The Scoop. Social Security News 1/20/2016. Kristy Maitre Tax Specialist Center for Agricultural Law and Taxation January 20, 2016

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1 The Scoop Kristy Maitre Tax Specialist Center for Agricultural Law and Taxation January 20, 2016 Social Security News 2015 was a special year for Social Security They launched their very first blog, Social Security Matters T The blog has helped SSA cover the issues and concerns that are most important to our beneficiaries and their families SA/subscriber/new?topic_id=USSSA_136 National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on IRS s Future Plans for Taxpayer Service New TAS Research Studies Volume 2 of the report contains four new research studies, including: A study examining whether organizations that obtained Section 501(c)(3) status on the basis of Form 1023 EZ applications meet the requirements for exempt status and A study designed to gain a better understanding of the needs of underserved Hispanic taxpayer The report also contains two studies that look at IRS enforcement programs 1

2 National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on IRS s Future Plans for Taxpayer Service One study examined the impact of audits on the subsequent compliance of self employed individuals The results of the study provide robust evidence that audits have important long term revenue implications, the report says However, the study found a significant disparity in results when it attempted to differentiate the subsequent behavioral responses of (seemingly) compliant taxpayers and (seemingly) noncompliant taxpayers It found that (seemingly) non compliant taxpayers who were audited increased their reporting compliance of taxable income by about 120 percent three years later, while (seemingly) compliant taxpayers who were audited subsequently reported less income National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on IRS s Future Plans for Taxpayer Service A second study examined the IRS s collectability curve The IRS generally assigns delinquencies to Taxpayer Delinquent Account (TDA) status within four to five months after it assesses a liability and sends the taxpayer a series of notices However, the volume of TDAs may delay collection actions from occurring for some time The study found that the IRS is most successful at collecting liabilities soon after TDA assignment While dollars continue to be collected throughout the life of the 10 year statutory collection period, the payment rate slows considerably These findings are similar to the results reported by private collection agencies, but run counter to some IRS procedures that prioritize collecting larger accounts, even though many smaller accounts become larger accounts simply because the IRS delays collection, allowing penalties and interest to continue to accrue and ultimately making them more difficult to resolve Premium Tax Credit About 1.4 million households that got financial help for health insurance failed to properly account for it on their tax returns last year, putting their subsidies at risk if they want to keep coverage About 316,000 households that got tax credits paid to them in advance but did not file any return at all last year 976,000 households that got tax credits and filed 2014 returns, but omitted a new form that is the key to accounting for their subsidies About 147,000 households that had requested extensions to file their 2014 taxes, but never followed through 2

3 2015 tax tool: Coming in January 2016 A new tax tool that can be used to determine the premium for a tax filer s second lowest cost Silver plan (SLCSP) will be available on this page during January 2016 The information this tool produces may be needed to complete Form 8962, Premium Tax Credit (PTC) The same tool may be used to determine eligibility for the 2015 affordability health coverage exemption. The tool will provide 2015 premiums for both the lowest cost Bronze plan and the second lowest cost Silver plan This information can be used to complete Form 8965, Health Coverage Exemptions For reference, you can see the 2014 version of these tax tools here These tools apply only to 2014 coverage and taxes. Do not use them for 2015 taxes Web Site tool/ Is There a Way to get a Payoff Figure Without Speaking to a Customer Service Representative? Yes Call the number on the balance due notice and follow the prompts to access the account information You will need to enter the Taxpayer Identification Number and use the caller identification number from the notice to establish a PIN Taxpayers with a PIN can use a touch tone phone to receive: A current or future payoff amount (within 120 days) The location for mailing payment An option to make payment arrangements through the Voice Balance Due phone application The option is also available on the general toll free number,

4 Dual Notice of Address Changes on Employment Tax Accounts Stakeholders are questioning why they're receiving notices of address change when they haven't changed their addresses Beginning January 2014, Public Law , Consolidated Appropriations Act, Provision 106 requires the IRS to issue dual address change notices on accounts with open employment tax filing requirements Any address change made to an account with an open employment tax filing requirement will generate a notice The IRS will also issue these notices for any variation from the address of record for the business entity, e.g., interchanging "Street" for "St." Understanding Your CP148A Notice When IRS changes a business address in IRS records, they send a CP 148A to the new address They issue a notice of confirmation of an address change to both the employer's former and new address If the address change is correct, the client does not need to do anything If the address change is not correct, please return the notice to IRS with a completed Form 8822 B, Change of Address or Responsible Party Business Understanding Your CP148B Notice When IRS changes a business address in their records, IRS sends a CP 148B to the old address IRS will issue a notice of confirmation of an address change to both the employer's former and new address If the address change is correct, the client does not need to do anything If the address change is not correct, return the notice to IRS with a completed Form 8822 B, Change of Address or Responsible Party Business 4

