Section 7216: Guidance and sample consent forms to comply with regulations involving disclosure and use of tax return information by tax return preparers.
ADVOCACY: AICPA Highlights Support for Provisions of Reconciliation Act, Submits Recommendations (October 2021)
As Congress considers the tax provisions in the reconciliation legislation recently passed by the House Ways and Means Committee, the American Institute of CPAs (AICPA) has submitted comments to the Congressional tax-writing committees’ leadership on several tax provisions. The AICPA believes it is important that special care is given to transition rules and sufficient time and flexibility is provided to implement the transition rules and offer penalty relief as needed. The recommendations offered are designed to help ensure that the final reconciliation package is administrable, equitable and meets the needs of both taxpayers and tax practitioners.
ADVOCACY: AICPA supports the Taxpayer Penalty Protection Act of 2021 [H.R. 5155] (September 2021)
The AICPA supports the ACT which provides fair and reasonable penalty relief for taxpayers. The Act also reduces contact with the IRS as they struggle with their own challenges.
UPDATE: House Ways & Means Committee releases tax proposals. (September 2021)
On Monday, September 13th, the House Ways & Means Committee released proposed details of tax changes and a section by section summary that are expected to be marked up this week. Changes include items such as mega IRA account limits, Roth conversion limits, raising the top marginal rate for individuals, raising the capital gains rate, sunsetting the increase in the estate/gift/GST tax exemption and much more
UPDATE: Introduction of new legislation on derivative taxation (August 2021)
On August 5, 2021, Senate Committee on Finance Chairman Ron Wyden introduced the “Modernization of Derivatives Tax Act of 2021” (“MODA”). The act would scrap most current rules and regulations for taxing derivates in favor of a new system. The legislation would require mark to market and ordinary tax treatment for all derivates and reduce the tax rules to one rule for mark to market, one rule for character of the income and one rule for the taxpayer’s country of residence.
UPDATE: Securing a Strong Retirement Act of 2021 (May 2021)
On May 4, 2021, the House Ways and Means Committee voted on a bipartisan basis to advance H.R 2954, effectively SECURE 2.0. Three provisions of interest shared by Bob Keebler, CPA/PFS, include: Section 309 allows for a one-time election to make a qualified charitable distribution of $50,000 to a CRT or charitable gift annuity; Section 312 imposes a statute of limitations for the excess contribution accumulation penalties; and Section 321 provides that only the portion of an IRA used in a prohibited transaction ceases to be treated as an IRA. The bill’s details in the legislative record can be found here.
UPDATE: American Families Plan Act (May 2021)
On Wednesday, April 28th, President Biden gave his first congressional address. As part of his plan for the nation, he proposed a long term capital gain rate of 39.6% for households with income over 1 million, restoration of the top marginal tax rate of 39.6% for those earning over $400,000, and elimination of the step up in basis at death. Given the forward momentum for forced recognition of capital gains at death, this episode of the PFP Section podcast covers client scenarios and all the details we know at this point so that you can have initial discussions with clients on what may be ahead.
UPDATE: Important development with SECURE Act post-mortem distributions (April 2021)
On April 9th, 2021, the IRS released updated Publication 590-B which has caused much confusion with retirement planning experts. In this PFP Section podcast episode, Bob Keebler, CPA/PFS, puts the key aspects on your radar so that you can best advise families you are helping who have experienced deaths after January 1, 2020. Note that post recording of this podcast, this article was released that suggested that an IRS spokesperson said the examples causing confusion are incorrect and they will be revising the publication to reflect the correct information. Stay tuned to PFP News for further developments as we have them. You can find the publication here.
UPDATE: IRS Publication 590 on the 10-Year Rule Under the SECURE Act (April 2021)
Recently released IRS Publication 590-B explains how the 10-year rule under the SECURE Act affects IRA distribution requirements. The Publication has experts in the field scratching their heads. Bob Keebler and Ed Slott explain in this podcast.
UPDATE: Members of Congress request estimated tax deadline postponement (March 2021)
In a letter to IRS Commissioner Charles Rettig, a diverse, bipartisan group of 60 members of Congress urged the IRS to extend the deadline for first quarter 2021 federal estimated tax payments to May 17. See Notice 2021-21 and read more in this Journal of Accountancy article.
UPDATE: Make the case for deadline relief for all taxpayers (March 2021)
The AICPA is asking members of Congress to call on the IRS to immediately give tax payment and filing relief to all taxpayers -- and we need your help and that of your affected small business clients. Please reference the AICPA Update from President and CEO Barry Melancon, CPA, CGMA, for details and a draft email.
UPDATE: American Rescue Plan Act of 2021 (March 2021)
President Biden signed off on the latest relief for businesses and individuals in March. You can learn the specifics you need to know for your clients in this PFP Section podcast episode from Bob Keebler, CPA/PFS, including: the ins and outs of the restaurant revitalization grant program, expansion of the employee retention credit and EIDL loans, tax free unemployment compensation and much more.
UPDATE: Second COVID-19 relief bill signed into law (December 2020)
President Donald Trump has signed into law the $900 billion COVID-19 relief bill. The legislation, also known as the Consolidated Appropriations Act, 2021, provides additional funding for small businesses, relief for individuals and ensures tax deductibility for business expenses paid with forgiven PPP loans.
ADVOCACY: Penalty relief for COVID-19 (November 2020)
The AICPA is continuing to advocate for IRS penalty relief for you and your clients as it pertains to COVID-19. On November 5th, the AICPA submitted this letter which expresses the challenges taxpayers and tax preparers faced this filing season and re-iterates the importance of prioritizing penalty relief.
UPDATE: Guidance issued on payroll tax deferral (September 2020)
In an August 12th letter to the IRS and Treasury, the AICPA asked for guidance on many open issues regarding the implementation of the presidential memorandum which deferred payroll taxes for certain wage earners. The IRS has now released guidance and you can learn more in this article.
UPDATE: Executive order offers additional pandemic relief (August 2020)
On August 8, President Trump signed an executive order to defer payroll taxes for certain individual taxpayers. In addition to this relief, he signed orders to compensate unemployed individuals, help with evictions and provide student loan relief. Learn more in this article.
UPDATE: Final regulations issued on payments to charitable organizations (August 2020)
In T.D. 9907, the IRS issues final regulations on the treatment of payments made to charitable organizations in return for consideration, including in return for state and local tax credits. Learn more in this Journal of Accountancy article.
ADVOCACY: AICPA requests guidance on executive order (August 2020)
On August 12, the AICPA sent a comment letter to the IRS and the Treasury Department asking for clarity around the recent presidential memorandums. You can watch this video and read this Journal of Accountancy article to learn more.
UPDATE: Guidance issued on NOLs (July 2020)
The IRS issued proposed REG-125716-18 and temporary regulations T.D. 9900 to help guide consolidated groups on the treatment of net operating losses after recent changes. Read more in this article.
UPDATE: IRA for rollovers and repayments discussed in IRS guidance last week (June 2020)
There have been a few member questions relating to Notice 2020-51, which was issued last week regarding waiving RMDs in 2020. We have been told by an IRS official that a 2020 required minimum distribution (RMD) that would otherwise be allowed to be rolled over, except for the lapse of the 60-day rule, can be put into a different IRA by August 31, 2020. However, a “repayment” for a distribution that was made from a non-spousal inherited IRA or a distribution that would otherwise violate the one-rollover-per-12-month rule needs to go back into the distributing IRA by August 31, 2020.
UPDATE: IRS announces rollover relief following AICPA advocacy (June 2020)
The AICPA requested implementation guidance for IRAs and trust issues related to COVID-related distributions provision (Section 2202) and the RMD waiver provision (Section 2203) of the CARES and SECURE Acts. The letter provides recommendations on issue including the 2020 RMD waiver, the 10-year rule, age of majority and reporting requirements, among others. In IR-202-127, the IRS responded by announcing rollover relief for RMDs from retirement accounts that were waived under the CARES Act. Anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020. The 60-day rollover period for any RMDs already taken this year has been extended to Aug. 31, 2020, to give taxpayers time to take advantage of this opportunity.
UPDATE: Guidance for COVID-related distributions and loans (June 2020)
In Notice 2020-50, the IRS provides guidance relating to the application of section 2202 of the CARES Act for qualified individuals and eligible retirement plans. Learn more in this Leimberg Information Services, Inc. podcast.
ADVOCACY: Mobile worker relief (June 2020)
On June 18, the AICPA submitted a letter supporting S. 3995, the Remote and Mobile Worker Relief Act of 2020 which is aimed to help balance between states’ rights to tax income from work performed within their borders and the needs of individuals and businesses to operate efficiently in the current economic environment.
ADVOCACY: Beneficiary deduction claims (June 2020)
The AICPA submitted comments on proposed regulations REG-113295-18 regarding a beneficiary’s ability to claim excess deductions pursuant to Section 642(h). The comments address the provisions concerning excess deductions of a terminating trust or estate and supplement previously submitted comments on the issue.
UPDATE: IRS finalizes guidance for 199A deduction (June 2020)
On June 24th, The Internal Revenue Service issued final regulations permitting a regulated investment company (RIC) that receives qualified real estate investment trust (REIT) dividends to report dividends the RIC pays to its shareholders as section 199A dividends
UPDATE: IRS offers electronic signatures for retirement plan participants (June 2020)
Notice 2020-42 provides participants, beneficiaries, and administrators of qualified retirement plans and other tax-favored retirement arrangements with temporary relief from the physical presence requirement for any participant election (1) witnessed by a notary public in a state that permits remote notarization, or (2) witnessed by a plan representative using certain safeguards.
UPDATE: Temporary relief for grantor trusts (June 2020)
Revenue Procedure 2020-34 grants temporary relief to arrangements that are treated as trusts under § 301.7701-4(c) which are, or have tenants who are, experiencing financial hardship as a result of COVID-19, to allow them to make certain modifications to their mortgages loans and their lease agreements, and to accept additional cash contributions with-out jeopardizing their tax status as grantor trusts.
UPDATE: IRS issues guidance on income tax withholding on certain periodic payments (May 2020)
In IR-2020-104, the IRS issued a proposed regulation updating the federal income tax withholding rules for periodic retirement and annuity payments made after December 31, 2020. Under the proposed regulation for 2021 and future calendar years, the Treasury Department and the IRS will provide the rules and procedures for determining the default rate of withholding on periodic payments when a taxpayer has no withholding certificate in effect in applicable forms, instructions, publications and other guidance.
UPDATE: IRS postpones certain filing deadlines (May 2020)
In Notice 2020-35, the IRS postpones deadlines for certain specified time-sensitive actions with respect to certain employment taxes, employee benefit plans, exempt organizations, and Coverdell education savings accounts on account of the ongoing COVID-19 pandemic. The notice also provides a temporary waiver of the requirement for a Certified Professional Employer Organization to file certain employment tax returns and their accompanying schedules electronically.
ADVOCACY: the AICPA supports the Small Business Expense Protection Act of 2020 (May 2020)
On May 6, the AICPA submitted a letter of support for S. 3612, the Small Business Expense Protection Act of 2020, which would clarify that the receipt and forgiveness of COVID assistance through the PPP does not affect the deductibility of ordinary business expenses. Read more in this article.
