Author Archives: c07890220

First Thursday Minutes February 7, 2019

Attendees:

Tax Professionals: Theresa Abel, Laura Dawson, Jessica Gatzke, Jacen Gondringer, Cindy Hockenberry, James Hockenberry, Carrie Houchins-Witt, Terry Johnson, Tricia Knight, Todd Koch, Rick Kollauf, Ken Larsen, Ruth Ann Michnay, Shania Murphy, Jodee Paape, Darian Panasuk, Kendra Privratsky, Jo Ann Schoen, Portia Vogt, Will Wallace, Doug Wendlandt

Stakeholder Liaisons: Karen Brehmer, Kathleen Fox, Alan Gregerson, Mike Mudroncik

Stakeholder Liaison Managers: Kristen Hoiby, Area 6 manager; Shane Ferguson, Director

Departments of Revenue: Lorie Bowker – ND; Vicki Gibbons – WI; Mark Krause – MN

Webinars – No upcoming webinars. Check out the webinars on Tax Reform on the IRS Video Portal.

Discussion items

  • Follow up on previous issue: Can the IRS include state tax withheld on transcripts?

We raised this issue in IMRS. The answer we got was:

Unfortunately, we do not currently have the capability to integrate state withholding data (which would come from the Forms W-2 filed with the Social Security Administration) into IRS Wage and Income Transcripts. We appreciate your interest as we continue to consider ways to improve the transcript process and contents.

  • Follow up on previous issue: Tax pros said that the IRS should waive estimated tax penalties for everyone in 2018.

Response – it was not waived for everyone, but the threshold was reduced to 85% instead of 90%: IRS waives penalty for many whose tax withholding and estimated tax payments fell short in 2018

  • EITC and Other Refundable Credits
  • Formerly called EITC Central. Now it includes information about other refundable credits, so the new title is “EITC and Other Refundable Credits”
  • Follow up on previous request: How to get unredacted transcripts
  • Steps for tax professionals to obtain wage and income transcripts needed for tax preparation
  • The IRS, in partnership with the tax preparation community, has devised a new process that will allow tax practitioners to access employer information needed for return preparation and electronic filing while also protecting taxpayer data.
  • The article above states that the IRS will stop faxing transcripts on February 4. We are going to extend the transcript faxing service beyond that date. The IRS is reviewing options for a new timeframe. We are committed to providing you with advance notice of the new date.
  • Insurers and employers have until March 4, 2019 to provide Form 1095-B and Form 1095-C.
  • The IRS has not been able to update IRS.gov. Even so, the information on this page is helpful to filers for the 2019 filing season:
  • See “3. Must I wait to file until I receive these forms?”

Your issues and questions:

  • Question: At what point does the IRS lock someone out of filing EITC? The client’s ex-husband files with children. We have to paper file, or file as early as possible.

Answer: Here are a variety of resources:

  • IRM 20.1.5.2.5 Two and Ten-Year Bans on Claiming the Earned Income Tax Credit

If you ordered W-2’s and 1099’s using this system, they are delayed until mid to late February. You can buy the forms at office supply stores. One tax pro commented that the forms were back-ordered at office supply stores.

A suggestion for 2019: Order the 1099’s and W-2’s for 2019 now. You will get them in July 2019. Then you will have them when you need them in January 2020.

State Departments of Revenue

Lorie Bowker – ND

  • North Dakota is not seeing any filing issues so far this season.
  • We ask that practitioners verify client’s direct deposit information as well as their current address.
  • It appears that the stillborn child deduction that was available in 2017 may pass and will be retroactive to 2018. Once signed into law our we will update the Schedule ND-1SA Statutory Adjustments and that is where you will take the deduction.

Vicki Gibbons – WI

  • Tax return processing is proceeding as expected.
  • We have had complaints from some taxpayers and practitioners who were told they couldn’t e-file because DOR was holding up their software. DOR requires that software providers pass various test files before we can accept returns. We respond to those submissions in one to two business days or sooner.
  • Wisconsin did extend its 1/31/19 filing deadline to 2/4/19 for all business tax filings. While we got notice out timely, it takes a little longer to get our systems to recognize that new date. If you see a balance on MTA even though filed timely and paid timely, please ignore until Friday. We are having issues moving the new code to our production system that will reprocess the submissions with the new due date.

