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The Axis of Awesome
NAEA recently announced two new member benefits, and we’re awfully excited by them:
E@lert is a DC resident and a quick search (<30 sec.) on what’s new in DC revealed:
- Verifyle: A secure, easy-to-use online document sharing, storage, and messaging service that provides private and secure email, cloud file sharing, and encryption.
- Wolters Kluwer TaxAware Center: An online 24/7/365 research portal, spanning state and federal tax news and information.
Go ahead and log on and explore both. We scheduled five demonstrations this week for Verifyle, and expect to provide even more.
But Isn’t Every Week EA Week?
For the past several years, state affiliates have been making formal requests to their governors, asking them to issue a proclamation declaring the first week of February “Enrolled Agent Week.”
Those of you working on this already, please let us know. If your state affiliate has not, please check the EA Week Proclamations page on NAEA’s website for details on how to make the request. By the way, if your governor declares a different week “EA Week,” we will call that a win, too.
After a Busy December, Congress Moves into 2020
Last year’s budget deal included approximately $426 billion in tax relief, $373 billion of which was the permanent repeal of three ACA provisions: medical device tax; excise tax on health plans (aka “Cadillac Tax”); and the tax on health insurance companies. The remainder of the package included tax extenders, technical corrections, and the SECURE Act. (BTW, make sure to attend our 2.0 CE webinar, “Tax Planning Considerations under the SECURE Act and New RMD Tables,” led by Lawrence Pon, EA, USTCP, on January 29, from 2:00-4:00 P.M. EST).
In general, most extenders were extended through the end of 2020. While Congress will continue to fuss over orphan provisions left out of the agreement, the big focus on extenders over the next few years will likely turn to TCJA as several TCJA business tax increases are triggered, and all individual TCJA tax relief will expire at the end of 2025. As much as most EAs would like extenders to go away, they likely will remain an ongoing headache.
The budget deal also contained just a few TCJA technical corrections. With partisanship driving tax policy, it is hard to see both sides compromising anytime soon on a larger package of corrections. This stalemate may continue until after this administration is gone.
Even given the substantial retirement tax policy in the last session of Congress, retirement is likely to continue to garner attention. Chairman Neal and others repeatedly have indicated they view this as the first retirement security package, and are planning on advancing a second one this year. While that this new package is unlikely to become law this Congress, it will mark the beginning of a new round of retirement savings proposals.
Digital taxes are likely to dominate the news in 2020. The OECD has released proposals on digital taxes and continues to try to gain consensus from its members. To date, the U.S. has objected to much in the OECD proposals, yet continues to remain engaged in the debate. In the meantime, more countries such as France, Canada, and Italy are adopting digital services taxes on their own with the U.S. threatening tariff retaliation.
Election year still could be an active year for NAEA and the tax community.
The SALT Wars Continue
E@lert is endlessly fascinated by the brouhaha over the $10k ceiling on the state and local tax deduction, which coupled with the demise of the personal exemption and the significant hike in the standard deduction has played havoc with itemizers.
High-tax states (ahem, New York, Connecticut, New Jersey, Massachusetts…) are madder than wet hens, and their respective Congressional delegations are attempting to claw back in some fashion the deduction.
Before vamoosing DC in December, the House passed legislation that, if passed (and it will not be this year), would repeal the $10k SALT deduction cap and raise it, temporarily, to $20k for MFJ filers. The repeal is expensive, even by DC standards, and skewed towards higher earners, both of which make the fight an uphill climb.
IRS Brings Down the Hammer
In the closing days of 2019, IRS announced a new agreement with the Free File Alliance (a consortium of tax software providers), forbidding the participants from hiding the free filing products from web searches. Free File offers free tax prep software to those with incomes below $69k, about 70 percent of the U.S. population. Given the press coverage, one would think this a rather mortifying state of affairs for companies such as Intuit and H&R Block.
The upshot: FFA companies will not “engage in any practice” to hide Free File functionality from “an organic internet search.” And, after some 18 years, IRS no longer promises it will not enter the tax return software business. From all appearances, the Service has no such plans…
IRS National Taxpayer Advocate Issues Annual Report…
The Office of the National Taxpayer Advocate earlier this week issued its 2019 annual report, which even absent former NTA Nina Olson is a lengthy and impressive document including 58 legislative change recommendations, including:
The NTA is required to produce a list of most serious problems, and among them are:
We pull the points most obviously in alignment with positions NAEA has taken over the years, but many of the recommendations are interesting and sure to spark conversation.
- IRS needs to develop a comprehensive taxpayer service strategy that puts taxpayers first, incorporates research on taxpayer needs and preferences, and focuses on measurable results.
- IRS lacks a comprehensive Servicewide return preparer strategy.
..and IRS Issues a Report of its Own
In case you still have appetite for IRS reports after reading the NTA’s doorstop, IRS issued its FY19 report, which essentially is a summary of 2019 operations and a statement of the organization’s mission, vision, values, and goals. The report makes for interesting reading and includes:
Several state items of interest:
- Recently enacted legislation in Pennsylvania provides a ten-year statute of limitations on most assessed taxes. And the City of Philadelphia announced new account numbers for e-check payments.