UPDATE: IRS issues guidance for trusts and estate taxation (May 2020)
In IR-2020-90, the IRS proposed regulations that provide guidance for estates and trusts, clarifying that certain deductions of estates and non-grantor trusts are not miscellaneous itemized deductions. Learn more in this article.
UPDATE: Additional flexibility granted for certain benefit plans (May 2020)
In notice 2020-29, the IRS is offering extra flexibility to taxpayers by extending claims periods for FSA accounts, offering mid-year elections for health coverage, health FSAs and dependent care assistance programs, and applying earlier relief for high deductible health plans. Learn more in this article.
UPDATE: Information for retirement plans in light of COVID-19 (May 2020)
Section 2202 of the CARES Act provides for special distribution options and rollover rules for retirement plans and IRAs and expands permissible loans from certain retirement plans. New FAQs have been issued and are available here.
UPDATE: Private letter ruling requests and more (May 2020)
Revenue Procedure 2020-29 allows taxpayers to electronically submit requests for private letter rulings and other legal advice. It also allows for electronic signatures on the required documents. The IRS will continue to allow for paper submissions in addition to electronic submissions. This revenue procedure modifies Rev. Proc. 2020-1.
UPDATE: IRS posts FAQ on paid sick and family leave (April 2020)
The Internal Revenue Service has posted and updated 67 FAQs about employer tax credits for paid sick and family leave enacted in the Families First Coronavirus Response Act, which gives small and midsize employers refundable tax credits that reimburse them, dollar for dollar, for the cost of providing paid sick and family leave wages to employees for leave related to the coronavirus. Learn more in this article.
UPDATE: IRS posts FAQs on COVID-19 relief for estate and gift taxes (April 2020)
The IRS resource covering filing and payment deadlines questions and answers now contains FAQs that link to additional content on relief for estate and gift taxes.
UPDATE: The IRS reminds taxpayers to file electronically (April 2020)
In IR-2020-68, the IRS reminds taxpayers and tax professionals to use electronic options to speed the processing of tax returns, refunds and payments and to support social distancing.
UPDATE: FAQs issued to address Form 706 delivery issues (April 2020)
The IRS has issued FAQs to help address issues that are related to returned or delayed deliveries of Form 706 to the Kansas City Service Center.
UPDATE: Temporary procedures for Forms 1139 and 1045 (April 2020)
In response to the COVID-19 Pandemic, the IRS is implementing temporary procedures for digital transmission of Form 1139 and Form 1045.
ADVOCACY: AICPA says current tax filing and payment extensions are not enough (April 2020)
In response to the Internal Revenue Service’s (IRS’s) recent announcements concerning temporary closures of its Practitioner Priority Service line, e-Services, Filing Information Return Electronically, and Affordable Care Act Information Returns system help desks, and the CAF number authorization process, the AICPA continues to urge both the Treasury Department and the IRS to provide broader tax filing and payment relief. The AICPA has issued 20 FAQs regarding tax filing and payment relief.
UPDATE: The CARES Act is now law (March 2020)
In response to the coronavirus (COVID-19) pandemic, Congress has passed the anticipated Coronavirus Aid Relief and Economic Security Act (H.R. 748) to bring the resources of the federal government to protect the health and well-being of Americans.
UPDATE: Families First Coronavirus Response Act (H.R. 6201) (March 2020)
On March 18, the Families First Coronavirus Response Act (H.R. 6201) became law. This legislation provides paid sick leave, tax credits and free COVID-19 testing, amongst other things. Learn more in this Journal of Accountancy article.
UPDATE: Additional relief for gifts, GST (March 2020)
In Notice 2020-20, the Secretary of the Treasury determined that any person with a federal gift tax or generation-skipping transfer tax payment due or the requirement to file Form 709 is also affected by the COVID-19 crisis and should be granted relief in addition to the relief provided in Notice 2020-18, issued on March 20, 2020. The April 15, 2020 deadline is postponed to July 15, 2020. Associated interest, additions to tax, and penalties for late filing or late payment will be suspended until July 15, 2020. The AICPA advocated for this outcome earlier this month and you can learn more in this article.
UPDATE: IRS extends tax filing deadline to 7/15 (March 2020)
The IRS has announced that the due date for filing Federal income tax returns and making federal income tax payments is automatically postponed to July 15, 2020. This includes any person, trust, estate, partnership, association and company or corporation. Bob Keebler, CPA/PFS, recorded this podcast on the topic, which is available courtesy of Leimberg Information Services, Inc.
ADVOCACY: AICPA requests guidance on QBI deduction (March 2020)
On March 4th, the AICPA also submitted a request for further guidance on the QBI deduction under Section 199A. Read those comments here.
ADVOCACY: Comments submitted relating to virtual currency transactions (February 2020)
On February 28th, the AICPA submitted comments on Revenue Ruling 2019-24 relating to virtual currency transactions. Read the comments here.
UPDATE: Draft of new federal income tax withholding methods published (June 2019)
The IRS has issued a draft version of new Publication 15-T (Federal Income Tax Withholding Methods) for the 2020 tax year that contains a first look at the new employer steps to figure federal income tax withholding.
UPDATE: Final regulations issued on charitable contributions and state and local tax credits (June 2019)
On June 11, the U.S. Department of the Treasury and the IRS issued final regulations that require taxpayers to reduce their charitable contribution deductions by the amount of any state or local tax credits they receive in return.
UPDATE: IRS issues Section 199A FAQs (April 2019)
Recently, the IRS issued FAQs on Section 199A, the qualified business income deduction for pass-through businesses. You can access the FAQs here.
UPDATE: Regs provide guidance on qualified opportunity funds (April 2019)
Recently, the IRS issued proposed regulations (REG-120186-18) which provide guidance under new section 1400Z-2 on gains that may be deferred as a result of a taxpayer’s investment in a qualified opportunity fund and special rules for an investment in a QOF held by a taxpayer for at least 10 years.
ADVOCACY: AICPA comments on the proposed estate and gift tax regulations (February 2019)
On February 15, the AICPA submitted this comment letter addressing the proposed regulations regarding estate and gift taxes and the difference in the basic exclusion amount which impacts donors of gifts made after 2017 and estates of decedents dying after 2017.
ADVOCACY: Government shutdown ends in time for tax filing season (January 2019)
The partial federal government shutdown ended last week, allowing the full IRS workforce to return to work on Monday, Jan. 28. Read more about the shutdown’s effect on the IRS in this article. Then learn how the AICPA is advocating for certain extensions in this letter.
ADVOCACY: AICPA advocates for penalty relief for tax filers (January 2019)
On January 28th, the AICPA sent a letter to the IRS and the Treasury requesting additional and more extensive relief to taxpayers who were unable to adjust their withholding and estimated tax payments for the 2018 tax year.
UPDATE: Section 199A final regulations released (January 2019)
On January 18th, the IRS released the highly-anticipated final regulations on Section 199A for the qualified business income deduction for pass-through entities. Learn more in this article and podcast.
UPDATE: When real estate qualifies for the 199A deduction (January 2019)
Notice 2019-07 explains details on the recently released 199A regulations and when real estate qualifies for the 199A deduction. Learn more in this podcast.
UPDATE: IRS waives penalty for 2018 underpayments (January 2019)
In IR-2019-03, the IRS announced that it is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.
ADVOCACY: QBI Deduction (October 2018)
The AICPA presented an oral testimony at a recent Treasury and IRS hearing concerning the proposed regulations to implement the deduction for QBI under section 199A. The focus was on five of the eleven key areas raised by the AICPA in its written comments.
ADVOCACY: 199A guidance request (October 2018)
On October 1, the AICPA submitted recommendations related to the Qualified Business Income Deduction, Methods for Calculating W-2 Wages for purposes of Section 199A and the IRS Frequently Asked Questions. Click here to read the comments.
UPDATE: IRS issues guidance on business expense deductions for meals, entertainment (October 2018)
On October 3rd, the IRS issued guidance on the business expense deduction for meals and entertainment following law changes in the Tax Cust and jobs Act. Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. Until the proposed regulations are effective, taxpayers can rely on guidance in Notice 2018-76.
ADVOCACY: AICPA comments on tax reform 2.0 (September 2018)
On September 25th, the AICPA submitted comments regarding outstanding issues after the Tax Cuts and Jobs Act of 2017. In this letter, the AICPA specifically highlights a few key issues like the Section 199A deduction, deduction for state and local taxes and disaster relief.
UPDATE: IRS Issues Guidance on Qualifying Relative and the Exemption Amount (August 2018)
On August 28th, the IRS issued Notice 2018-70 which states the intention to issue proposed regulations to clarify who is a qualifying relative for the new $500 dependent credit and head of household filing status for tax years 2018-2025.
ADVOCACY: AICPA requests guidance regarding S corporation items (August 2018)
On August 13th, the AICPA submitted a letter requesting immediate guidance on various S corporation items in order to comply with 2018 tax obligations and to help clients make informed decisions regarding cash-flow, entity structure and tax planning issues.
UPDATE: IRS issues Section 199A guidance (August 2018)
On August 8th, the Internal Revenue Service issued guidance on the new Sec. 199A deduction for qualified business income in the form of proposed regulations and a separate notice on how to calculate W-2 wages for those purposes and FAQs. For more guidance on 199A, check out this article published in the Journal of Accountancy and read the PFP newsletter for upcoming web events.
ADVOCACY: AICPA Comments on Hardship Distributions Resulting from Casualty Losses (August 2018)
On August 2nd, the AICPA requested immediate guidance on the hardship distribution rules from 401(k) plans and 403(b) arrangements resulting from casualty losses. Read more here.
ADVOCACY: AICPA Comments on the Protecting Taxpayers Act (S. 3278) (August 2018)
On August 1st, the AICPA submitted comments on the bi-partisan tax administration bill “Protecting Taxpayers Act” (S. 3278). Support for Section 202, Regulation of Tax Return Preparers, is included in the comment letter along with a continued request for a modernized tax administration system.
ADVOCACY: AICPA makes recommendations on Form W-4 & instructions (July 2018)
On July 12th, the AICPA submitted recommendations regarding the draft Form W-4 and instructions. In the letter, specific suggestions are made on how to simplify the form and protect taxpayers’ identities.
ADVOCACY: AICPA Recommends Virtual Currency Guidance (May 2018)
On May 30th, the AICPA submitted recommendations to the IRS related to tax rules and how they apply to virtual currency activities. Read the recommendations here.
ADVOCACY: AICPA Supports “Taxpayer First Act” Discussion Draft (April 2018)
On April 6th, the AICPA submitted a letter to the House Ways and Means Oversight Subcommittee in support of their effort to redesign the IRS. In the letter, the AICPA emphasized a commitment to support Congressional efforts to ensure a service-oriented, modernized tax administration.
ADVOCACY: AICPA Submits Written Statement on President’s Fiscal Year 2019 Budget (February 2018)
On February 28th, the AICPA submitted comments to the U.S. Senate Committee on Finance regarding The President’s Fiscal year 2019 Budget. In its statement, the AICPA provided a series of recommendations to strengthen tax administration and improve compliance programs while protecting the public. Read the recommendations here.