Mark Krause – MN

  • We’ve had very few reports of software errors so far this filing season. Continue to review returns with extra due diligence and report any errors to your software provider and our e-file coordinators at 651-556-4818, option 4. If you want to verify if something is working correctly or not, contact me.
  • Your client may receive a return verification letter to verify their identity. Have the taxpayer follow the instructions on the letter to verify their identity which will allow us to continue processing their return. If they don’t have web access, have them call 651-296-3781 and we can verify the return with the information that they provide from the letter.
  • New this filing season. We are issuing 1099-MISC forms when a taxpayer claimed a refundable credit on form M1RCR – Credit for tax paid to Wisconsin and that credit amount exceeded Minnesota tax liability. If the amount was less than $600, a 1099-MISC form will not be issued but the amount may still be taxable. If you would like more information, please contact me.
  • Our new beta website is up and running. Please check it out and complete a survey before the end of February. We want your feedback!
  • Due to a much lower state standard deduction amount, we expect many more Minnesotans to itemize on the state return only. Make sure that your clients are saving receipts and documents as they were in the past.

Next Call

The next call will be on March 7, 2019. We’ll send out the WebEx link closer to that date.

Meetings are one hour long. Come when you can, leave when you must.

Thank you to everyone who attended. We appreciate your time and input!

Tax reform law makes changes to employee achievement award rules

Tax Reform Tax Tip 2018-190

December 10, 2018

The IRS reminds employers that last year’s Tax Cuts and Jobs Act made changes to several programs that can affect an employer’s bottom line and its employees’ deductions. This includes employee achievement awards.

Here are some facts about these changes:

Under previous law:

  • Employers could deduct the cost of certain employee achievement awards. Deductible awards were excludible from employee income.

Under the Tax Cuts and Jobs Act:

  • There is now a prohibition on cash, gift cards and other non-tangible personal property as employee achievement awards.
  • Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property.
  • The new law clarifies that tangible personal property doesn’t include cash, cash equivalents, gift cards, gift coupons, certain gift certificates, tickets to theater or sporting events, vacations, meals, lodging, stocks, bonds, securities, and other similar items.

More information:

Tax Cuts and Jobs Act: A Comparison for businesses

Employer Update

Subscribe to IRS Tax Tips

Tax reform brings changes to qualified moving expenses

Tax Tip 2018-192

December 12, 2018

For businesses that have employees, there are changes to fringe benefits that can affect a business’s bottom line and their employee’s tax liabilities. One of these changes is to qualified moving expenses.

Under previous law, payment or reimbursement of an employee’s qualified moving expenses were not subject to income or employment taxes.

Under last year’s tax reform legislation, employers must include all moving expenses, in employees’ wages, subject to income and employment taxes.

Exception

Generally, members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if:

  • They are on active duty
  • They move pursuant to a military order and incident to a permanent change of station
  • The moving expenses would qualify as a deduction if the employee didn’t get a reimbursement

Transition rule

There is a transition rule under the new law. Under this rule, certain payments or reimbursements aren’t subject to federal income or employment taxes. This includes amounts that:

  • An employer pays a third party in 2018 for qualified moving services provided to an employee prior to 2018.
  • An employer reimburses an employee in 2018 for qualified moving expenses incurred prior to 2018.

To qualify for the transition rule, the payments or reimbursements must be for qualified expenses which would have been deductible by the employee if the employee had directly paid them before Jan. 1, 2018. The employee must not have deducted them in 2017.

Corrections

Employers who have included amounts covered by the exception or the transition rule in individuals’ wages or compensation can take steps to correct taxable wages and employment taxes.