5 PTIN Requirement for Receiving Assistance through Practitioner Priority Service (PPS) Circular 230 attorney has support employees who are all listed appointees on Form 8821 because they re members of his firm The staff doesn't prepare any returns and only gathers information, such as transcripts etc. In the past, his staff would call PPS for account related matters to obtain transcripts, verify payments, etc However, based on the new PPS change in service scope, IRS employees are stating that his staff members must provide their own PTIN numbers and not that of the firm s owner The practitioner has reviewed IRM on the change in PPS scope of service and feels the chart and cautionary notes are causing confusion As a result, PPS assistors are not providing the information needed to assist callers with valid Forms 8821 with account related inquiries PTIN Requirement for Receiving Assistance through Practitioner Priority Service (PPS) To obtain assistance via PPS, the caller must be a tax practitioner actively assisting the taxpayer This requirement extends to employees of a named business entity as the appointee or a named individual as the appointee on Form 8821, Tax Information Authorization In both cases, the caller must have a Preparer Tax Identification Number (PTIN) to obtain assistance unless the caller is a Circular 230 representative, i.e., attorney, certified public accountant, enrolled agent, enrolled actuary or an enrolled retirement plan agent, and provides PPS with this information The chart in IRM (10) is accurate PPS will continue to follow the procedures currently in place. Support staff for a Circular 230 representative does not qualify for PPS assistance unless the support staff member calling has their own PTIN IRM Table (Form 2848) 5

6 IRM Table PPS Telephone Calls IRS Budget Congressional approval of a $290 million budget increase for taxpayer assistance will enable IRS to hire up to 1,000 additional customer service representatives The Commissioner states they will be able to assist during 2016 filing season They have yet to hire anyone, what about training? 6

7 Who Can Represent You Before the IRS? Representation rights, also known as practice rights, fall into two categories: Unlimited Representation Limited Representation Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter. This is true no matter who prepared your return. Credentialed tax professionals who have unlimited representation rights include: Enrolled agents Certified Public Accountants Attorneys Who Can Represent You Before the IRS? Limited representation rights authorize the tax professional to represent you if, and only if, they prepared and signed the return They can do this only before IRS revenue agents, customer service representatives and similar IRS employees They cannot represent clients whose returns they did not prepare They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question For returns filed after Dec. 31, 2015, the only tax return preparers with limited representation rights are Annual Filing Season Program Participants IRS Walk In Services TAC type in search engine Click on state Services can be different from office to office Many are shut down from Noon 1:00 for lunch Many now require an appointment 7

8 Iowa Services Account inquiries (help with letters, notices and levies on your wages or bank account) Adjustments (changes to tax account information or payments) Alien clearances (Sailing Permits) Assistance with Affordable Care Act tax provision questions for individuals Basic tax law assistance January 1 April 15 (answers related to your individual Federal Tax Return) (Topics) Form 911, Request for Taxpayer Advocate Service Assistance Help with Form 2290, Heavy Highway Vehicle Use Tax Return (tax law & submission of tax return) Services Individual Taxpayer Identification Numbers and Form W 7 (More Information) Multilingual assistance (over 150 languages translated) Payment arrangements Payments (Check or Money Order only) Procedural inquiries Solutions to tax issues Tax forms (based on availability) 8

9 New Form Premium Tax Credit Verification The client could be sent this new form to verify: Forms 1095 Premium Tax Credit Information to support the entries made in Part 4 of Form 8962, Premium Tax Credit, regarding the shared policy allocation Information to support the entries made in Part 5 of Form 8962, Premium Tax Credit, regarding the Alternative Calculation for Year of Marriage Proof that they paid health insurance premiums Acceptable documentation includes copies of both sides of cancelled checks, paid receipts, certificates of group health plan coverage, credit card statements, or bank records showing direct debit of the payments 9

