Monthly Archives: July 2015

Same-sex marriage to boost state tax revenue

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate



The Supreme Court’s ruling legalizing same-sex marriages across the United States was a victory for the couples who long fought for equal marital rights.

It also could prove to be a reason for state treasuries to celebrate.

The Williams Institute at the UCLA School of Law says that the increased number of weddings could produce a national economic boost of up to $2.6 billion in just the first three years that same-sex marriage ceremonies are performed nationwide.

That should lead to a total of $184.7 million in new tax revenue, says the law school think tank.

More wedding money

The money, according to the group’s data, will come from the expanded wedding services as gay and lesbian couples head to the altar.

Businesses that provide wedding planning, catering, venue and myriad other wedding-related services naturally will see their incomes and taxes increase.

So will ancillary industries, such as the travel and lodging sectors that will have the couples’ out-of-town wedding guests as new customers. This spending boost can lead to an increase in state and local tax revenue and an influx of tourism dollars that benefit local businesses.

More state income taxes possible

In addition, the Williams Institute estimates more than 13,000 new jobs will be created nationwide, thanks to the growing number of nuptials.

For the 41 states that collect income taxes, that will mean additional taxes from the new workers within their borders.

Some states also could see increased tax collections simply from the new couples’ filing status changes.

Now that same-sex couples can fill out returns as married filing jointly in states with income taxes, some of the new married couples could see their taxes go up as their combined incomes push them into higher tax brackets.

No income tax, no problem

Even the states that don’t levy individual income taxes should benefit substantially.

In my home state of Texas, for example, Williams Institute researchers estimate that more than 23,000 couples will marry during the first three years of legal same-sex marriage, providing the Lone Star treasury with nearly $15 million in tax revenue on total wedding spending of almost $182 million.

The financial forecast is similar for Florida, another large, no-income-tax state that offers lots of beach venues where couples can exchange vows.

Tax planning for all

Of course, the opposite is true, too. States could see a dip in their revenue, thanks to the newly married same-sex couples.

This might happen, for example, if only one spouse works. By now being able to file a joint state tax return, the same-sex newlyweds could see lower tax bills.

So states, just like their taxpaying residents, will be doing some tax planning to see how the new marriage equality law affects their bottom lines.

Generally, however, more wedding business will be good not only for the happy couples, but for the states’ economies and tax collectors.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Filing, Withdrawing, and Managing IRS Authorizations

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!



Clients need their CPA to have the appropriate authorization to communicate with the IRS on their behalf. Whether they are selected for an audit, assessed a large penalty, or simply need a transcript to determine what payments were made this tax year, clients rely on CPAs to address their tax issues. Most practitioners regularly use a power of attorney (Form 2848, Power of Attorney and Declaration of Representative) to represent their clients. However, other types of IRS authorizations have practical uses. And, at times, it may make sense to obtain more than one type ofauthorization.

Form 8821

Form 8821, Tax Information Authorization, is used to obtain taxpayer information. It does not hold the same weight as Form 2848 (i.e., Form 8821 does not allow a practitioner to represent a client in any way). However, if a practitioner has this type of authorization, he or she is equipped with the tool to call the IRS and obtain information such as client transcripts, payments made on the account, filing status, and more.

A benefit of a Form 8821 authorization is the ability to use less-expensive staff to call the IRS and obtain IRS account information. If a practitioner lists his or her firm’s name as the appointee on Form 8821, anyone from the firm may call the IRS and obtain information about the taxpayer. For example, the firm’s secretary or bookkeeper, instead of the tax manager or partner, could call the IRS to obtain a client’s transcript. Considering that call-wait times have increased steadily in line with recent cuts to the IRS’s budget, using less costly staff to make basic IRS phone calls can be beneficial.