ADVOCACY: AICPA Requests More Direction on Section 199A (February 2018)
On February 21st, the AICPA submitted a request for immediate guidance on section 199A, emphasizing that taxpayers and practitioners need more clarity in order to comply with 2018 tax obligations and also for making informed decisions regarding cash-flow, entity structure and other planning issues.
ADVOCACY: AICPA Requests Technical Corrections from IRS (February 2018)
On February 22, the AICPA submitted a request for technical corrections regarding Pub. L. No. 115-97. Among the items included were net operating loss (TCJA Section 13302), applicable recovery period of qualified improvement property (TCJA Section 13204) and the charitable contribution deduction (TCJA Section 11023). For more information, read the letter.
ADVOCACY: AICPA Requests Immediate Guidance Regarding IRC Section 199A (February 2018)
On February 21st, the AICPA submitted a request for immediate guidance on Internal Revenue Code section 199A, the deduction for qualified business income of pass-through entities. In the letter, the AICPA emphasized that taxpayers and practitioners need clarity in order to comply with 2018 tax obligations and also for making informed decisions regarding cash-flow, entity structure and other planning issues.
ADVOCACY: AICPA’s Written Statement at the Hearing on “Legislation to Improve Tax Administration” (January 2018)
Read the written statement submitted for the January 30th Hearing on “Legislation to Improve Tax Administration” which emphasizes the AICAPA’s long-standing commitment to support a service-oriented and modernized tax administration. As taxpayers face a period of uncertainty and ambiguity in light of the significant tax law changes, AICPA emphasized the importance of a modern-functioning IRA that is able to issue immediate guidance on priority issues.
ADVOCACY: AICPA Requests Resources for Treasury/IRS (January 2018)
On January 30th, the AICPA submitted a letter to Congress emphasizing the importance of ensuring appropriate resources are provided to the Treasury and the IRS so that they may provide timely taxpayer assistance and guidance regarding the recently passed tax reform legislation, Pub. L. No. 115-97.
ADVOCACY: AICPA Requests Guidance Regarding Pub. L. No. 115-97 (January 2018)
On January 29th, the AICPA submitted a request for immediate guidance regarding Pub. L. No. 115-97 which revised many sections of the IRC. Some of the specific areas called out in the letter for immediate attention include defining the specified service trade or business under section 199A and penalty relief for underpayment of taxes.
UPDATE: President Trump Signs the Tax Cuts and Jobs Act (December 2017)
Blurb: On December 22, President Trump signed H.R. 1, known as the Tax Cuts and Jobs Act, into law making widespread changes to the Internal Revenue Code. These changes take effect January 1, 2018. Among the changes impacting individuals are increased standard deductions, repealed personal exemptions, lower tax brackets, and many changes to itemized deductions. Read this article or visit the Tax Reform Center for more information on how individual clients are impacted by the new rules.
UPDATE: Tax Reform On the Horizon (December 2017)
The monumental passing of the Tax Cuts and Job Act will result in historic tax reform impacting nearly everyone. Stay updated on new planning ideas and resources via the Tax Reform Resource Center
ADVOCACY: AICPA Comments Proposed Tax Changes by Senate and House (November 2017)
On November 13, the AICPA submitted a comment letter on the SFC Tax Cuts and Jobs Act. A similar letter was submitted in November 10th regarding the Tax Cuts and Jobs Act of 2017 (H.R. 1, as amended). In the comments, the AICPA focused on subjects like the deduction for state and local taxes, non-qualified deferred compensation, education tax incentives, and treatment of small and pass-through businesses.
UPDATE: House Ways and Means Committee Releases Draft Tax Reform (November 2017)
The House Ways and Means Committee released draft tax reform legislation on November 2, 2017. The Tax Cuts and Jobs Act, H.R. 1, incorporates many of the provisions listed in the Republicans’ September tax reform framework while providing new details. A similar bill is expected to be released soon by the Senate. Core ideas from the proposal as it impacts individual taxpayers include reducing the number of tax brackets, lower marginal rates, reduce itemized deductions and increase the standard deduction. Stay updated on the latest information on tax reform by visiting the AICPA Tax Reform Resource Center
ADVOCACY: AICPA Submits Comments on Tax Reform (October 2017)
On October 25, the AICPA submitted a letter to the administration supporting comprehensive tax reform. Because over 100 comment letters, position papers and statements for the record have been submitted in the past five years by the AICPA, this letter is a brief summary of some of the key issues for the profession like:
- A modernized IRS
- IRS regulation of tax return preparers
- Other tax simplification and administration issues
ADVOCACY: AICPA Urges Congress to Adopt Permanent Disaster Relief (October 2017)
On October 6, the AICPA wrote a letter to Congress in support of Title III of the National Disaster Tax Relief Act of 2017 (H.R. 3679). In the letter, the AICPA expressed their long-term position which advocates for permanent disaster tax relief and recommends that the permanent tax provisions take place immediately.
UPDATE: IRS Enforces Health Coverage Reporting (October 2017)
On October 13, the IRS stated that for the 2018 tax filing season, it will not accept electronic filings for personal income tax returns unless taxpayers indicate that they and everyone on their return had healthcare coverage, qualified for an exemption from coverage or will make a shared-responsibility payment. The IRS also said that any returns filed on paper that do not address the health coverage requirements may be suspended until the IRS receives the appropriate information. Learn more in this article.
UPDATE: Unified Framework Proposes Changes to Individual Income Taxes (September 2017)
On September 27, the Trump Administration, the House Committee on Ways and Means and the Senate Finance Committee released Unified Framework for Fixing Our Broken Tax Code. This is the culmination of months of negotiations. Some of the proposed changes affecting individual tax payers include doubling the standard deduction, eliminating most itemized deduction, retaining tax benefits encouraging higher education, retirement and work and compressing the current seven tax brackets to three. Learn more in this AICPA video and this podcast.
UPDATE: Relief for Hurricane Harvey Victims (August 2017)
On August 28, the IRS issued Notice IR 2017-135 which provides relief for victims located in certain areas of Texas, allowing them until January 31, 2018 to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions that run out on October 16th and businesses with extensions that run out on Sept 15th.
Furthermore, the IRS has extended relief to 401(k) and retirement plan participants by allowing plans to give loans and hardship distributions without incurring penalties. For a list of eligible counties, visit the FEMA website. The qualified hardship withdrawals must be made by January 31, 2018. Bob Keebler, CPA/PFS, interviews Jerry Schreiber, CPA, on the tax aspects of hurricane losses in this podcast.
On August 1, the AICPA submitted written testimony and proposals for the Hearing on “How Tax Reform Will Simplify Our Broken Tax Code and Help Individuals and Families.” Some of the proposals from the AICPA include:
- Simplified Income Tax Rate Structure
- Modified Education Incentives
- Targeted Efforts against identity Theft and Tax Fraud
- Repealed “Kiddie Tax” Rules
ADVOCACY: AICPA Submits Comments on Executive Order 13789 Identifying and Reducing Tax Regulatory Burdens (August 2017)
On August 2, the AICPA submitted recommendations for modification or repeal of four of the identified regulations in the Executive Order 13789 issued by President Trump in April Identifying and Reducing Tax Regulatory Burdens. One of the recommendations asks the IRS to entirely withdraw proposed section 2704 regulations. Read more in the comment letter.
ADVOCACY: AICPA Submits Statement on Comprehensive Tax Reform Hearing (July 2017)
On July 18, the AICPA submitted a statement for the record of the hearing on “Comprehensive Tax Reform: Prospects and Challenges.” In the letter, the association emphasized the significant compliance hurdles for taxpayers and administrative complexity for taxpayers and practitioners. Read more in the statement.
ADVOCACY: AICPA Submits Comments to Senate Finance Committee Regarding Tax Reform (July 2017)
On July 17, the AICPA submitted tax reform recommendations to the Senate Finance Committee in response to his call for suggestions from stakeholders on a number of topics related to taxation. Overall, the comments emphasized the need for a tax system that is administrable, stimulates economic growth, has minimal compliance costs, and allows taxpayers to understand their tax obligations. Read the comment letters submitted on individual income tax, savings and investments tax, business income tax and international tax.
ADVOCACY: AICPA Letter Supports the Thune INVEST Act of 2017 (June 2017)
On June 22, the AICPA submitted a letter of support for the Thune INVEST Act of 2017. Many of the provisions in the INVEST Act, such as the expansion of the deduction for start-up and organizational expenses, the expensing of inventory by small and mid-sized businesses, and the exception for small and mid-sized businesses from capitalization of certain costs to inventory, would contribute to simplifying the tax rules and encourage economic growth and efficiency. Read more in the letter.
ADVOCACY: AICPA Supports Mobile Workforce State Income Tax Simplification Act (June 2017)
On June 20, the AICPA submitted a letter in support of the proposed Mobile Workforce State Income Tax Simplification Act of 2017. In this letter, Barry Melancon, CEO, encouraged a uniform national standard to simplify compliance with all of the different state laws for individuals who have income from more than one state.
ADVOCACY: AICPA Comments on Notice 2016-48, Implementation of Path Act ITIN Provisions (September 2016)
On September 27, the AICPA urged the IRS to effectively administer the ITIN program, including ITIN renewals, without disrupting the tax filings of the many individual taxpayers who wish to remain compliant with their annual filing obligations. In order to ensure a smooth operation, the AICPA recommended the following:
- Clarity in future taxpayer-oriented materials on the expiration date of an ITIN
- Renewal for ITINs issued prior to January 1, 2013
- Notification of ITIN holders of expirations
- Response via an automated telephone or online system which would allow taxpayers to verify scheduled expiration date of ITIN
- Simplified procedures for ITIN holders
- Consider allowing certain ITIN holders to use CAAs located outside of the U.S.
ADVOCACY: AICPA Recommends Simplification for Americans Living Abroad (August 2016)
On August 15, The AICPA provided comments to the Internal Revenue Service to advocate for simplification of tax filing obligations for Americans living abroad. Recommendations were made to relieve these specific Americans of filing the following forms related to specified foreign financial accounts:
- FinCEN Form 114 - Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”)
- Form 8938 - Statement of Specified Foreign Financial Assets
- Forms 3520 / 3520A - Annual Return to Report Transactions with Foreign Trust and Receipt of Certain Foreign Gifts and Annual Information Return of Foreign Trust with a U.S. Owner
UPDATE: Due Dates for Partnership and C-Corp Tax Returns Date Changes (July 2016)
As previously communicated, effective for 2016 tax returns, due dates for federal partnership tax returns have been moved from April 15 to March 15 and due dates for C Corporations have changed from March 15 to April 15. Review the following charts to track all of the changes, including some extended due dates, at the federal and state level:
UPDATE: AICPA Expresses Concern over Section 385 (July 2016)
The AICPA submitted a comment letter which express its concerns that the United States Department of the Treasury (“Treasury”) and the Internal Revenue Service (IRS) do not have the authority to extend the application of the proposed section 385 regulations to partnership equity or debt instruments issued by partnerships.
ADVOCACY: AICPA Comments on Notice 2014-21Virtual Currency Guidance (June 2016)
The AICPA Individual & Self-Employed Tax TRP submitted a comment letter to the IRS and Treasury regarding IRS Notice 2014-21. The letter requests additional guidance on the treatment of virtual currency while highlighting a few major issues, not addressed in Notice 2014-21, that may arise as virtual currency continues to expand and gain additional popularity in the marketplace.
