Karen Brehmer Kathleen Fox Alan Gregerson
Stakeholder Liaison Managers
Kristen Hoiby, Manager of Area 6 Shane Ferguson, Director
Departments of Revenue
Lorie Bowker – ND John Fuller – IA Vicki Gibbons – WI
No upcoming webinars in May. Four webinars planned for June. We will send info when we can. Also check Webinars for Tax Practitioners.
Check out the webinars on Tax Reform on the IRS Video Portal.
1) Low Income Taxpayer Clinics
Nikki McCain is the director of the Low Income Taxpayer Clinic in South Dakota. She explained who they serve and the kinds of cases they work. Tax professionals may want to consider sending some clients to an LITC for assistance.
- Low Income Taxpayer Clinics on the Taxpayer Advocate Website. That page also helps you find a local
- Another way to find a local clinic: Low Income Taxpayer Clinic List
- Information for Taxpayers Seeking LITC Services (including income guidelines)
2) Modernization Plan
The IRS released a six-year plan to modernize the agency’s Information Technology systems and improve a variety of taxpayer services critical to the nation’s tax system.
The plan outlines a bold strategy to enable business transformation focused on improving services for taxpayers and the tax community while protecting taxpayer data.
3) Opportunities for you
4) IMRS issues – Karen
Q1: When will the IRS stop faxing transcripts to POAs?
A1: The date is under review and we will provide advance notice of the date when a decision is made.
Q2: On March 22, IRS announced: IRS expands penalty waiver for those whose tax withholding and estimated tax payments fell short in 2018; key threshold lowered to 80 percent
Taxpayers must file Form 843 to get this relief. A tax pro in California stated:
“My concern is that taxpayers who have already filed and were subject to penalty under the 85% rule but would not have been subject to penalty under the 80% rule have to proactively request a refund of the overpaid penalty. Doing so costs them money in terms of accounting fees and their time. My hope was that the Service would automatically adjust the penalties and refund those affected. Taxpayers shouldn’t be burdened with the follow up when the Service changes the rules mid-season.”
We asked you for your thoughts. You agree that it should be automatic. The consensus of the group was summed up by Todd Koch:
“It should be automatic as people qualify. The number of clients involved is small, but why create an administrative burden on the IRS or taxpayers to get a refund? The cost to pay me to do it is often greater than the refund received. So if it’s not automatic, I will likely not be filing them.”
Terri Lillesand offered: “If we could submit a revised 2210, that would be a lot easier than doing Form 843. All we’d have to do is recalculate the return and the waiver is likely claimed
automatically by the software. But I agree with everyone else, it should just be automatic if a taxpayer hits the 80%.”
5) National Small Business Week
National Small Business Week is May 6 – 10. The IRS will share messages for small business owners. We appreciate your efforts to share these messages with your clients who are small business owners. Look for more information later this week or early next week.
6) IMRS issues – Alan
No POA Notices Received, IMRS issue 18-0002259.
We are looking for more examples of this issue: If you filled out Form 2848 and checked the box to get copies of notices, but you did not get copies of notices, please let Alan Gregerson know. His email is Alan.J.Gregerson@irs.gov. Fax number 877-278-3811.
Basis Computation Attachment
Question: On Part II of Schedule E (Form 1040), a taxpayer who owns an interest in a S- corporation and reports a loss, receives a distribution, disposes of a stock, or receives a loan repayment from S-corporation must check a corresponding box under line 28, column (e) and attach a computation detailing the S-corporation basis for 2018 filing. If the practitioner does not attach this basis computation, will there be a penalty, request for that information, reject the return, or a penalty assessed?
Update: we don’t have an answer for you yet, but we are working on getting one.
QBID update: This question was raised last month. New FAQ 32 on IRS.gov:
Q32. I was told that I can rely on the rules in the proposed regulations under § 1.199A-1 through 1.199A-6 to calculate qualified business income (QBI) for my 2018 tax return. Does this mean I do not have to include adjustments for items such as the deductible portion of self-employment tax, self-employed health insurance deduction, or the self-employed retirement deduction when calculating my QBI in 2018?
Your issues and questions:
1) CORRECTION to a question from last month:
Question: The new 1040 does not have a place for the tax pro to enter the date it was signed. Does anyone else have concerns about this?
The minutes stated: Ruth Ann said she adds a signature just for her records and to mitigate risk.
Correction: Ruth Ann said she adds a DATE just for her records and to mitigate risk.