More information:

Circular E: Employer’s Tax Guide

Instructions for Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund

Subscribe to IRS Tax Tips

New Opportunity Zone tax incentive benefits investors

Tax Reform Tax Tip 2018-191

December 11, 2018

Qualified Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. These zones are designed to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a Qualified Opportunity Fund and meeting other requirements.

In the case of an eligible capital gain realized by a partnership, the rules allow either a partnership or its partners to elect deferral. Similar rules apply to other pass-through entities, such as S corporations and its shareholders, as well as estates and trusts and its beneficiaries.

To qualify for deferral:

  • Capital gains must be invested in a QOF within 180 days.
  • Taxpayer elects deferral on Form 8949 and files with its tax return.
  • Investment in the QOF must be an equity interest, not a debt interest.

If a taxpayer holds its QOF investment at least five years, the taxpayer may exclude 10 percent of the original deferred gain. If a taxpayer holds its QOF investment for at least seven years, the taxpayer may exclude an additional five percent of the original deferred gain for a total exclusion of 15 percent of the original deferred gain. The original deferred gain – less the amount excluded due to the five and seven year holding periods – is recognized on the earlier of sale or exchange of the investment, or December 31, 2026. If the taxpayer holds the investment in the QOF for at least 10 years, the taxpayer may elect to increase its basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged. This may eliminate all or a substantial amount of gain due to appreciation on the QOF investment.

More information:

Opportunity Zones

Frequently asked questions

Tax Reform

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Steps for tax pros to obtain W&I transcripts needed for tax prep

12 | 19  | 2018

FS-2018-20, December 2018

The Internal Revenue Service, in partnership with the tax preparation community, has devised a new process that will allow tax practitioners to access employer information needed for return preparation and electronic filing while also protecting taxpayer data.

The new process is part of a series of steps planned by the IRS to enhance safeguards around the tax transcript format and distribution to better protect taxpayers from identity theft. A transcript is a summary of tax return entries on the Form 1040 series.

In September 2018, the IRS began partially masking the personally identifiable information for all individuals and entities listed on an individual tax return. The redesigned transcript will fully display all financial entries. See New Tax Transcript and Customer File Number for details.

In addition to masking PII data, the IRS also will stop faxing transcripts as of February 4, 2019 to both taxpayers and authorized third parties, including tax professionals. This safeguard applies to both individual and business transcripts.

Individual taxpayers may view their masked transcripts at Get Transcript Online or order by mail for delivery to the address of record. Masked transcripts will still be available to tax professionals through the Transcript Delivery System, an e-Services tool. Business transcripts are not masked and maybe accessed by tax professionals through TDS.

The IRS slightly delayed the date it will stop faxing transcripts and worked with members of the tax professional community on an alternative to faxing that will allow certain tax practitioners access to data needed to file prior-year individual tax returns.

Starting January 7, 2019, tax professionals who meet certain requirements may request an unmasked Wage and Income Transcript. The unmasked transcript will only be sent to the practitioner’s e-Services Secure Object Repository (SOR), a secure electronic mailbox.

The Wage and Income Transcript shows data from information returns received by the IRS such as Forms W-2, 1099, 1098 and Form 5498, IRA Contribution Information. It also shows the full employer name, address and Employer Identification Number (EIN) needed by tax preparation software in order to e-file.

How to Request a Wage and Income Transcript

Tax practitioners must first go to the e-Services’ Transcript Delivery System to obtain a masked Wage and Income Transcript to see if it meets their needs. If employer information is still needed for tax preparation, tax practitioners may order an unmasked Wage and Income Transcript if the client does not have the employment information. The practitioner must:

  • Have a Centralized Authorization File (CAF) number in good standing;
  • Have an e-Services account and access to the SOR, the e-Services secure mailbox.

Tax practitioners who meet those requirements should take the following steps:

  1. Call the Practitioner Priority Service line
  2. Authenticate identity with CAF number, name, Social Security Number and Date of Birth
  3. Fax a completed authorization form (if needed)
  4. Request an unmasked Wage and Income Transcript
  5. Access e-Services secure mailbox to receive the unmasked Wage and Income Transcript

Alternatively, tax practitioners who do not have an e-Services account or SOR access may request that the unmasked Wage and Income Transcript be mailed to the client’s address of record.