UPDATE: AICPA Comments Regarding the Consistent Estate Basis Reporting Issue (June 2016)
On June 1, the AICPA sent comments on the proposed regulations regarding the new section 1014(f) requirement for consistency between a recipient’s basis in property acquired form a decedent and the value of the property as reported for estate tax purposes and associated reporting requirements pursuant to new section 6035. Included in the comments were the following suggestions to the Treasury and IRS:
- Remove the “zero basis rule”
- Remove the Prop. Reg § 1.6035 -1(f)
- Include and address many other issues in the regulations
Click here to read the comments in full. PFP/PFS section members also have access to an in-depth Estate Basis Consistency Reporting Resource Center which contains the latest regulation updates, a webcast and a podcast series on the topic.
UPDATE: Form 8971 Due Date Delayed Until June 30, 2016 (March 2016)
Effective March 23, 2016, the Internal Revenue Service delayed the filing of Form 8971 until June 30, 2016 ( Notice 2016-27). Proposed and temporary regulations issued by the IRS in February govern the newly enacted provision that requires consistency between a recipient’s basis in certain property acquired from a decedent and the value of the property as finally determined for federal estate tax purposes ( REG-127923-15; T.D. 9757). The regulations provide rules regarding the consistent basis reporting requirement and the required statement that must be furnished to the IRS and beneficiaries on Form 8971 now due June 30.
ADVOCACY: Response Letter to H&R Block's Advertisements (March 2016)
H&R Block recently released a new radio spot and video that misrepresent the CPA's competence, client service and ability to represent clients before the IRS, and misleads the public.
ADVOCACY: AICPA Urges IRS to Make Offshore Disclosure Rules Fairer (March 2016)
In a letter to the IRS, the AICPA recommended few changes to the program that allows taxpayers to become compliant by voluntarily disclosing offshore accounts and paying a penalty. A key change would be restoring a rule that allowed a taxpayer to pay the penalty after the closing agreement; otherwise, a taxpayer who fails to reach an agreement and withdraws from the OVDP could not receive back their pre-payment.
ADVOCACY/UPDATE: IRS Proposes Estate Basis Consistency Rules with Form 8971 due March 31 (March 2016)
Proposed and temporary regulations issued by the IRS last week govern the newly enacted provision that requires consistency between a recipient’s basis in certain property acquired from a decedent and the value of the property as finally determined for federal estate tax purposes ( REG-127923-15; T.D. 9757). The regulations provide rules regarding the consistent basis reporting requirement and the required statement that must be furnished to the IRS and beneficiaries on Form 8971 due March 31. They exempt from the reporting requirement estates that file an estate tax return just to claim portability of a deceased spouse’s estate tax exemption. Read more in the Journal of Accountancy online. AICPA submitted comments to Treasury and IRS, requesting a delay from March 31, 2016 to May 31, 2016 for the new estate basis reporting.
UPDATE: IRS Extends Due Dates for Estate Basis Reporting Until March 31 (February 2016)
The IRS on Thursday further delayed the due date for statements required under Sec. 6035(a)(3)(A) reporting the value of an estate’s assets from Feb. 29, 2016, to March 31, 2016 (Notice 2016-19). The extra time is designed to give taxpayers time to review proposed regulations, which the IRS anticipates issuing shortly, before they have to file Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent. Read more in the Journal of Accountancy online. Listen to Bob Keebler’s report (courtesy of Leimberg Information Services).
ADVOCACY: AICPA Members Sit Down with Congress to Discuss IRS Improvements (February 2016)
Members of AICPA tax advocacy committees met last week with members of Congress and the Internal Revenue Service commissioner to emphasize tax practitioners' unhappiness with the IRS's poor service levels and to discuss how CPAs can help the IRS become "a modern-functioning, evolutionary, and respected federal agency for the 21st century." Read more in the Journal of Accountancy online.
ADVOCACY: AICPA Comments on Form 8971 (February 2016)
AICPA submitted comments on the IRS Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent, posted on the IRS draft forms website (originally posted 12/18/15 and updated draft posted 1/26/16), and instructions (originally posted on an Office of Management and Budget website 1/4/16, and then updated draft posted on IRS website 1/27/16).
ADVOCACY: AICPA Requests Guidance on Consistent Basis Reporting Between Estates and Beneficiaries (February 2016)
The AICPA submitted a comment letter to the IRS with several suggestions regarding the needed guidance from Treasury and IRS on the application of Section 2004 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) relating to the provision of consistent basis reporting between estates and persons acquiring property from a decedent.
ADVOCACY: AICPA Commends Congress for IRS Service Funding Hike (January 2016)
The AICPA, a longstanding advocate for sufficient IRS funding so that the agency can be responsive to taxpayers and tax advisers, hailed the funding increase as a positive step and has pledged to continue its dialogue with Congress and the IRS. Read more.
Podcast: Q4 Update on New Tax Laws, Private Letter Rulings, and Court Cases (January 2016)
In this video podcast (slides), Bob Keebler recaps the Federal interest rate increases from December 2015 as well as the 2016 tax rates. He also covers court cases and Private Letter Rulings from the fourth quarter of 2015.
Cases and PLRs covered in the podcast include: IRA rollovers and distributions, inclusion of tax refund in gross estate, extension to elect portability, generation-skipping tax (GST) automatic allocation election, non-taxable gift of stock made in ordinary course of business, disclaimer of beneficial interest not deemed a taxable gift, and basis election.
UPDATE: Draft Form 8971 and Instructions Released (January 2016)
The IRS has released the draft Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent, and instructions. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 requires executors of an estate and other persons who are required to file a Form 706, Form 706-NA, or Form 706-A, to report to the Internal Revenue Service (IRS) and to each beneficiary receiving property from an estate the estate tax value of the property, if the return is filed after July 31, 2015. Form 8971 is used to report to the IRS and a Schedule A will be sent to each beneficiary (a copy of each Schedule A will also be attached to the Form 8971). Some property received by a beneficiary may have a consistency requirement, meaning that the beneficiary must use the value reported on Schedule A as the beneficiary’s initial basis the property.
UPDATE: Protecting Americans from Tax Hikes (PATH) Act of 2015 and Insights on Interest Rate Hike (December 2015)
The PATH Act that Congress passed on December 18, which extends a long list of expired tax provisions, also contains a large number of other tax items. These include changes in penalties, new information return due dates, new due-diligence requirements and a host of other changes. Read this article (12/16) and another (12/18) from the Journal of Accountancy.
Listen to a podcast from Bob Keebler and Scott Sprinkle discussing the impact on your individual clients, including:
- The Federal interest rate hike, including investment issues regarding allocation, duration, and equity consideration, mortgage decisions, loan issues, credit card debt, GRAT opportunities, and a comparison of techniques and discussion of which benefit from lower vs. higher rates so you can determine the optimal entry points.
- A summary of the PATH Act as it pertains to individual clients, including a section-by-section description of the provisions and which are extended for a period of time or made permanent.
ADVOCACY: Congress Negotiates $1.1 Trillion Deal that Includes Tax Extenders (December 2015)
Congressional negotiators have hammered out a $1.1 trillion spending package necessary to keep the federal government running through September. The bill makes permanent some tax breaks and extends others. The House and Senate are expected to vote later this week. Read this article.
ADVOCACY: AICPA Opposes Legislation to Regulate Tax Preparers (December 2015)
The AICPA is opposing a bill that was introduced in the House giving the Internal Revenue Service the statutory authority to regulate tax return preparers. “Congress should not enact yet another set of rules for professional, credentialed tax return preparers,” the AICPA said in a letter last week to the House Ways and Means Committee opposing the Tax Return Preparer Competency Act of 2015, H.R. 4141. AICPA Tax Executive Committee chair Troy Lewis explained, “Ensuring that tax preparers are competent and ethical is critical to maintaining taxpayer confidence in our tax system. Indeed, these goals are consistent with AICPA’s own Code of Conduct and enforceable tax ethical standards. However, we believe the Tax Return Preparer Competency Act allows the IRS to overregulate professional, credentialed tax return preparers and their staff without providing adequate value to taxpayers or additional protection to the public.”
UPDATE: Congress Passes Surface Transportation and Reauthorization Reform Act (December 2015)
On December 4, Congress passed Surface Transportation Reauthorization and Reform Act, H.R. 22, which contains provisions that revoke passports for taxpayers with unpaid tax debt and require the IRS to use third-party debt collectors. Read the article in the Journal of Accountancy and listen to a podcast from Bob Keebler on how this impacts your individual clients.
ADVOCACY: AICPA Urges Congress to Act Now on Extenders (October 2015)
Not knowing if key tax benefits will be available to claim on their 2015 return creates havoc for many taxpayers, the AICPA pointed out in a letter to tax committees, urging them to act soon. For example, even if Congress is expected to extend the popular research credit, a company cannot use it to offset liability in calculating its 2015 financial statements, which lowers its net income and diminishes its position. Small businesses also suffer as they risk losing significant sums if they make a purchase anticipating the Section 179 expense deduction will be restored and it is not.
ADVOCACY: AICPA Endorses Permanent Disaster Tax Relief Provisions (September 2015)
AICPA endorsed permanent disaster tax relief provisions in Title III of the National Disaster Tax Relief Act of 2015, H.R. 3110 and S. 1795, in letters to the sponsors of the legislation on Sept. 24 and Sept. 28.
Title III of the identical bills includes a number of permanent tax relief provisions recommended by the AICPA so that taxpayers know what tax relief will be available automatically to them if a federally declared natural disaster strikes where they live or where they have a principal place of business. The AICPA is a long-time advocate of implementing permanent disaster tax relief provisions because tax relief currently is dependent on Congressional action after every disaster and has been available only sporadically.
Read AICPA’s letter to Rep. Reed and the letter to Senator Vitter.
ADVOCACY: AICPA Recommends Changes to Senate Finance Committee Proposal to Grant Broad Authority to IRS to Regulate Paid Tax Return Preparers (September 2015)
In a letter to the Senate Finance Committee today, the AICPA commended the committee for its efforts to combat identity theft and tax fraud in the Chairman’s Mark of a Bill to Prevent Identity Theft and Tax Refund Fraud, but spelled out concerns regarding the bill’s provision granting broad authority to the Department of the Treasury and the IRS to regulate paid tax return preparers.
AICPA Tax Executive Committee Chair Troy K. Lewis noted that in order to prevent potential overregulation, unnecessary administrative costs, marketplace confusion or other unintended consequences, the AICPA recommends that Congress prescript language that grants the IRS the specific authority necessary to address the concerns of incompetent and fraudulent, currently-unenrolled tax return preparers. At a minimum, he said the AICPA encourages Congress to limit the IRS’s authority to require a PTIN and require the IRS to take steps to mitigate marketplace confusion.
UPDATE: Proposed Rules Govern Taxation of Gifts and Bequests from Covered Expatriates (September 2015)
Under new proposed regulations (Reg-112997-10) that implement IRC Section 2801, any U.S. person who received a covered gift or bequest on or after June 17, 2008 from a covered expatriate under Section 877A will be subject to tax at the highest estate or gift tax rate. Exceptions include qualified disclaimers of property, charitable donations that qualify as estate or gift tax charitable deductions, gifts or bequests to a covered expatriate’s U.S. citizen spouse if the gift would have qualified for the marital deduction, among others.