2) Math Error notices and due diligence
Ruth Ann Michnay said a client got a math error notice for AOTC. There was not an actual “math error.”
Kathleen stated that when the IRS issues a math error notice, we can correct the problem over the phone. Documentation via the mail is not necessary.
The National Taxpayer Advocate has expressed concerns about Math Error notices. See MATH ERROR NOTICES: Although the IRS Has Made Some Improvements, Math Error Notices Continue to Be Unclear and Confusing, Thereby Undermining Taxpayer Rights and Increasing Taxpayer Burden
Ruth Ann asked: What is the impact, if any, on preparer due diligence penalties when the IRS issues a math error notice?
We will research this.
3) Letter 12C
Q: We have received several IRS notices (Ltr. 12C) stating: “We received your 1040 but need additional info.” The notice requests a copy of Page 1 and 2 of 1040 and copies of W-2, 1099s etc to show withholdings etc. Did we do something wrong in the e-file transmission or is this a security check process?
A: Letter 12C is sent when we need to verify something on the return before we issue the refund. More information on IRS.gov:
Understanding Your Letter 0012C. (This may seem like a small difference, but IRS.gov says “Letter 0012C” even though the letter itself says “Ltr. 12C.)
4) Incorrect Partnership return – what to do?
Q: I have a publicly traded partnership (PTP) that did not report all the information on Schedule K-1 that is needed for calculating excess business interest available on the 1040. I have called the PTP several times to try to get the information needed to properly complete Form 8990 but cannot get a response. Where do I go from here?
We will research this.
5) QBI FAQ 33 on IRS.gov
Q33. Health insurance premiums paid by an S-Corporation for greater than 2% shareholders reduce qualified business income (QBI) at the entity level by reducing the ordinary income used to compute allocable QBI. If I take the self-employed health insurance deduction for these premiums on my individual tax return, do I have to also include this deduction when calculating my QBI from the S-Corporation?
A33. Generally, the self-employed health insurance deduction under section 162(l) is considered attributable to a trade or business for purposes of section 199A and will be a deduction in determining QBI. This may result in QBI being reduced at both the entity and the shareholder level.
Todd Koch said:
- We agree with the first sentence that generally SE health is a flow through from the entity and should reduce
- We disagree with the second sentence that SE health included as wages or guaranteed payments at the entity level and therefore has reduced QBI once must then reduce QBI again when it is taken as SE health at the individual
- Reducing a QBI twice for only one expenditure is not what was intended and is not
- How do we reconcile these two views?
- The mechanics of the process are that no SE health is actually passed through at the entity level if the amounts are included on a W-2 or as a guaranteed payment; they are transformed into wages or guaranteed
- If this step in the process is taken into account, then we get to a QBI where the wages (excluding employee benefits) are removed once and the self-employed health insurance benefit is removed once which is the anticipated
We will look into this. If you have thoughts on this, send them to Alan.J.Gregerson@irs.gov
State Departments of Revenue
Lorie Bowker – ND
- North Dakota just finished a legislative session and we will be issuing a complete rundown in a newsletter in the next couple of months. If you have interest in any updates from the legislative session it would be a good idea to sign up from our website for emails and you’d be notified as soon as we post the
- A couple of quick highlights that came out of the session:
- HB 1174 Exclude Social Security Benefits – to extent it is taxable to ND and limited to an AGI of $50,000 for single filer and $100,000 for a married filing Jointly.
- HB 1053 Exclude Military Retirement Benefits – to extent taxable to ND – no AGI limitation
- HB 1112 Mandatory filing of information returns – W-2’s and 1099s
- HB 1276 $4,150 deduction per stillbirth – tax year 2018 and forward – not law until 7/1/19. We will have a process to claim for anyone who had already filed their 2018 return and this process will be added to our website once this becomes law (July 1, 2019 – as unfortunately there was not an emergency clause attached to the bill).
John Fuller – IA
- Iowa is experiencing significant flooding and the Department has put together a web page with filing extensions and FAQs
- The Iowa legislature adjourned April 28, 2019. The Department continues to release guidance on significant tax reform legislation from the 2018
Vicki Gibbons – WI
- We are still scanning paper docs filed by April 15 and creating vouchers for loose checks and vouchers rejected with payments from our We expect to have everything in our system by end of next week. The following week, we will begin sending bills to those that filed their return but didn’t pay in full.
The next call will be on June 6, 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!