To ensure your authorization form is processed timely, please review Fact Sheet 2018-21, IRS Offers Tips to Tax Professionals to Reduce CAF Number Errors, Better Protect Data from Cyberthieves.

The IRS continues to work with the tax professional community and is exploring an option to send masked as well as unmasked transcripts to the security mailbox.

How to create an e-Services account

Tax professionals who lack access to the secure SOR mailbox are encouraged to create an e-Services account as quickly as possible. IRS e-Services offers a suite of tools for tax professionals including the Transcript Delivery System that offers immediate access, with proper authorization, to clients’ masked transcripts, and the Secure Object Repository (SOR) which is a secure mailbox for e-Services users only. The SOR is available from the e-Services page at www.irs.gov/eservices or from the TDS menu.

E-Services is protected by a two-factor authentication and identity proofing process called Secure Access. Secure Access provides a rigorous identity proofing process to set up an account and a two-step login process for returning users.

Returning users must enter their credentials (username and password) plus a security code sent to a mobile phone or generated by an IRS2Go app each time they attempt to access their account.

Prior to creating an e-Services account, please review Secure Access: How to Register for Certain Online Self-Help Tools. If you have all the information requested, it will take approximately 15 minutes to complete. If you lack the information or are unable to complete the process successfully, there is an “exception process” for tax professionals. Please see Important Update about Your e-Services Account for alternatives as well as FAQs about e-Services and Secure Access.

Tax practitioners who are not e-Services users and who only want access to the SOR must register and create an e-Services account. They do not need to file any other applications, such as an e-File application.

Tax practitioners who have an e-Services account and who are listed as responsible officials on an e-File application can add delegated users. These delegated users can access the SOR and TDS once they create an e-Services account.

Practitioners who want to access both the SOR and TDS must create an e-Services account and submit an e-File application, if one is not on file. Unenrolled practitioners also must e-file five or more returns annually to access TDS. An e-File application requires a background check and may take up to 45 days to complete so plan accordingly. Additional Information is at Circular 230 Practitioners e-Service Transcript Delivery System Access and at Become an Authorized e-file Provider.

 

IRS offers tips to tax professionals to reduce CAF number errors

12 | 19  | 2018

FS-2018-21, December 2018

The Internal Revenue Service today outlined common errors that may delay processing of Centralized Authorization File (CAF) numbers. Reducing errors in CAF applications is one way to speed the approval process for tax professionals.

The IRS also reminded tax practitioners that CAF numbers are valuable cybercriminal targets and outlined steps tax professionals should take annually to help protect their CAF number from misuse.

The IRS annually processes 3.5 million paper Forms 2848, Power of Attorney and Declaration of Representative, and Forms 8821, Tax Information Authorization. The Form 2848 grants eligible practitioners the authorization to represent a client before the IRS. The Form 8821 grants individuals or organizations the authorization to inspect a client’s tax records.

When practitioners submit Forms 2848 or 8821 for the first time, they are issued a nine-digit CAF number that they use as an identifier on all their future third-party authorization requests. During fiscal year 2018, the IRS rejected 384,081 authorization requests.

Issues that cause an IRS CAF assistor to reject the Forms 2848 or 8821 are as follows:

  • Lack of an original pen and ink signature (i.e. use of a digital signature, no signature or use of a signature stamp) by the Taxpayer.
  • The Representative Designation is not complete on page 2 of Form 2848.
  • Level H designation on Form 2848 requires the signor to have prepared the tax return.  If the signor did not prepare the return, as verified by the CAF assistor, then this is a basis for rejection.
  • The Representative information requested is incomplete or missing on Form 2848. This includes the Designation; Licensing Jurisdiction or Authority; Bar, License, Certification, Registration or Enrollment Number or representative signature and/or date.
  • Check of the box 6 to add a new designee but retain the former designee.  A copy of the old Form 2848 is required to retain the prior authorization; however, the copy is not attached.
  • The Forms 2848 or 8821 are missing the required Taxpayer and/or Representative identification information.
  • The Tax Matter identification is not specific.  The completion of “all years” or “all future periods” is not acceptable.  This needs to be specific tax modules.
  • The title of the Officer of the Business and/or Company (if applicable) is blank.
  • The date of the Taxpayer signature is blank.