A U.S. citizen, a domestic trust, or an electing foreign trust who receives a covered gift or bequest will be liable for the tax. The value of the covered gift is reduced by the amount of the gift tax exclusion, and the property’s value is determined on the date of receipt. The net amount is multiplied by the highest estate or gift tax rate in effect for the calendar year. The tax will be reported and paid on a new Form 708, which will be released once the regulations are finalized. Read more in the Journal of Accountancy online.
ADVOCACY: Highway Funding Bill Changes Tax Return Due Dates (July 2015)
The federal highway funding extension bill passed by Congress on July 30 and signed by President Obama on July 31 contains several tax provisions, including changing the due dates for partnership and corporate tax returns, a provision the AICPA has long advocated. This article in the Journal of Accountancy outlines these changes and other items affected, including mortgage interest statements, basis of inherited assets, and the six-year statute of limitation.
ADVOCACY: AICPA Due Dates Proposal Moves Forward (July 2015)
The AICPA's proposal to re-order certain filing due dates that are causing headaches for many taxpayers, especially those with investments in flow-through entities, was included in the Highway Trust Fund reauthorization passed by the House July 15. Learn more about the due dates challenges, solution and AICPA proposal.
UPDATE: IRS Considering Proposed Regs to Disallow Valuation Discounts on Transfers of Family Entity Interests (July 2015)
Given the likelihood of a change to the current valuation discount rules, it is advisable for practitioners to consult with their clients today. If a client is thinking about giving a gift of a family entity or limited partnership interest, he or she should consider making those gifts now while the valuation discounts are still available. Learn more.
UPDATE: Required Minimum Distribution Regulations (July 2015)
In a recent podcast, Bob Keebler provides an update on Notice 2015-49 issued July 9, 2015 regarding the use of lump sum payments to replace lifetime income being received by retirees under defined benefit pension plans. The IRS announced that it would amend regulations to provide that qualified defined benefit plans cannot replace any joint and survivor, single life, or other annuity currently being paid with a lump-sum payment or other accelerated distribution. The rules will be applied as of July 9, 2015, except for certain grandfathered transactions. Read more from the Journal of Accountancy.
UPDATE: Proposed Regulations for ABLE Accounts (June 2015)
On June 19, the IRS issued proposed regulations implementing Sec. 529A, which authorizes states to offer specially designed tax-favored accounts for the disabled (ABLE accounts). Sec. 529A was added by the Achieving a Better Life Experience (ABLE) Act of 2014, which was part of the Tax Increase Prevention Act of 2014. Contributions made to an individual’s ABLE account can be used to meet the individual’s qualified disability expenses. Read more about the proposed regulations from the Journal of Accountancy.
UPDATE: FBARs Due June 30; New Guidance Limits Penalties (June 2015)
The deadline for the Treasury Department to e-file the Report of Foreign Bank and Financial Accounts (FBAR) is June 30, and the penalties for noncompliance can be large. CPAs may need to do some digging with clients, who may not realize they are subject to file an FBAR. Learn more about e-filing FBARs in this article. FinCEN Report 114 details the requirements for the e-filing of FBARs.
In May, the IRS issued interim guidance easing FBAR penalties. Prior to the memo, penalties for willful violations of FBAR filing requirements could be as high as 50% of the balance of the applicable accounts each year. The memo recommends a penalty of 50% of the highest aggregate balance of all unreported foreign financial accounts during the years under examination, allocated across all years based on the balances for the year. For non-willful violations, the memo recommends that if a taxpayer has more than one account, only one $10,000 penalty should be imposed each year, not $10,000 per account.
ADVOCACY: AICPA Urges IRS to Raise Safe Harbor Threshold in Tangible Property Regulations (April 2015)
The AICPA reiterated its support for a higher de minimis safe harbor threshold for taxpayers who do not have an applicable financial statement (AFS), asking the IRS to increase it from $500 to $2,500 and adjust it annually for inflation. In a letter to the IRS, the AICPA noted, “Many small business owners stated [in an AICPA survey] that repairs are consistently over $500….A cell phone or printer easily cost over $500 and are replaced quickly.”
In addition, the AICPA recommended that Treasury expand the definition of an approved AFS to include a reviewed set of financial statements, stating: “The AICPA believes the requirement that a taxpayer have an AFS to use the $5,000 de minimis threshold unfairly discriminates against smaller taxpayers, and recommends an alternative test to allow such taxpayers to use the de minimis rule.”
UPDATE: Statute of Limitations Does Not Run Due to Failure to Make Foreign Financial Asset Disclosure (April 2015)
In IRS Technical Advice Memorandum 2014-018, the IRS describes the circumstance of an executor for a decedents estate filing the decedents final Form 1040. The executor does not report a foreign financial asset of the decedent, which Code Section 6038D requires should be reported on Form 8938 with the Form 1040. The executor also does not report income from such foreign financial asset on the estates Form 1041, and did not report the asset on the estate Form 706 which the estate was obligated to file. The three year statute of limitations for both the Form 1041 and Form 706 has expired. The TAM employs Code Section 6501(c)(8) to extend the statute of limitations on assessment for the estate income tax return and the Form 706. Practitioners should be aware of this area of risk when preparing returns for decedents and estates.
UPDATE: Exclude Personal Information from Exempt Organization Applications and Returns (April 2015)
You can prevent unwanted disclosure of private information, such as Social Security numbers, by not including it in exemption applications (Forms 1023 and 1024) and information returns (Forms 990, 990-EZ, 990-PF, 990-T, and Form 5227). The IRS does not require an organization to include any individual's Social Security or bank account number on a return or other form available to the public.
ADVOCACY: AICPA Calls for Uniform Retirement Plan Types and Rules (March 2015)
"Because qualified retirement plans are such a large source of retirement savings for many Americans, it is important that the tax rules governing the plans are as simple as possible," the AICPA observed when it sent eight recommendations to the Senate Finance Committee tax reform working group on savings and investment. Among the recommendations is a proposal to reduce the number of retirement plans and eliminate top heavy rules.
ADVOCACY: AICPA Recommendations to Simplify Retirement Plans (March 2015)
The AICPA submitted eight recommendations to the Senate Committee on Finance Tax Reform Working Group on Savings and Investment that would simplify employer-sponsored retirement plans and individual retirement accounts. In the letter to the working group, Troy Lewis, CPA, CGMA, chair of the AICPA Tax Executive Committee, wrote, “Because qualified retirement plans are such a large source of retirement savings for many Americans, it is important that the tax rules governing the plans are as simple as possible.”
UPDATE: How the AICPA’s New Confidentially Rule Interacts with Section 7216 (March 2015)
The recently revised AICPA Code of Professional Conduct includes a new Confidential Client Information Rule under Section 1.700.001, which expands the guidance on maintaining the confidentiality of client information. The general thought previously has been that if CPA tax practitioners were complying with Sec. 7216 and revisions of its related regulations that went into effect six years ago (Regs. Secs. 301.7216-1 through 301.7216-3), they were complying with the less detailed AICPA code Rule 301, Client Confidential Information. Now that the new AICPA guidance with its expanded interpretations has taken effect (on Dec. 15, 2014), members are encouraged to assess their practices for compliance with both sets of rules.
Sec. 7216 prohibits tax preparers from knowingly or recklessly disclosing any taxpayer information obtained in the process of preparing returns. The AICPA's Confidential Client Information Rule, on the other hand, is concerned with other confidential information not necessarily involving tax return preparation. A recent article in the Journal of Accountancy discusses the effect of these two requirements on CPAs.
ADVOCACY: AICPA Recommends Estate Tax Portability Relief for Surviving Spouses (March 2015)
The AICPA submitted a letter on March 19 to the IRS and the Department of the Treasury recommending relief for surviving spouses who would like to elect portability of their deceased spouse’s unused estate tax exemption.
The portability election must be made by a decedent’s executor on a timely filed Form 706. However, executors of estates for decedents who died on January 1, 2014 or later may be unaware that a Form 706 is required to be filed (even for estates below the filing threshold) within 9 months of the date of death in order for the surviving spouse to make the portability election.
The AICPA requested that Treasury and IRS:
- Permanently allow estates below the filing threshold 15 months after the death to file Form 706 in order to elect portability;
- Provide a short Form 706-EZ to make the portability election; and
- Allow the surviving spouse to file Form 706 for portability, if the executor chooses not to file the form because the estate is not otherwise required to do so.
Read more from the Journal of Accountancy.
UPDATE: New Sec. 529A Credit Rules Will Allow State Accounts to Be Grandfathered (March 2015)
The Internal Revenue Service has announced that, because a number of states may be setting up their own Achieving a Better Life Experience (ABLE) programs (which allow tax-free savings accounts to be set up to benefit disabled individuals) before the IRS has issued guidance on them, any state program set up before the guidance is issued will be deemed to comply with the rules. This Journal of Accountancy article provides more information.
UPDATE: AICPA Calls for Missed Tax Election Relief (January 2015)
If you or your client missed a deadline for one of 26 tax elections that are set by law, you (or the client) are out of luck. That’s why the AICPA is calling on Congress to allow the IRS to grant relief as it does now for missed elections with deadlines set in regulation instead of statute. Elections with deadlines set by law include installment payments for estate tax, innocent spouse relief and claiming an unused portion of the estate tax exclusion (known as portability). Read the AICPA’s letter requesting relief for taxpayers in certain situations when they miss a statutory deadline or make an error in choosing an election.
UPDATE: Congress Passes Tax Extenders (December 2014)
The House and Senate approved a one-year extension of tax provisions that expired at the end of last year; however, the bill does not address 2015 extenders, as negotiations on a broader bill fell apart. The bill is now with President Obama for his signature. Individual tax extenders in the bill include:
- the tax deduction of expenses of elementary and secondary school teachers;
- the tax exclusion of imputed income from the discharge of indebtedness for a principal residence;
- the equalization of the tax exclusion for employer-provided commuter transit and parking benefits;
- the tax deduction of mortgage insurance premiums; the tax deduction of state and local general sales taxes in lieu of state and local income taxes;
- the tax deduction of contributions of capital gain real property for conservation purposes;
- the tax deduction of qualified tuition and related expenses; and
- the tax exemption of distributions from individual retirement accounts for charitable purposes.
UPDATE: IRS Releases Guidance on After-Tax Rollovers (September 2014)
The IRS released guidance in Notice 2014-54 on how to allocate pre- and after-tax amounts distributed from qualified retirement plans to multiple destinations. Notably, the new guidance allows workers to roll over after-tax amounts and convert the money to a Roth IRA, tax free. The rule applies to distributions made on or after September 19. Read more from Journal of Accountancy.