10 New Form 8971 New Form

11 New Form 8971 Instructions for Form 8971 and Schedule A 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 and a copy of each Schedule A will 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 Who Must File An executor of an estate and other persons required to file Form 706 or Form 706 NA under section 6018(a) and 6018(b) or a qualified heir required to file Form 706 A under section 2032A after July 31, 2015, whether or not that form is filed timely, is required to file Form 8971 with attached Schedule(s) A with the IRS and to provide each beneficiary listed on the Form 8971 with that beneficiary s Schedule A Therefore, this requirement does not apply to an executor of an estate that is not required to file an estate tax return under section 6018(a) but who does so for the sole purpose of making an allocation or election respecting the generation skipping transfer tax 11

12 Where to File File Form 8971 (including attached Schedules A) at the following address: Department of the Treasury Internal Revenue Service Center Mail Stop #824G Cincinnati, OH Failure to File Correct Forms 8971 by the Due Date (IRC Section 6721) If the executor of an estate or other person required to file Form 8971 fails to file a correct Form 8971 and/or Schedule A with the IRS by the due date and reasonable cause is not shown, a penalty may be imposed The penalty applies if there is a: Failure to file timely Failure to include all information required to be shown on the form or schedule Failure to include correct information on the form or schedule, or Failure to file a correct supplemental Form 8971 and/or Schedule A by the due date A complete Form 8971 includes all Schedule(s) A Only one penalty will apply for all failures relating to a single filing of a single Form 8971 and the Schedule(s) A required to be filed along with it Each filing of a Form 8971 with Schedule(s) A is a separate filing, regardless as to whether the filing is of the initial Form 8971 and Schedule(s) A or a supplemental Form 8971 and Schedule(s) A Penalties The amount of the penalty depends on when the correct Form 8971 and Schedule(s) A is filed The penalty is: $50 per Form 8971(including attached Schedule(s) A) if it is filed within 30 days after the due date The maximum penalty is $500,000 per year (or $175,000 if the taxpayer qualifies for lower maximum penalties, as described below) $250 per Form 8971(including attached Schedule(s) A) if it is filed more than 30 days after the due date or if it is not filed The maximum penalty is $3,000,000 per year ($1,000,000 if the taxpayer qualifies for lower maximum penalties, as described below) 12

13 Failure to Furnish Correct Schedules A to Beneficiaries by the Due Date (IRC Section 6722) If the executor of an estate or other person required to file Form 8971 fails to provide a correct Schedule A to a beneficiary and does not show reasonable cause, a penalty may be imposed The penalty applies if there is a failure to provide the schedule by the due date, a failure to include all information required to be shown on the schedule, a failure to include correct information on the schedule, or a failure to provide a correct supplemental Schedule A by the due date The penalty applies for each Schedule A required to be provided The amount of the penalty depends on when a correct Schedule A is provided Penalty The penalty is: $50 per Schedule A if it is provided within 30 days after the due date The maximum penalty is $500,000 per year (or $175,000 if the taxpayer qualifies for lower maximum penalties $250 per Schedule A if it is provided 30 days or more after the due date or if it is not filed The maximum penalty is $3,000,000 per year ($1,000,000 if the taxpayer qualifies for lower maximum penalties Penalties for Inconsistent Filing Beneficiaries who report basis in property that is inconsistent with the amount on the Schedule A may be liable for a 20 percent accuracy related penalty under section

14 The Shared Responsibility Payment and the Iowa Return Taxpayers can deduct their entire withholding, estimated payment, and additional federal tax paid amounts on lines 31, 32, and 33, but certain amounts must be added back on line 28, including the following: Excess advance premium tax credit repayment reported on line 46 of the federal 1040 Federal self employment tax reported on line 57 of the federal 1040 Unreported Social Security and Medicare tax on line 58 of the federal 1040 Additional tax on IRAs and other qualified retirement plans reported on line 59 of the federal 1040 Federal household employment tax reported on line 60a of the federal 1040 First time homebuyer credit repayment reported on line 60b of the federal 1040 Individual responsibility payment reported on line 61 of the federal 1040 Additional Medicare tax from federal form 8959 reported on line 62a of the federal 1040 Other additional federal taxes reported on line 62c of the federal 1040 It is acceptable to report on line 28 either the current year s self employment/household employment tax/other federal taxes or the prior year s, as long as the reporting method is consistent from one year to the next State Tax Return Some states have already stated there will be refund delays Utah, North Dakota and Illinois More matching of data upfront Due Date Issues Eleven states, along with Washington, D.C., and Puerto Rico, now require employers to file both Annual Reconciliations and W 2 forms by January 31 each year More states are considering this accelerated due date Beginning January 31, 2017, the federal government has adopted the earlier filing for tax year 2016 W 2 forms due in