The average processing time for a third-party authorization request is less than 5 days. Because this is a manual process, it is important that tax practitioners also submit accurate forms to avoid delays.

The IRS urges tax practitioners to protect the CAF numbers just as they would their Electronic Filing Identification Numbers (EFINs) and Preparer Tax Identification Numbers (PTINs).

However, as cybercriminals target tax practitioners for data thefts, more CAF numbers are falling into crooks’ hands. Today’s identity thief is just as knowledgeable about tax practices as technology. The IRS has noticed an increase in criminal’s efforts to pose as a tax practitioner using a stolen CAF number or to fax one of the third-party authorization forms using a stolen CAF number.

Here are a few steps tax professionals can take to protect their CAF numbers:

  • Make a data security plan and take sound security steps to protect all taxpayer data as outlined in Publication 4557, Safeguarding Taxpayer Data.
  • Make an annual review of the firm’s third-party authorizations. Prior to filing season is a good time to review the list of clients represented.
  • If the list includes clients who are no longer represented, fax a copy of the authorization form to the IRS CAF unit with the word “Withdraw” written at the top. Review Publication 947 for details.
  • Be aware of data theft signs, which include the receipt of tax transcripts for clients that you either did not request or taxpayers you do not represent.
  • Contact the Practitioner Priority Service telephone line if the CAF number has been stolen, if there is suspicion it’s being misused or if transcripts are being received that were not requested.

Additional Resources:

IRS takes additional steps to partner with tax professionals

12 | 19 | 18

IR-2018-256

WASHINGTON – After working with the tax preparation community, the Internal Revenue Service today announced it would stop its tax transcript faxing service as of Feb. 4, 2019, and offer a more secure alternative to taxpayers and tax professionals.

The IRS worked with the tax preparation community to reach agreement on an alternative that will meet tax practitioners’ needs in e-filing individual tax returns while also enhancing safeguards for taxpayer data.

The IRS continues to look for way to better protect taxpayer information and tax transcripts, which are summaries of individuals’ tax returns. Cybercriminals who obtain tax transcripts use them to file fraudulent returns that are difficult to detect because they closely mirror a legitimate tax return.

The halt to faxing transcripts is another step taken by the IRS to protect taxpayer data. In September 2018, the IRS began to mask personally identifiable information for every individual and entity listed on the transcript. See New Tax Transcript and Customer File Number.

All financial entries on the transcript remain visible. However, tax practitioners who work to bring taxpayers into compliance by filing prior-year tax returns may need access to employer information that taxpayers no longer have. In those cases, tax practitioners may request an unmasked Wage and Income Transcript. The Wage and Income Transcript can be used for current year tax preparation but it generally is not available until mid-year.

Alternatives for taxpayers for return preparation

The IRS has multiple ways taxpayers can obtain a copy of their tax transcript other than faxing. Individuals may still call the IRS to obtain a masked tax account transcript and one will be mailed to the last address of record.

For faster service, taxpayers may go to IRS.gov for Get Transcript Online, verify their identities and create a account. They can then view or download a copy of their tax transcript immediately. Or they can go to IRS.gov for Get Transcript by Mail and request a transcript be mailed to their last address of record. Taxpayers also may call 800-908-9946 for automated service to order a transcript by mail.

Alternatives for tax professionals for return preparation

Starting Jan. 7, 2019, tax professionals who contact the Practitioner Priority Service number may, with proper authorization, have an unmasked Wage and Income Transcript deposited in their e-Services secure mailbox.