ADVOCACY: AICPA Submits Comments to IRS on Material Participation of a Trust or Estate (September 2014)
The AICPA submitted comments to the Department of the Treasury and the IRS relating to the issue of material participation by a trust or estate in a trade or business for purposes of section 469 of the Internal Revenue Code. The AICPA realizes that, after 28 years without guidance and two court decisions on which taxpayers are able to rely, the expanded scope of the section 1411 net investment income tax has created a broader need for all trusts and estates that have an interest in a trade or business to determine under section 469 whether the trust or estate materially participates in the trade or business. Specifically, AICPA suggests that guidance from the IRS or Treasury should:
- Incorporate the conclusions reached in the two court decisions;
- Thoroughly address the complicated issues involved;
- Provide comprehensive, administrable, and clear guidance;
- Count the combined activities of any trustee or executor who, under local law, has fiduciary duties and responsibilities with respect to the trust or estate, irrespective of the capacity in which the individual is performing those activities and irrespective of whether the individual also owns an interest in the same trade or business;
- Count the activities of employees and agents employed by the trust or estate to perform services in the trade or business;
- Provide that the material participation tests for individuals set forth in Temp. Reg. § 1.469-5T(a) apply to trusts and estates;
- Include a special rule to treat, for a certain period of time, an estate or former grantor trust as materially participating in any trade or business in which the decedent or deemed owner materially participated at the time of his or her death;
- Provide that the character of the income is determined at the level of the trust or estate, and the character of any distributed income remains the same in the hands of the beneficiary;
- Include a special rule to provide that the participation of the beneficiary of a qualified subchapter S trust is used to determine whether the trust’s gain from the sale of the S corporation stock is treated as active or passive;
- Include a special rule to provide that the S portion and the non-S portion of an electing small business trust are treated as a single trust for purposes of applying the section 469 rules.
- Provide that a trust or estate may qualify as a real estate professional under section 469(c)(7) and tests for how a trust or estate may qualify as a real estate professional.
ADVOCACY: AICPA Urges Congress to Act Now on Tax Extenders (September 2014)
The AICPA sent a letter urging House and Senate tax committee members to immediately address the 57 tax provisions that expired at the end of 2013 and six provisions that expire at the end of 2014 so that taxpayers can have more certainty. “These ever-changing, often expiring, short-term changes to the tax laws make it increasingly difficult for small businesses and their owners to perform any long-term tax, cash-flow or financial planning. If businesses are not able to rely on these tax benefits for the long-term, they are limited in their ability to plan, invest, grow and expand, and hire additional workers,” the AICPA wrote. Acting now would also prevent unnecessary delays in the tax filing season and further distortions in financial reporting.
ADVOCACY: Small Businesses Need Cash Method of Accounting, AICPA Tells Congress (July 2014)
The AICPA called on a House small business panel to expand the cash method of accounting to small businesses. “The cash method of accounting is simpler in application, has fewer compliance costs, and does not require taxpayers to pay tax before receiving the income being taxed,” the AICPA said in its written testimony. The AICPA also noted the impact on professional service firms that are subject to state regulations limiting ownership to individuals who actively participate in the business — for them, the hardship “would increase significantly." Many states prohibit public accounting firms from allowing any passive (investor) ownership and a majority of the owners must hold active CPA licenses.
UPDATE: One-IRA-Rollover-a-Year Rule Effective in 2015 (July 2014)
Starting in 2015, taxpayers will only be able to make one rollover per year no matter how many IRAs they own.
Following up on its promise earlier in the year to follow the Tax Court’s holding in Bobrow v. Commissioner that the limit of one rollover per year applies on an aggregate basis and not on an IRA-by-IRA basis, the IRS withdrew a proposed regulation from 1981, which had provided otherwise. The IRS also announced that the new rule will not apply to any rollover that involves a distribution that occurs before January 1, 2015.
The IRS reiterated that the new interpretation of Sec. 408(d)(3)(B) will not affect an IRA owner’s ability to transfer funds from one IRA trustee to another (as opposed to the taxpayer’s getting a check and making the transfer himself or herself) because those transactions are not considered rollovers under Rev. Rul. 78-406 and therefore are not subject to the one-a-year limit.
Read more from the Journal of Accountancy.
Listen to a “60 Second Planner” audio clip with Bob Keebler on this topic, courtesy of Leimberg Information Services, Inc. (LISI).
ADVOCACY: IRS Voluntary Program for Tax Preparers is Unlawful and Improper, Says AICPA (June 2014)
After repeated requests to the IRS to obtain public comment on its proposed program to certify unlicensed preparers or to consider alternatives, the AICPA sent a letter to the agency expressing strong concern that the program “would cause significant legal problems.”
AICPA President and CEO Barry Melancon and AICPA Board Chairman William E. Balhoff observed that implementing the program “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.”
The AICPA outlined several policy and legal concerns with both the agency’s legal basis to create such a program, as well as the process that the IRS used. However, Melancon and Balhoff also noted that it valued its relationship with the IRS: “We have sought to work with the IRS to achieve workable solutions to regulate tax return preparers and protect the public, and we stand ready to continue these efforts.”
ADVOCACY: AICPA Speaks up for Members on Net Investment Income Tax (June 2014)
While progress has been made in simplifying the regulations for the NIIT, the AICPA would like to see more changes to ease the burden on taxpayers. In a letter to the IRS and Treasury, the AICPA offered detailed suggestions that included:
- Increasing the threshold amounts and adjusting them for inflation to make the optional simplified reporting method available to more taxpayers.
- Giving taxpayers the option of including their entire chapter 1 gain or excluding their entire chapter 1 loss from the disposition of certain active interests in pass-throughs to reduce the burden of calculating the loss or gain subject to the tax
- Providing a simplified safe harbor method for tiered pass-through dispositions
UPDATE: New Rules for Providing Written Tax Advice Finalized (June 2014)
The IRS issued final regulations under Circular 230 on the rules for practitioners to provide written tax advice and certain other related provisions (T.D. 9668), adopting the proposed regulations (REG-138367-06) issued in September 2012 with some modifications. The regulations require practitioners to base written advice on reasonable factual and legal assumptions and to consider all relevant facts that the practitioner knows or reasonably should know. Practitioners must use reasonable efforts to identify the facts relevant to written federal tax advice. Read more from the Journal of Accountancy.
ADVOCACY: AICPA Proposes a Level Playing Field for PFIC Filers (May 2014)
The complex passive foreign investment company (PFIC) rules apply to more and more U.S. taxpayers, resulting in compliance costs for minor shareholders that “can, at times, far exceed the underlying tax potentially imposed by the PFIC rules,” the AICPA told the IRS commissioner and Treasury officials in comments. The PFIC Task Force of the International Tax Technical Resource Panel recommends 10 ways to address the disparity between the treatment of direct and indirect shareholders and the related compliance costs.
ADVOCACY: AICPA Opposes Proposed Voluntary IRS Preparer Registration Program (May 2014)
In a letter to IRS Commissioner John Koskinen, AICPA expressed opposition to the “voluntary certification” program proposed by the IRS in the aftermath of the Loving case. The AICPA has “deep concerns with regard to a voluntary system, and the speed with which the IRS is moving to implement such a system,” AICPA President and CEO Barry C. Melancon, CPA, CGMA and Jeffrey A. Porter, CPA, chair of the AICPA Tax Executive Committee, wrote. “We believe a voluntary program would create confusion regarding the relative proficiencies of the various types of preparers. In addition, the proposed voluntary system would undoubtedly leave the impression among most taxpayers that certain tax return preparers are endorsed by the Internal Revenue Service.”
UPDATE: Erroneous IRS Notices on E-Filed Forms 1041 (May 2014)
The AICPA has contacted the IRS regarding erroneous notices sent to fiduciaries who e-filed Form 1041 with a balance due. The problem seems to have been caused when an electronically filed tax return was posted “one cycle earlier” than the mailed payment. As a result, a CP161 notice may have been generated showing an amount due (including penalties and interest). We understand that the IRS is addressing this glitch and issuing corrected notices.
If the taxpayer made the payment timely and the payment check has cleared, the IRS should issue a CP210 notice to reverse the penalty and interest and clarify that no payment is owed. This problem should resolve itself for most of the incorrect notices. If you have a client who received such an incorrect notice and the IRS has not yet corrected this situation, you can contact the IRS directly even without a power of attorney if “yes” is checked in the Paid Preparer Authorization box on the bottom of page 1.
UPDATE: IRS Finalizes Rules on Distributions to Pay Insurance Premiums (May 2014)
Final regulations issued by the IRS on Friday state that distributions from qualified retirement plans that are used to pay for accident or health insurance premiums are taxable (T.D. 9665), unless a statutory exclusion applies. However, distributions used to pay for disability insurance to replace retirement plan contributions in the event of a participant’s disability are not taxable if they meet certain requirements. Read more from the Journal of Accountancy.
UPDATE: Proposed Legislation to Lighten NIIT, Income Tax Burden on Estates (April 2014)
The AICPA submitted a legislative proposal to Congress to treat estates and certain trusts as married persons filing separately for both income tax and the net investment income tax purposes. This proposal highlights the excessive tax burden placed on an estate compared with the tax burden that the decedent had during his or her life, as well as provides a solution to these inequalities. Currently, an individual’s estate is subject to the top rate of 39.6% on annual taxable income in excess of $12,150.
ADVOCACY: AICPA Recommendations for NIIT and CRTs (March 2014)
In a comment letter, the AICPA made several recommendations to the IRS regarding how forthcoming final regulations should apply the net investment income tax rules to charitable remainder trusts. The comments focus on the proposed regulations’ elective simplified method for calculating a CRT’s net investment income and attributing that net investment income to the beneficiary’s annuity or unitrust distribution. Read more from the Journal of Accountancy.
ADVOCACY: Tax Incentives for Higher Ed Expenses (March 2014)
Approximately 1.5 million taxpayers failed to claim an education deduction they qualified for, in a study by the Government Accountability Office. The simplification of over 13 education tax incentives, long endorsed by the AICPA, is picking up momentum in Congress and is included in the Tax Reform Act. In response to recent bills and proposals, the AICPA made several recommendations to further ease compliance, such as making the new American Opportunity Tax Credit 100% refundable and available for graduate-level and professional degree courses.
UPDATE: President Obama’s Budget Proposal Contains Limitations on Retirement Accounts (March 2014)
President Obama’s proposed 2015 budget would limit tax deductible contributions to 401(k)s and IRAs to 28% of income and cap retirement savers' tax-deferred accounts to an amount needed to produce a joint and 100% survivor annuity of $210,000 beginning at age 62 (presently $3.2 million). The budget would also eliminate the carried interest provision that allows income from managed retirement investments to be taxed at the capital gains rate, while dropping the "chained" consumer price index proposal reducing Social Security cost-of-living adjustments.
Additionally, it would require that Roth IRAs follow the same required minimum distribution rules as other retirement accounts (RMDs at 70 ½ similar to traditional IRAs). It also establishes a 5-year rule for IRAs inherited by (most) non-spouse beneficiaries, requiring that distributions be taken out over a five year period of time, and establishes 60-day rollover rule for IRAs inherited by non-spouse beneficiaries. Finally, the budget includes mandatory automatic IRA enrollment for small businesses and RMD elimination for small retirement accounts of $100,000 (cumulative across all retirement plans).
Even though these provisions may not be enacted, it’s helpful to know what the President’s legislative agenda for this year is. We will monitor and keep you apprised of any developments.