- The Massachusetts Department of Revenue finalized the rule that implements $100k annual sales economic nexus threshold for remote retailers and issued a TIR to announce the penalty schedule for individuals who fail to comply in 2020 with requirements of the MA Health Care Reform Act.
- Washington State is cautioning that businesses importing goods may be subject to tax under recent business and occupation (B&O) and sales tax economic nexus law changes.
- Effective January 1, 2020, a new Kentucky state law changes the filing requirements for tangible personal property tax returns.
IRS issued proposed regulations (REG-116139-19) outlining procedures for identification and recovery of a misdirected direct deposit refund. The proposed regulations would streamline procedures for coordinating with financial institutions to identify misdirected refunds and reflect statutory changes in the Taxpayer First Act. Comments are due by February 21st.
We’re lumping all the other guidance (whether authoritative or no) together this week:
U.S. Tax Court
- IRS in a QuickAlert earlier this week announced a list of seven forms, including Form 8910 (Alternative Motor Vehicle Credit), necessary to claim extender-related tax credits cannot be used until further notice and will reject if filed.
- In Notice 2020-5, IRS issues guidance providing the 2020 standard mileage rates for taxpayers to use in determining the deductible costs of operating a vehicle for business, charitable, medical, or moving expense purposes. EAs should note some of the rates are reduced year-over-year.
- IRS updated FAQs related to virtual currency and charitable contributions.
- In a SB/SE Memorandum, the director of SB/SE field and campus examination provides guidance for QBI on a SFR prepared under §6020(b).
Judge Pugh presides over this week’s U.S. Tax Court case, Charles L. Frost. v. Commissioner (153 T.C. No. 2). Petitioner, arguing pro se, is a self-employed insurance salesman and consultant who, alas, also prepared tax returns as an enrolled agent and former revenue agent whose Schedule C deductions for business travel and LLC losses on Schedule E IRS found so objectionable as to impose §6662(a) accuracy-related penalties.
While in some environments an enrolled agent is an unknown entity, Judge Pugh clearly understands the profession and writes:
Petitioner also prepared tax returns as an enrolled agent with the Internal Revenue Service during the years in issue.He has prepared returns for profit as an enrolled agent for about 25 years. Before becoming an enrolled agent, petitioner had performed collections work as an IRS revenue agent. During almost 40 years of work at the IRS and then preparing tax returns, petitioner was aware of and advised his clients about tax compliance issues such as the substantiation requirements for expenses related to business deductions…
We could go on, but suffice it to say Mr. Frost (who is not an NAEA member) did not have a good day in Judge Pugh’s courtroom, up to and including the affirmed accuracy-related penalties.
| || EVERYTHING BUT THE KITCHEN SINK|
We will start with a confession: the New Year’s resolution didn’t take. And that Buckeyes officiating (or should we say “officiating”) still hurts. Yet we pick ourselves up and march onward.
Since last year, we discovered Microsoft will cease supporting Windows 7 on Tuesday, January 14, 2020. The time to do something—especially considering security concerns—is now, and CNET has deets. Also of a technical nature, here is a crib sheet on a dozen or so Excel keyboard shortcuts; do not fall for this Chase phising effort; and Steve Jobs unveiled the first IPhone 13 years ago yesterday.
Else, we have recently been fascinated by Carlos Ghosn’s audacious escape from Japan; Jeopardy’s “The Greatest of All Time” tournament; and the question of whether intermittent fasting (IF—after all, IRS does not have the market on acronyms cornered) works.
Otherwise, we offer a bucket full of tax-related items, pulled especially for America’s Tax Experts®:
- ICYMI: IRS announced filing season opens on January 27, an expanded IP PIN program available in 20 states, and a new gig economy tax center (and the APA weighs in on on-demand pay and the gig economy).
- Forewarned is forearmed: As a result of 2014 disposition regulations, taxpayers may claim a partial disposition of a building component and recognize a loss in the year of disposition. IRS has targeted this partial disposition for audit. IRS is concerned—not surprisingly—taxpayers are failing to recognize partial disposition gains/losses accurately.
- IRS is in the business of taxing accessions to wealth, Forbes’ Tony Nitti reminds us as he examines §104, which stipulates emotional distress is not treated as a physical injury. Exceptions, we discover, are always the rule when it comes to the IRC…
- The U.S. Tax Court has updated its procedures for non-attorneys to be admitted to practice (USTCP). The amended procedures change the composition of, and the contracting process related to, the panel of experts who prepare and grade the Court’s written examination.
- Twitter: Forbes’ Kelly Phillips Erb posted her annual top 100 tax Twitter influencers, and included NAEA’s president, Jerry Gaddis, EA, as well as Kerry Freeman, EA; Amber Gray Fenner, EA; Nayo Carter Gray, EA; Ryan Ellis, EA; Patrick Murphy, EA; and Eva Rosenberg, EA
- NAEA PAC: our PAC website will be undergoing maintenance from 10:00 P.M. January 11 through 4:00 A.M. January 12 (EST).
- There is a tax angle to everything: We loved this Tax Notes podcast, which included the oldest person in the world, Nike, and the Queen of Mean. You may thank us later.
“There are years that ask questions and years that answer.’”
— Zora Neale Hurston (1891-1960), American folklorist and author
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NAEA E@lert | Volume 2: Issue 3
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