Additionally, as a proactive measure, practitioners should consider having a Form 8821 on file for all clients (even clients that do not currently have any tax issues). This is because Form 8821 allows the appointee to be copied on all IRS correspondence. The appointee will then receive a copy of a client’s notice at the same time as the client—allowing the practitioner the opportunity to determine how the client should address the matter. After all, sometimes clients ignore an IRS notice or do not understand its severity.

Checkbox Authorization (Third-Party Designee)

A CPA can complete the “Third Party Designee” section on a client’s Form 1040, U.S. Individual Income Tax Return(often referred to as “checkbox authority”). This allows the CPA to discuss the processing of the client’s tax return, including the status of tax refunds. This authorization has limited use but may be worthwhile to ensure a return is correctly processed.

How to Complete Forms 2848 and 8821

Completing Forms 2848 and 8821 is fairly straightforward. A practitioner needs to have:

  • Taxpayer information (name, address, taxpayer identification number, and phone number);
  • The practitioner’s information (name, address, Centralized Authorization File (CAF) number, preparer tax identification number (PTIN), telephone number, and fax number); and
  • Tax information (type of tax, tax form number, years or periods, and specific tax matters, if applicable).

A practitioner will need to enter a CAF number to complete the forms. A CAF number is a unique nine-digitidentification number assigned to a practitioner the first time he or she files an authorization form with the IRS. A CAF number is different from a Social Security number, employer identification number, or PTIN.

CAF Number Tips
  • If practitioners do not have a CAF number, they may enter “none” in the CAF number section on the form, and the IRS will assign one.
  • If practitioners forget their CAF number, they may call the Practitioner Priority Service line at 866-860-4259866-860-4259 FREE. Once authenticating information is provided, the IRS representative can usually provide the CAF number over the phone.
Where to File Forms 2848 and 8821

Practitioners must mail or fax their authorization forms to the applicable CAF unit (Ogden, Utah; Memphis, Tenn.; or Philadelphia) unless they check the box on line 4 of Form 2848 or 8821 (specific use not recorded on the CAF). In that case, the practitioners would mail or fax the form to the office handling the matter.

Unfortunately, with the retirement of the online Disclosure Authorization product in 2013 (which allowed practitioners to file Forms 2848 and 8821 electronically), mailing or faxing these forms are the only filing options.

Tip: If a client has an urgent issue and the practitioner does not have time to wait for the authorization to be recorded at the CAF unit, the practitioner may call the IRS and scan and fax the authorization form to the agent who takes the call.

Withdrawing Form 2848 or 8821 Authorization

Practitioners may withdraw an authorization at any time. To do so, they must write “WITHDRAW” across the top of the first page of the Form 2848 or 8821 with a current signature and date below the annotation. Then they must provide a copy of the authorization form with the withdrawal annotation to the same CAF unit where the form was originally filed. The instructions to Form 2848 provide additional steps to take if practitioners do not have a copy of the authorization form. A taxpayer may also revoke the authorization at any time by following procedures similar to the withdrawal steps.

A new authorization supersedes an existing authorization unless otherwise specified on Form 2848 or 8821. Authorizations also expire with the taxpayer’s death (proof of death is required).

Obtaining a Listing of All Authorizations on File With the CAF Unit

It is advisable to keep a list of all client authorizations that a practitioner has open with the IRS. But, at times, a practitioner may need to obtain that list from the IRS. For example, a retiring CPA may wish to withdraw all authorizations on file with the CAF unit. To do so, the CPA may first make a Freedom of Information Act (FOIA) request for a CAF representative/client listing. This is known as a “CAF77 request.” A sample FOIA CAF77 letter is shown on the IRS’s FOIA Guidelines webpage.

The IRS will then provide a printout or electronic copy of all of the CPA’s current authorizations. The CPA can send a signed withdrawal request for all authorizations. The CAF unit will then delete the authorizations attached to thatCPA.