REMINDER: Review Software NIIT Calculations Carefully (February 2014)
Tax practitioners need to be very careful reviewing the NIIT calculations from their software programs as we are hearing various cases where the software is not defaulting correctly or overrides may not easily or successfully happen. For example, some software programs:
- are not correctly computing NII on Form 1041 K-1s,
- are not allowing the grouping of an activity involving the rental of personal property with an active trade or business, and
- are excluding rental income for expats from the NIIT calculation when it should be included in the NIIT calculation.
The instructions to Form 8960 at the bottom left hand corner of page four contain, "Special Rules For Certain Passive Income", that makes it clear that passive activities properly grouped with trades or businesses in which the taxpayer materially participates are treated as non-passive and, consequently, not subject to NIIT. This matches what the statute and regulations state. Some software programs may need to fix their software for this clarification. Tax practitioners should be extra careful checking the Form 8960 calculations this year.
UPDATE: IRS Releases Draft Form 5227 and Instructions (January 2014)
The IRS released draft Form 5227, Split-Interest Trust Information Return, and draft instructions. Form 5227 includes dramatic changes due to section 1411 of the IRC, which imposes the 3.8% net investment income tax.
ADVOCACY: AICPA Calls for Permanent Tax Relief for Disaster Victims (December 2013)
To treat all taxpayers in declared disaster areas fairly and consistently, the AICPA is asking that 10 permanent provisions be added to the tax code. Currently, the government deals with each disaster as an individual event, which means taxpayers may get different treatment for similar losses; they often do not even know what treatment they will receive until the government enacts the required relief. In a letter to Congress and the IRS, the AICPA calls for provisions to help businesses and property owners, such as a five-year carryback period for net operating losses and tax-free withdrawals up to $100,000 from qualified retirement plans if the money is repaid in five years.
ADVOCACY: AICPA Recommends that IRS Issue Additional DOMA Guidance (December 2013)
The AICPA identified 17 areas in which the IRS should provide additional guidance to taxpayers and tax practitioners as a result of the U.S. Supreme Court’s decision ruling the Defense of Marriage Act (DOMA) unconstitutional. This request for additional guidance covers income tax, estate and gift tax and other issues. Among the issues on which the AICPA requested guidance are:
- The status of certain civil unions and registered domestic partnerships;
- Whether special notations are needed on amended returns to aid in the processing of forms filed by couples who choose to amend their returns to convert to joint status;
- Whether a same-sex married employee who requests that his/her employer file to obtain a FICA tax refund must also amend his/her Form 1040 to change the filing status;
- The tax treatment of payments that qualify as alimony to/from a former same-sex marriage partner;
- The tax-free transfer of property between spouses;
- The process for estates to claim portability of the estate tax exemption if they did not file Form 706 because they were below the filing threshold; and
- How taxpayers must report, or track, previously reported gifts that are now eligible for the marital exclusion and for gift splitting.
Read the comment letter.
ADVOCACY: AICPA Calls on IRS to Provide Shutdown Plan for Input (November 2013)
The AICPA asked the IRS to announce its plans now for how it will operate if there is another federal government shutdown in January. Practitioners should be able to provide input into such a plan, the AICPA noted in a letter to the IRS. The AICPA is deeply concerned about the potential impact such a shutdown would have in light of the fact that only 9.3% of the agency was deemed essential during the Oct. 15 filing deadline.
ADVOCACY: AICPA Recommends Changes to 3.8% NII Tax on International Entities (August 2013)
The AICPA recently submitted recommendations to the IRS for the proposed regulations that provided guidance for the Net Investment Income (NII) tax and its effects on international entities (controlled foreign corporations CFCs and passive foreign investment corporations PFICs). Under section 1411, the new 3.8% NII tax imposes a tax on unearned income on investments of certain individuals, estates, and trusts, and certain foreign entities whose income is above the statutory threshold amounts. Subpart F and PFIC income should be treated as “other income” and not dividend income for purposes of the 3.8% tax, the AICPA told the IRS.
UPDATE: Consolidated and Extended Relief Now Available for Late S Elections (August 2013)
The IRS released Rev. Proc. 2013-30, which provides a simpler framework for requesting relief for late S corporation elections, including those for ESBT, QSST, QSub, and late corporate classifications that the taxpayer intended to start with the original election. The procedure will provide a single source for requesting relief; the IRS also included a flowchart for determining availability.
ADVOCACY: AICPA Opposes Combining Partnership and S Corporation Regimes (August 2013)
In a letter to the House Ways and Means Committee Chairman and Ranking Member, the AICPA objected to a proposal in Option 2 of Chairman Camp’s Small Business Tax Reform discussion draft. The proposed reform would eliminate the current Subchapter S and Subchapter K regimes and replace them with a single, unified regime. While the AICPA is in favor of simplifying the tax system, the new system, as proposed, would result in significant complexity and corresponding costs.
ADVOCACY: AICPA Requests Administrative Relief for Missed or Late QTIP and QRT Elections (August 2013)
The AICPA petitioned to Congress requesting that the IRS be given authority to grant section 9100 relief for missed and late Qualified Terminable Interest Property (QTIP) and Qualified Revocable Trust (QRT) elections. Section 9100 relief is helpful when practitioners or taxpayers inadvertently do not file elections or file them late; however, section 9100 does not currently provide relief for many elections with statutory due dates, such as the QTIP and QRT elections.
ADVOCACY: AICPA Recommends Section 736(b)(2) Partnership Payments Be Exempt from 3.8% NII Tax (August 2013)
For proposed regulations covering IRC section 736(b)(2), the AICPA recommended that certain partnership payments not be subject to the 3.8% net investment income tax under four specified circumstances. In a recent letter to the IRS, the AICPA outlined what it considers appropriate basis for the exceptions, including level of participation by partners, nature of the business operated within the partnership, and nature of the payments received among other criteria.
UPDATE: IRS Releases Draft Net Investment Income Tax Form (August 2013)
Last week, the IRS posted a draft version of new Form 8960, which will be used to compute the 3.8% net investment income tax imposed on high-income individuals and trusts and estates starting this year. On Form 8960, taxpayers will calculate total investment income and total deductions and modifications (such as investment interest expense and state taxes) to arrive at net investment income. The form provides separate tax calculations for individuals and for trusts and estates. Now that the draft form (which is one page) has been released, taxpayers and practitioners can examine it and address areas where the IRS has requested comments by September 27. Read more from the Journal of Accountancy.
ADVOCACY: AICPA Speaks Up Against Limits on Cash Methods of Accounting (July 2013)
The AICPA voiced its objections to a proposal that would prohibit many pass-through entities, farmers and personal service corporations from using the simpler cash method of accounting. Under the Small Business Tax Reform Discussion Draft released by Ways and Means Committee Chairman Dave Camp, only individuals and certain taxpayers with average gross receipts of $10 million or less would be eligible for the cash method. In a letter to committee leaders, the AICPA urged them to consider the financial burden that the proposal would place on businesses. “The proposal would require these companies to change to the accrual method, force their owners to pay tax before they have the cash to pay it, and add to complexity and costs,” the AICPA stated.
ADVOCACY: AICPA Calls for Simplification of Education Tax Incentives (July 2013)
The AICPA recently laid out several proposals to Congress to clean up overlapping education tax credits, recommending that features of existing education tax credits be combined into one simplified tax credit. The AICPA also recommended repealing certain deductions and educational savings bonds, and then merging the Coverdell Education Savings Accounts into Section 529 accounts to simplify and harmonize education savings tools.
ADVOCACY: AICPA Recommends Changes to Medicare Surtax Proposed Regulations (June 2013)
On June 17, the AICPA submitted comments on proposed regulations under Section 1411 regarding the new 3.8% Medicare surtax on net investment income. In his letter, AICPA Tax Executive Committee Chair Jeffrey Porter notes that the IRS’s guidance on Sec. 1411 "generally provides a reasonable approach to interpreting, implementing, and complying with the new [net investment income] tax rules." However, in response to the proposed regulations, the AICPA is making 16 detailed recommendations. Read more in this Journal of Accountancy article. Proposed regulations issued on November 30, 2012 answered many questions.
ADVOCACY: AICPA Requests Clarification from IRS on Conversion of Disregarded Entities to Partnerships (June 2013)
The AICPA Partnership Taxation Technical Resource Panel recommended that the IRS issue additional guidance regarding the conversion of disregarded entities to partnerships with respect to Revenue Ruling 99-5. The issues that the AICPA requested clarification from the IRS include the treatment of liabilities upon conversion of a disregarded entity to a partnership and the treatment of non-recognition transactions that result in the conversion of a disregarded entity to a partnership.
ADVOCACY: AICPA Recommends Simpler Small Business Tax Rules to Congress (May 2013)
The AICPA made recommendations focused on simplification of the tax rules for small businesses and pass-through entities, including reforming tax return due dates and adjustments. The AICPA submitted a letter with a written statement for the May 15th House Ways and Means Committee Select Revenue Subcommittee hearing. The hearing was in response to Chairman Camp's small business tax reform discussion draft. Significant opinions by the AICPA included:
- The AICPA opposes the limitation on use of cash method of accounting imposed on non-natural persons and the elimination of exceptions for personal service corporations and farmers.
- The AICPA supports the availability of the cash method for an increasing level of gross receipts for small businesses.
The AICPA supports the proposed new due dates for Partnership, S Corporation, and C Corporation returns and the automatic 6-Month extension of corporate income tax returns.
ADVOCACY: AICPA Addresses “Challenging Tax Season” and IRS Budget with House (May 2013)
Jeffrey Porter, Chair of the AICPA Tax Executive Committee, submitted written testimony on May 6 to the House Ways and Means Committee in response to the Committee’s recent hearing on “Internal Revenue Service Operations and the 2013 Tax Return Filing Season.” It was recommended that Congress pass legislation that would permit taxpayers to report de minimis changes in their income from a corrected Form 1099 or amended Schedule K-1 in the year of receipt of the amended form. This recommendation would remedy the issue of taxpayers having to file amended returns or incur penalties due to minimal changes in income because of amended forms.
The AICPA also advocated for Congress to review funding levels of the IRS’s 2014 fiscal year budget. It was recommended that the IRS be given the resources necessary to properly process tax returns and enforce the tax laws, which is vital to maintaining a voluntary compliance tax system. The AICPA believes that the any increase in enforcement funding must be balanced with positive responses to the taxpaying public as customers, which has become difficult, as the IRS’s role has expanded from one concentrated on tax collection to one focused on distributing benefits to a variety of individuals and businesses.
ADVOCACY: AICPA Sends Tax Reform Proposals and Principles to Ways and Means (May 2013)
In April 2013, the AICPA offered numerous recommendations to congressional study groups for ways to improve tax laws for individuals, businesses and exempt organizations. This is a significant step as the 11 study groups formed by House Ways and Means Committee Chair Dave Camp will likely be critical influences on tax reform legislation. The AICPA submitted comments to the House Ways & Means Tax Reform Working Groups.
AICPA Comments on IRS's Proposed Guidance Regarding Cancellation of Debt (April 2013)
On April 1, the AICPA submitted comments to the IRS regarding proposed guidance governing how to report the cancellation of debt. The AICPA believes changes are needed to the filing requirements for Form 1099-C, Cancellation of Debt. Specifically, AICPA recommended that:
- The IRS require lenders to issue Form 1099-C only upon the legal discharge of a debt, which will occur at the earlier of the expiration of the applicable statute of limitations or when all collection efforts by the lender or surrogate collection organizations have ceased.