15 Rev Proc Forms W 2, W 2G, or 1099 R, must be secured before an electronic return can be filed If the forms cannot be secured e file providers can submit the electronic return only after securing Form 4852, Substitute for Form W 2, Wage and Tax Statement, or Form 1099 R, Insurance Contracts, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, etc., in accordance with the use of that form Forms 1095 Form 1095 A must also be secured before a client can file a tax return Applies to those clients who received insurance from the Marketplace federal or state Forms 1095 B and 1095 C are delayed in some cases until March 31 The return can be filed prior to receiving these forms, but use due diligence in addressing whether the client had health insurance in compliance with ACA Tax Act Data Breach Criminals may have stolen tax information from approximately 450 of TaxAct s customers The company sent a letter to 450 of its customers notifying them of a data breach occurring between Nov. 10 and Dec. 4, 2015, warning that their names, Social Security Numbers and tax returns may have been accessed 15

16 Section 179 Verify if Your State Couples with PATH States Lag Behind Federal Government on Small Business Expensing TaxFoundation.org Farm Tax Schools 2016 November 2, 2016 to December 13, Locations in Iowa and Online Webinar Save the Date for the 2016 Annual Farm and Urban Income Tax Schools The program is intended for tax professionals and is designed to provide up to date training on current tax law and regulations November 2 3: Maquoketa November 7 8: Red Oak November 9 10: Sheldon November 14 15: Mason City November 17 18: Ottumwa November 21 22: Waterloo December 5 6: Denison December 12 13: Ames and Live Webinar Summer Webinars S Corporation Reasonable Compensation ABLE Accounts Travel, Meals and Entertainment Preparing for a Gambling Audit Your Client Dies, What s Next? Innocent Spouse Above the Line Deductions Roth IRA s Net Operating Losses The Portability Election IRS Return Preparer Penalties Overview Miscellaneous Income New Developments 16

17 Summer Webinars Employee vs. Independent Contractor Cancellation of Debt Tax Research with Limited Resources Injured Spouse IRS Representation Let s Talk Dependents Inventory Issues Retirement Options for Small Business Preparing for an IRS Audit Getting your Client Right with IRS Appeals How to Write Your Appeals Request Start Up Costs Federal Energy Credits Overview Hobby Losses Beginning Tax Preparers Class CALT is working on offering a basic class for NEW tax preparers this fall in October The week long webinar will cover the basics an individual needs to know such as: Requirement to file Dependents Filing Status Itemized deductions Earned Income Tax Education Credits Other issues a first or second year preparer needs to know as well as a refresher for others who need to brush up on issues The class will be a week long or more and will be offered at a special rate The Scoop Throughout the filing season two Scoops will be held on Scoop Dates 8:00 8:30 am Central time 12:00 12:30 Central time This assists with accommodating our west coast practitioners The same information will be shared at both sessions You have the option of registering for whatever session suits your schedule node fieldseminar date/month 17

18 Future Scoop Dates Jan 28, 2016 Feb 10, 2016 Feb 24, 2016 Mar 09, 2016 Mar 23, 2016 Apr 06, nodefield seminar date/month The CALT Staff John D. Lawrence Interim Director Associate Dean, College of Agriculture & Life Sciences Extension Programs and Outreach Director, Agriculture & Natural Resources Extension 132 Curtiss Hall Iowa State University Ames, Iowa Kristine A. Tidgren Staff Attorney E mail: ktidgren@iastate.edu Phone: (515) Fax: (515) The CALT Staff Kristy S. Maitre Tax Specialist E mail: ksmaitre@iastate.edu Phone: (515) Fax: (515) Tiffany L. Kayser Program Administrator E mail: tlkayser@iastate.edu Phone: (515) Fax: (515)