in 2013, the IRS and its leadership team have been, and remain, absolutely committed to avoiding any selection and further review of potential political cases based on names and policy positions.”

Koskinen acknowledged that there still are some pending applications. He pledged to move forward with attempts to resolve those applications. On May 28, 2013 the IRS set up an expedited process for the pending 145 applications. Koskinen reports that they have completed action on 142 of these applications. The other three are on hold because they have been in litigation. He stated they will attempt to resolve those other three applications.

Koskinen continued, “This is part of a larger, ongoing effort to ensuring the IRS runs its tax administration efforts in a fair manner for the nation’s taxpayers. This has been a central component of my work as Commissioner, and fairness remains a cornerstone commitment for the IRS.”

Apple Tax Bill of $14.5 Billion

On August 30, the European Commission ruled that Ireland had provided “illegal state aid” of 13 billion Euros to Apple Computer. The Irish authorities are directed to collect this amount, which is $14.5 billion in U.S. currency.

Apple has had a long-term business operation in Ireland. Between 2003 and 2014, Irish tax officials approved an Apple corporate structure that greatly reduced tax.

Apple created two Irish corporations to hold intellectual property and to purchase various computer components from Chinese companies and sell them in Europe. Under the agreements that interpreted Irish law, neither of the two companies was an Irish resident. Therefore, they were not subject to the standard corporate tax in Ireland. The Apple companies paid just 0.005% tax to Ireland in 2014.

If Ireland does collect the $14.5 billion plus added interest, Apple may benefit from reduced U.S. taxes through the foreign tax credits. This is effectively a transfer of potential U.S. tax money to Ireland. Members of Congress expressed outrage at this result. House Ways and Means Committee Chairman Kevin Brady (R-TX) considered the European Commission ruling “a predatory and naked tax grab.” He pledged to implement tax reforms next year to make a similar tax result unlikely.

Senate Finance Committee Chairman Orrin Hatch (R-UT) stated, “Further examination of today’s ruling is needed, but it appears the European Commission has issued an extraordinary decision that targets U.S. business by rewriting already existing tax policies.”

Speaker of the House Paul Ryan (R-WI) stated, “Slamming a company with a giant tax bill – years after the fact – sends exactly the wrong message to job creators on both sides of the Atlantic.”

Finally, Sen. Chuck Schumer (D-NY) responded, “This is a cheap money grab by the European Commission, targeting U.S. businesses and the U.S. tax base. By forcing their member states to retroactively impose taxes on U.S. companies, the EU is unfairly undermining our ability to compete economically in Europe while grabbing tax revenues that should go toward investment here in the United States.”

Applicable Federal Rate of 1.4% for September—Rev. Rul. 2016-20; 2016-36 IRB 1 (18 August 2016)

The IRS has announced the Applicable Federal Rate (AFR) for September of 2016. The AFR under Section 7520 for the month of September will be 1.4%. The rates for August of 1.4% or July of 1.8% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2016, pooled income funds in existence less than three tax years must use a 1.2% deemed rate of return. Federal rates are available by clicking here.