- The IRS amend the applicable regulations so that a Form 1099-C is issued only for the year that a debt is legally discharged, which would solve the timing problem created because the current 36-month non-payment testing period results in a Form 1099-C being issued several years after the debt is legally discharged.
- The IRS collaborate with other government agencies involved with credit card and other debts to ensure that the rules for legal discharge of debt are applied so that borrowers do not receive a Form 1099-C if the lender or 3rd party purchaser of the debt intends to continue collection efforts.
UPDATE: Penalty Relief Announced for Payments Related to Delayed Forms (March 2013)
Under Notice 2013-24, relief is available to individuals and businesses filing extensions for tax returns claiming tax benefits using forms that were not released until March by the IRS. The relief applies to the late-payment penalty, normally 0.5% per month, charged on tax payments made after the regular filing deadline. Taxpayers must still estimate their expected tax liability and pay the estimated amount by the original due date and will still be subject to interest for any tax payment made after the original deadline. This relief applies to any of the forms delayed until February or March, primarily due to the January enactment of the American Taxpayer Relief Act.
ADVOCACY: AICPA Legislation Would Adjust Due Dates to Address K-1 Issue (February 2013)
Taxpayers and preparers have long struggled with problems created when Schedule K-1s arrive late, sometimes within days of (before or after) the extended due date of many returns and up to a month after the extended due date of business returns, including Forms 1065, 1120S, 1120, and 1041. This makes it difficult, if not impossible, to file a timely, accurate tax return. An AICPA-backed bill has been re-introduced in both houses of Congress to alleviate this problem. If enacted this year, it would take effect for tax year 2014 (2015 filing season).
ADVOCACY: AICPA Raises Concerns About IRS Delays in Release of Tax Forms (February 2013)
In a Feb. 15 letter to the IRS, the AICPA raised concerns about the impact in the IRS’ delay in releasing certain tax form is having on taxpayers and CPAs. These form delays are causing taxpayers and tax preparers to face a very compressed and difficult filing season.
The letter states that while the AICPA is pleased with the recent release of Form 4562 (Depreciation and Amortization) and Form 8863 (Education Credits), the Institute remains concerned about the continuing delay in the release of 29 other forms. The AICPA requested a dialogue with the IRS to gain more clarity on IRS’ plans to release the remaining forms, and provide taxpayers with potential reasonable cause relief from failure to file, failure to pay, and estimated tax penalties.
ADVOCACY: AICPA Proposes Tax Code Cleanup (February 2013)
While many major tax policies continue to be debated in Washington, the AICPA believes many technical issues can be resolved with less controversy, making practitioners and taxpayers' lives easier. The AICPA recently submitted our Compendium of Legislative Proposals on provisions in the Internal Revenue Code that need attention. The Compendium covers a broad range of problems that continue to vex preparers and taxpayers such as overlapping education tax incentives and varying mileage rates and proposes solutions that help simply tax administration.
UPDATE: Tax Season News (February 2013)
Catch up on the latest news from the IRS affecting your clients this tax season, including:
- Revised Form 8949 for 2012 Now Available
- IRS releases changes to 5471 and 8621 Form Instructions
- More Hurricane Sandy Filing Extensions and a Funding Package from Congress
- IRS Issues Form 8958, Allocation of Tax Amounts Between Registered Domestic Partners and Same Sex Spouses in Community Property States
- IRS To Start Processing Form 8863, Education Credits on February 14th
UPDATE: IRS Postpones Effective Date of New Procedures for Consents to Disclose (February 2013)
Rev. Proc. 2013-19, issued Feb. 6, delays the date that taxpayer consents to disclose and consents to use tax return information must contain the mandatory language recently issued in Rev. Proc. 2013-14. The original effective date of Jan. 14, 2013, has been moved back to Jan. 1, 2014. Read more from Journal of Accountancy.
ADVOCACY: IRS Reopens PTIN Registration System (February 2013)
On February 2, the IRS reopened its PTIN registration system, following an AICPA letter urging the IRS to address the issue and clarification from the district court that struck down the IRS’ return preparer registration program. The court refused the IRS’ request to suspend its injunction on the program, but it did clarify that the injunction does not affect the IRS's requirement that preparers use a preparer tax identification number. Read more from Journal of Accountancy.
UPDATE: New Section 7216 Guidance (Jan. 2013)
As accounting firms continue preparations for the 2013 tax filing season, CPAs should closely review the final regulations and new revenue procedure recently released by the IRS under IRC Section 7216. This Code section involves the disclosure or use of tax return information by a tax return preparer. Some aspects to be aware of include:
- Accounting Services. The preamble to the final regulations (TD 9608) suggests that the solicitation of a current tax client about new accounting services (including payroll return preparation) may necessitate obtaining the written consent of the client.
- Rev. Proc. 2013-14 provides revised language that tax return preparers must include in written consent forms provided to clients regarding disclosures or use of tax return information.
- Electronic Signatures. Rev. Proc. section 6 addresses the procedures for taxpayers furnishing the tax return preparer with an electronic signature verifying that the taxpayer consented to the disclosure or use of the tax return information.
- Consent Form Language. Rev. Proc. section 7 provides examples of the modified language for consent forms to be provided to clients filing returns in the Form 1040 series.
- Effective Date. Consents obtained on or after January 1 must contain the modified consent form language highlighted in the Rev. Proc.
UPDATE: U.S. District Court Strikes Down IRS Preparer Regulation Program (Jan. 2013)
On January 18, the United States District Court struck down the IRS registered tax return preparer program and enjoined it from enforcing the regulations (Loving, No. 12-385 (D.D.C. 1/18/13)). The IRS immediately issued a statement saying they "have confidence in the scope of its authority to administer the program." Indeed, on January 23, the IRS filed a motion to suspend the District Court’s injunction pending appeal which the Service intends to file within 30 days.
Simply stated, the District Court indicated in its ruling that Congress never contemplated that the 1884 law that created rules for practice before Treasury, Circular 230, would define “practice” to cover tax return preparation. However, the pre-existing Circular 230 rules, beyond the new tax return preparation rules, continue to apply to CPAs, attorneys, & Enrolled Agents.
Because the Court’s injunction was effective immediately, the IRS closed down the PTIN registration system. The unavailability of the PTIN system creates an administrative challenge for CPAs who may still need to renew their PTIN or obtain one for the first time – actions still required by the Internal Revenue Code. The AICPA has contacted IRS and they are aware of this issue and are working to resolve it. The AICPA continues to monitor the situation and interact with the IRS, and will keep you informed of any developments.
UPDATE: Section 7216 Final Regulations Issued (December 2012)
The Internal Revenue Service issued final regulations on Wednesday on the circumstances in which tax return preparers can use or disclose taxpayer information. The regulations adopt rules issued in 2010 as temporary regulations, and they cover what lists practitioners may compile to solicit return preparation business, transfers of such lists in the sale of a practice, statistical compilations of taxpayer information, and conflict-of-interest reviews. Source: JournalofAccountancy.com
Also, in Rev. Proc. 2013-14, the IRS has provided guidance to tax return preparers about the format and content of taxpayer consents to disclose and consents to use tax return information and modified the mandatory language required on each taxpayer consent. The guidance applies to individuals filing a return in the Form 1040 series. The revenue procedure also lists specific requirements for electronic signatures when a taxpayer executes an electronic consent to the disclosure or consent to the use of the taxpayer’s tax return information.
UPDATE: Updated ITIN Guidance (November 2012)
On November 29, 2012, the IRS issued updated ITIN guidance that incorporates most of the interim guidelines announced earlier in the year and makes them permanent. Most significantly, the individual taxpayer identification number (ITIN) applications submitted directly by individuals will continue to require original documentation (e.g., passports, driver’s licenses, national ID cards) or certified copies. On the other hand, certified acceptance agents (CAAs) will be able to certify the authenticity of the documents for adults – a positive change that was strongly advocated by the AICPA.
This change means the applicant will not need to mail original documents to the IRS as required under the interim procedures. However, for the rules for dependents of ITIN holders will continue to require original documents or copies. Finally, new ITINs will be issued for a five-year period rather than an indefinite period. The updated procedures take effect January 1, 2013.
ADVOCACY: AICPA Comments on Proposed Revisions Circular 230 (November 2012)
Proposed regulations were released in September 2012 to eliminate the old section 10.35 covered opinion standards. AICPA submitted comments on the proposed revisions on November 29, 2012. The AICPA supports the proposed regulations and is particularly grateful for the simplification provided through the elimination of Section 10.35. If issued in final form in 2013, these changes will have a significant impact on CPAs and other tax professionals. Some of the major provisions under the proposed regulations include:
- Written Advice: The proposed amendment eliminates the complicated and costly “covered opinion” rules in current Circular 230 §10.35, and expands the written advice requirements of §10.37. Proposed §10.37 would establish one standard for all written tax advice by providing that practitioners must: (1) base all written advice on reasonable factual and legal assumptions; (2) exercise reasonable reliance; and (3) consider all relevant facts the practitioner knows or should know.
- Disclaimers: The disclaimers in email and other writings are eliminated under the proposed amendments. The overuse of these disclaimers has resulted in clients ignoring the disclaimer outright.
- General Standard of Competence: The revised §10.35 establishes a general standard that a practitioner must exercise competence when engaged in practice before the IRS. Proposed §10.35 defines competent practice to include the knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged.
ADVOCACY: AICPA Submits Comments to IRS on Proposed Regulations Regarding Shareholder Debt of S Corporations (November 2012)
On Nov. 13, the AICPA submitted a letter to the IRS supporting the IRS’s proposed regulation to clarify the proper treatment of shareholder debt of S corporations. The AICPA also suggested that IRS include in the regulation an example it provided to help tax preparers better understand basis for S corporation shareholders. AICPA Tax Executive Committee Chairman Jeffrey A. Porter, CPA, wrote, “The proposed regulations will, when final, substantially reduce the uncertainty clouding the proper treatment of shareholder debt under section 1366 of the Internal Revenue Code. We appreciate and applaud the Service for adding more clarity and fairness in tax administration.” In an effort to provide further clarity, the AICPA recommended and offered specific language for inclusion in any final regulations regarding the issue of bona fide indebtedness.
ADVOCACY: AICPA Suggests Improvements to the Partnership De Minimis Section 704(b) Proposed Regulation (November 2012)
On Nov. 2, the AICPA submitted comments on the proposed regulations (REG-109564-10) that withdraws the de minimis exception of Treas. Reg. § 1.704-1(b)(2)(iii)(e) (the “De Minimis Exception”) regarding a partner’s distributive share. The proposed regulation was withdrawn because the rule may have resulted in unintended tax consequences. The AICPA comments address the withdrawal of the De Minimis Exception and suggest an alternative that will reduce the burden of complying with the substantial economic effect rules without diminishing the safeguards that the current rules provide. The AICPA believes that partnerships that pose little to no risk to the underlying policies of section 704(b) should be excluded from the complicated substantial economic effect rules.