Tax practitioners must meet certain requirements in order to use the secure mailbox option. Those requirements are outlined in Fact Sheet 2018-20, Steps for Tax Professionals to Obtain Wage and Income Transcripts Needed for Tax Preparation. Practitioners also should review Fact Sheet 2018-21, IRS Offers Tips to Tax Professionals to Reduce CAF Number Errors, Better Protect Data from Cyberthieves.

The Wage and Income Transcript provides information limited to the Forms W-2, 1099 and other income documents sent to the IRS. It does not include general tax transcript information. The Wage and Income Transcript will give tax practitioners the employer information needed to file tax returns electronically.

Tax professionals also may request that an unmasked Wage and Income Transcript be sent to the client’s address of record. Alternatively, taxpayers may request an unmasked transcript for tax preparation, and it will be mailed to their address of record.

Faxing and business tax transcripts

The Feb. 4, 2019, discontinuation of the faxing service also applies to business tax transcripts as well as individual tax transcripts. However, business tax transcripts are not masked. At the request of business taxpayers, the transcript will be mailed to the address of record. Tax professionals may obtain a business tax transcript through the e-Service Transcript Delivery System.

IRS NEWS FOR TAX PROFESSIONALS December 2018

►UPCOMING WEB CONFERENCES

Check Webinars for Tax Practitioners for upcoming webinars.

►Recently added to the IRS Video Portal https://www.irsvideos.gov/

 Tax Reform Basics for Employers

This webinar gives an overview of Tax Reform changes for Employers. Topics include changes to Employer Credit Family and Medical Leave, Employee Achievement Awards, Qualified Transportation Fringe Benefits, and others.

This webinar addresses Tax Reform changes related to Individual Taxpayers. Topics include changes to standard deductions, personal exemptions, itemized deductions, child tax credit, and other changes.

►TAX REFORM – Individuals 

Get Ready for Taxes: Learn how the new tax law affects tax returns next year

  • The IRS is advising taxpayers about steps they can take now to ensure smooth processing of their 2018 tax return and avoid surprises when they file next year.
  • The IRS has recently updated a special page on its website with steps to take now for the 2019 tax filing season.

Tax reform affects if and how taxpayers itemize their deductions

  • The Tax Cuts and Jobs Act nearly doubled the standard deduction. TCJA changed several itemized deductions that can be claimed on Schedule A, Itemized Deductions.
  • This means that many individuals who formerly itemized may now find it more beneficial to take the standard deduction. Taxpayers may only do one or the other. They either take the standard deduction or claim itemized deductions.

Child Tax Credit and Credit for Other Dependents at a Glance

  • You may able to claim the Child Tax Credit if you have a qualifying child under the age of 17 and meet other qualifications. The maximum amount per qualifying child is $2,000. Up to $1,400 of the credit can be refundable for each qualifying child as the Additional Child Tax Credit. A refundable tax credit may give you a refund even if you don’t owe any tax.
  • Your qualifying child must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit.
  • Credit for Other Dependents: Dependents who can’t be claimed for the Child Tax Credit may still qualify you for the Credit for Other Dependents. This is a non-refundable tax credit of up to $500 per qualifying person. The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien.

►TAX REFORM – Business

CHECK THIS OUT!  Tax Cuts and Jobs Act: A comparison for businesses

  • The Tax Cuts and Jobs Act changed deductions, depreciation, expensing, tax credits and other tax items that affect businesses. This side-by-side comparison can help businesses understand the changes and plan accordingly.

After tax reform, many corporations will pay blended tax rate

  • Last year’s tax reform legislation replaced the graduated corporate tax structure with a flat 21 percent corporate tax rate. This new maximum tax rate for corporations is effective for tax years beginning after Dec. 31, 2017.
  • A corporation with a fiscal year that includes Jan. 1, 2018, will pay federal income tax using what is called a blended tax rate. They will not use the flat 21 percent tax rate for their entire fiscal year.

Some S corporations may want to convert to C corporations

  • After last year’s tax reform legislation, some S corporations may choose to revoke their S-Corp election to be a C corporation because of the new, flat 21-percent C corporation tax rate. Before taking any action, S corporations should consult their tax advisors.