Other Resources

For additional guidance on IRS authorizations, refer to the following resources:

  • Publication 4019, Third Party Authorization, Levels of Authority: This publication provides a nice summary chart of various types of authorizations (purpose, how authority is granted, etc.).
  • Publication 947, Practice Before the IRS and Power of Attorney: This 19-page publication provides information about practicing before the IRS.
  • Form 56, Notice Concerning Fiduciary Relationship: This form is used to authorize the designated person to perform any act on the taxpayer’s behalf (i.e., he or she is a fiduciary under Sec. 6036 or 6903).
  • The CAF authorization rules: The IRS CAF webpage (available at provides detailed guidance on CAF rules and processes.
  • Internal Revenue Manual (IRM) Section 21.3.7, Processing Third Party Authorizations Onto the Centralized Authorization File: This IRM section applies to IRS employees responsible for performing CAF account work, but the information may also be useful to tax practitioners to understand the IRS’s procedures.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

IRS urged to go more digital

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!



The technical glitches at the New York Stock Exchange and United Airlines, not to mention the recent hacking of the Internal Revenue Service’s “Get Transcript” online service, might tend to make people back off of technological solutions.

One tax advisory panel, however, thinks more online IRS access is just what taxpayers need.

Taxpayers increasingly prefer digital self-service to phone and paper methods, according to the Electronic Tax Administration Advisory Committee, or ETAAC. This all-volunteer group serves as the focal point for, as its name indicates, electronic tax administration issues.

“The IRS needs to transform its taxpayer service and compliance capabilities for efficiency through digital tools,” ETAAC members said in their 2015 annual report to Congress. “While the IRS is making progress to plan for the development of digital tools, the IRS needs to accelerate its strategy to overcome service shortfalls.”

Comprehensive and easy-to-use IRS digital service tools, says ETAAC, will reduce the taxpayer burden, increase compliance and improve taxpayer service.

TIGTA agrees, with caveats

Meanwhile, the Treasury Inspector General for Tax Administration, or TIGTA, agrees that technology improvements are crucial to future tax collection success and taxpayer satisfaction. The IRS watchdog office warns, however, that any expanded online options must be contingent on key technology and security upgrades.

“As taxpayers continue to be provided with the electronic products and services they desire to interact and communicate with the IRS, the risk associated with unauthorized access to tax accounts will continue to grow,” said TIGTA’s J. Russell George in a statement accompanying his office’s recent look into IRS electronic services.

“As such, completion of those technology projects that improve online service while mitigating the risks must be a priority,” George noted.

Continuing IRS money troubles

The recommendations of the two panels are no surprise to the IRS. The agency has increasingly turned to digital and online services in recent years, primarily to fill gaps in personal customer service that the agency says are the result of insufficient funding. The revenue shortage also affects digital solutions.

“Any proposed strategy must consider our limited funding and finite resources for high-priority information technology projects and other investments across the agency,” the IRS said in a statement in response to the TIGTA report.

Both TIGTA and ETAAC agree that money is a problem.

“The IRS also needs to closely collaborate with Congress to assess its investment decisions and allocate its resources appropriately,” notes the ETAAC report. “This will ensure that Congress invests in key areas necessary for long-term improvements to taxpayer service and compliance.”

Similarly, TIGTA’s audit found that additional IRS funding needs to be committed to fully complete the agency’s key information technology projects.

Congressional intransigence

But getting the dollars from Capitol Hill is easier said than done, especially since the IRS has remained in congressional crosshairs for the past few years. The Republican-led House and Senate have slashed the IRS’ budget as punishment for the agency’s handling of the Tea Party 501(c)(4) nonprofit status controversy.

Will Congress eventually loosen the purse strings so that the IRS can keep pace with the digital tax solutions that taxpayers demand? Under normal (as far as that word can be used in connection with Congress) circumstances, I’d say yes.

But with the IRS an easy target and the 2016 election year on the horizon, look for federal lawmakers to continue to punish the IRS financially in order to make political points.

Unless we taxpayers can persuade our representatives and senators to change their minds, we’ll just have to hope the IRS can cobble together the safe and useful digital solutions we want and need.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.