Here’s how tax reform changed accounting methods for small businesses

  • The Tax Cuts and Jobs Acts allows more small business taxpayers to use the cash method of accounting. Tax reform now defines a small business taxpayer as a taxpayer that has average annual gross receipts of $25 million or less for the three prior tax years and is not a tax shelter.

Here’s how tax reform affects farmers and ranchers

  • Many farmers and ranchers will benefit from tax law changes brought about by last year’s Tax Cuts and Jobs Act. Here are some of those changes along with details about how they will affect farmers and their bottom line.

Like-kind exchanges now limited to real property

  • The IRS reminds taxpayers that like-kind exchange tax treatment is now generally limited to exchanges of real property.
  • Effective Jan. 1, 2018, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock are still eligible.

EMPLOYERS AND BUSINESS OWNERS

WARNING!  IRS warns of “Tax Transcript” email scam; dangers to business networks

  • The IRS and Security Summit partners today warned the public of a surge of fraudulent emails impersonating the IRS and using tax transcripts as bait to entice users to open documents containing malware.
  • The scam is especially problematic for businesses whose employees might open the malware because this malware can spread throughout the network and potentially take months to successfully remove.

Employers should be aware of W-2 scam, protect employee information

  • Small businesses should be on-guard against a growing wave of identity theft and W-2 scams. Employers hold sensitive tax data on their employees – such as Form W-2 data – which is highly valued by identity thieves.
  • All employers are targets for the W-2 scam. This scheme has become one of the more dangerous email scams.
  • See the YouTube video on the W-2 Scam

►OTHER NEWS

IRS provides tax inflation adjustments for tax year 2019

  • The IRS announced the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2018-57 provides details about these annual adjustments. The tax year 2019 adjustments generally are used on tax returns filed in 2020.

401(k) contribution limit increases to $19,000 for 2019; IRA limit increases to $6,000

  • The IRS announced the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019. The IRS issued technical guidance detailing these items in Notice 2018-83.

IRS Criminal Investigation Releases Fiscal Year 2018 Annual Report

  • The IRS released the Criminal Investigation Division’s annual report, reflecting significant accomplishments and criminal enforcement actions taken in fiscal year 2018.
  • A major focus of CI in fiscal 2018 was traditional tax cases, including international tax enforcement, employment tax, refund fraud and tax-related identity theft. Other areas of emphasis included public corruption, cybercrime, terrorist financing and money laundering.

►THE BEST OF IRS.GOV

Let Us Help You

  • Before you call, check out the topics people ask about most. We have high call volumes and encourage you to click on one of these hot topics for faster service.
  • Online Tools and Resources
  • Telephone and Local Assistance

IDENTITY THEFT / DATA THEFT / SCAM ALERTS

National Tax Security Awareness Week 2018, December 3 – 7, 2018

  • The IRS, State Tax Agencies and the Tax Industry announced a National Tax Security Awareness Week, to encourage both individual and business taxpayers to take steps to protect their tax data and identities in advance of the 2019 filing season.

►YOUR PRACTICE

Business MeF Production Shutdown/Cutover Schedule

  • Shutdown for “Send Submissions” only is scheduled to begin at 11:59 a.m., Wednesday, December 26, 2018, to prepare the system for the upcoming 2019 Filing Season.
  • Transmitters can continue to use the other service requests except “Send Submissions” until 11:59 p.m., Wednesday, December 26, 2018.
  • Subscribe to Quick Alerts to get MeF updates.

IRS issues final regulations, expanding paid preparer due diligence requirement to head of household filers

  • The Treasury Department and the IRS issued final regulations expanding the long-standing paid preparer due diligence requirement to include individual income tax returns claiming the head of household filing status.
  • Paid preparers must submit Form 8867, Paid Preparer’s Earned Income Credit Checklist, with every tax return claiming any of the covered tax benefits. The form is designed as a checklist to help paid preparers meet the requirement by obtaining eligibility information from their clients.

TAX EXEMPT ORGANIZATIONS

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►SUBSCRIPTIONS

Subscribe to e-News for Tax Professionals

  • Preparers can register to get this electronic newsletter. It’s one of the best ways for tax professionals to get the latest national and local IRS news. (Editor’s note: most of the articles in this monthly newsletter come from e-News for Tax Professionals.)

Subscribe to e-News for Small Businesses

  • e-News for Small Businesses is a free electronic mail service designed to provide tax information for small business owners and self-employed individuals.
  • Sign-up and you will receive information about:
    • Important upcoming tax dates for SB/SE customers
    • What’s new for small businesses on the IRS website
    • Reminders and tips to assist small businesses/self-employed with tax compliance
    • IRS News Releases and special IRS announcements that pertain to SB/SE customers
    • Tax-related information from other federal agencies
  • When you subscribe, you will receive a confirmation message by e-mail. Remember, you must respond to this email in order to verify your subscription.
  • Subscribe / Unsubscribe

Subscribe to e-News for Payroll Professionals

►NEWS FROM OTHER AGENCIES

Healthcare.gov

  • 2019 Open Enrollment is here – and ends Dec 15

Tax reform brings changes to qualified moving expenses

Tax Tip 2018-192

December 12, 2018

For businesses that have employees, there are changes to fringe benefits that can affect a business’s bottom line and their employee’s tax liabilities. One of these changes is to qualified moving expenses.

Under previous law, payment or reimbursement of an employee’s qualified moving expenses were not subject to income or employment taxes.

Under last year’s tax reform legislation, employers must include all moving expenses, in employees’ wages, subject to income and employment taxes.

Exception

Generally, members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if:

  • They are on active duty
  • They move pursuant to a military order and incident to a permanent change of station
  • The moving expenses would qualify as a deduction if the employee didn’t get a reimbursement

Transition rule

There is a transition rule under the new law. Under this rule, certain payments or reimbursements aren’t subject to federal income or employment taxes. This includes amounts that:

  • An employer pays a third party in 2018 for qualified moving services provided to an employee prior to 2018.
  • An employer reimburses an employee in 2018 for qualified moving expenses incurred prior to 2018.

To qualify for the transition rule, the payments or reimbursements must be for qualified expenses which would have been deductible by the employee if the employee had directly paid them before Jan. 1, 2018. The employee must not have deducted them in 2017.

Corrections

Employers who have included amounts covered by the exception or the transition rule in individuals’ wages or compensation can take steps to correct taxable wages and employment taxes.

More information:

Circular E: Employer’s Tax Guide

Instructions for Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund

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New Opportunity Zone tax incentive benefits investors

Tax Reform Tax Tip 2018-191

December 11, 2018

Qualified Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. These zones are designed to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a Qualified Opportunity Fund and meeting other requirements.

In the case of an eligible capital gain realized by a partnership, the rules allow either a partnership or its partners to elect deferral. Similar rules apply to other pass-through entities, such as S corporations and its shareholders, as well as estates and trusts and its beneficiaries.

To qualify for deferral:

  • Capital gains must be invested in a QOF within 180 days.
  • Taxpayer elects deferral on Form 8949 and files with its tax return.
  • Investment in the QOF must be an equity interest, not a debt interest.

If a taxpayer holds its QOF investment at least five years, the taxpayer may exclude 10 percent of the original deferred gain. If a taxpayer holds its QOF investment for at least seven years, the taxpayer may exclude an additional five percent of the original deferred gain for a total exclusion of 15 percent of the original deferred gain. The original deferred gain – less the amount excluded due to the five and seven year holding periods – is recognized on the earlier of sale or exchange of the investment, or December 31, 2026. If the taxpayer holds the investment in the QOF for at least 10 years, the taxpayer may elect to increase its basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged. This may eliminate all or a substantial amount of gain due to appreciation on the QOF investment.

More information:

Opportunity Zones

Frequently asked questions

Tax Reform

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