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In honor of the start of filing season, a prayer (slightly embellished) by Pulitzer Prize winning columnist, Russell Baker, who passed away on Monday:
“O mighty Internal Revenue,
Who turneth the labor of man to ashes,
We thank thee for the multitude of thy forms,
Which thou has set before us,
And for the infinite confusion of thy commandments,
Which multiplieth the fortunes of (enrolled agents) and accountants alike.
Grant that this sacrifice not be found insufficient unto thy auditor.”
| || LEGISLATIVE & TAX ADMINISTRATION NEWS|
IRS has reopened. Now what? What impact will the shutdown have on filing season? We have some good news, a request for patience, and many unanswered questions.
The Service agreed to continue faxing tax transcripts beyond its original moratorium date of February 4, 2019, as NAEA President Jean Nelsen, EA suggested recently to IRS Commissioner Rettig. A new deadline has not been announced yet. We are assured the IRS will provide advance notice of any new timelines. This announcement comes on the heels of another letter from Senate Finance Committee Chairman Grassley and Ranking Member Wyden to IRS Commissioner Rettig.
We are pleased the agency listened to the practitioner community and will continue to engage with NAEA to address other issues with the new policy on faxing tax transcripts. IRS’s decision—let’s slow down and ensure the new transcript policy secures taxpayer information as well as protects taxpayers’ rights to representation—is the correct one. The delay will allow the IRS to train its personnel properly, as outlined in a December IRM procedural update.
To learn more about this issue, be sure to tune in to Bill Nemeth, EA, for his E-services Update webinar on February 19.
EA Renewals—Part I
Stop everything! Check your Social Security card. What’s the last digit of your Social Security number?
Yesterday marked the deadline for EA renewals for those with SSNs ending in 0, 1, 2, or 3. If you’re in this camp and have not renewed, do it NOW. Late renewals are tedious beyond belief—don’t subject yourself to that.
EA Renewals—Part II
Even without a government shutdown, it can take up to ninety days for IRS to process a renewal application. NAEA reached out to the Return Preparer Office (RPO) to better understand expectations for renewals submitted both before and after the shutdown.
Not surprisingly, we have been asked for patience as employees return to a large backlog of requests and correspondence. We are also assured EAs will not be prohibited from representing clients due to any delays in processing. This conversation is ongoing and we will continue to provide clarification as we receive it.
IRS Enforcement FAQs
The Service has released a fact sheet about the resumption of exam activities, which addresses what a taxpayer in the midst of an audit should expect.
For information related to liens, levies, and other collections activities, IRS collection staff have released similar procedures in its own FAQs.
With the government reopening, at least temporarily, the new 116th Congress has started its work in earnest. For Washingtonians, that means dusting off our crystal balls and making predictions. Anyone can do it (trust us on this one), but predicting correctly what Congress will do in the next year is a difficult enterprise. With that caveat, we offer some general prognostications for what might happen with tax policy in 2019.
The tax writing committees each have a new chairman: Richard Neal (D-MA) at House Ways and Means and Chuck Grassley (R-IA) at Senate Finance. While newly tapped as chairmen, neither of these two are new to the tax writing world. Congressman Neal has over twenty years of experience on the Ways and Means Committee, including six years as the ranking member. This is Chairman Grassley’s second turn as finance chairman. Senator Grassley has a longstanding, firm, and unshakeable commitment to oversight which we expect will continue during his term. Both chairmen have considerable experience and expertise in crafting tax policy and working in a bipartisan fashion.
Both chairmen have indicated their oversight committees will focus on oversight of the implementation of the Tax Cuts and Jobs Act. In private discussions with NAEA, for example, Finance Committee staff indicate they plan to assess the complexity of the new Form W-4 (for both taxpayers and employers). Echoing NAEA (or so we like to believe), Chairman Grassley and Ranking Member Wyden are concerned the new Form W-4 would require employees to essentially do a mini-tax return in order to calculate withholding.
Both chairmen have also indicated they will closely follow the tax filing season, especially any problems caused by the historic, 35-day government shutdown.
At the end of 2017, Congress allowed a number of temporary tax provisions to expire: for example, tax credits for biodiesel and renewable fuels; mortgage insurance deductibility; and special expensing rules for certain film, television, and live theatrical productions. Chairman Grassley and Chairman Neal have both expressed an interest in trying to extend these provisions as part of the bill to fund the government beyond February 15. That begs the bigger question: can Congress come to some agreement on border security and funding that the president will agree to sign?
If negotiators were to reach a deal that includes the extender package, we have no clarity on how the retroactive extenders would affect the current filing season. Our best guess is that taxpayers who have already filed would need to file amended returns to take advantage of the extended tax provisions. And how long it would take for IRS to reprogram its systems is anyone’s guess.
Tax writers are likely to consider the IRS reform package hammered out last year between both houses of Congress and both parties. Timing for consideration is unclear and if the new chairmen will want to make any changes to the small package that was agreed to, but not passed, last year. For the record, NAEA remains deeply committed to advancing IRS reform and we will continue to report on this issue.
The latest Internal Revenue Bulletin (IRB) was released on Monday.
Rev. Proc. 2019-12, released on January 29, provides that certain charitable contributions under §170(c) made by a C corporation or pass-through entity which result in a state income tax credit is considered an ordinary and necessary business expense under §162.
Revenue Ruling 2019-4 provides the various prescribed rates for federal income tax purposes, including the applicable federal interest rate. It will be in the next IRB to be released on February 11.
And an amendment to last week’s E@lert description of the final §199A guidance. The summary should have read: “the deduction is limited overall to 20 percent of taxable income minus net capital gain, which could reduce the deduction for investors with significant qualified dividend income.”
Two Arizona tax preparers, who worked for Tax Xpress, have been indicted for filing false state income tax returns.
District of Columbia
The DC Office of Tax and Revenue reminded taxpayers and tax professionals of a number of changes for this filing season.
The Department of Justice has indicted DC and Maryland residents for a scheme to obtain fraudulent tax refunds from IRS.
Georgia has revised its Employer’s Tax Guide for 2019, which reduced the maximum Georgia state withholding tax rate to 5.75 percent.
The Iowa Department of Revenue has updated its 2017 Alternative Minimum Tax Forms, which could result in a change to tax liabilities that can be addressed by submitting an amended 2017 return by April 30, 2020.
Proposed regulations for the Massachusetts Paid Family and Medical Leave law have been released. Employers are responsible for paying Paid Family and Medical Leave contribution rates on behalf of employees and employers.
A tax preparer convicted for managing and directing a fraudulent return preparation business, Primetime Tax Services, Inc., was sentenced to over ten years in prison.
Corporation Tax Bulletin 2019-2, issued on January 24, provides guidance for taxpayers in determining GILTI (global intangible low taxed income) and FDII (foreign derived intangible income).
The latest issue of the Texas Comptroller’s Tax Policy News has been released. It covers Wayfair, the updated Rules of Practice and Procedure, and a variety of tax season resources.
The Virginia tax season began on January 28, but processing of returns has been delayed because the Virginia Assembly is still debating the state’s response to the TCJA.
| || EVERYTHING BUT THE KITCHEN SINK|
If one of your New Year's resolutions is to make more money in 2019, the Strategist and New York Magazine have listed the top personal finance books to read to make your money dreams come true.
Tax provision inflation adjustments were announced last year but now is the time for employees to take some time to understand them and how they impact their tax planning. Forbes points out the top three of these numbers employees need to understand.
Even though it's freezing outside, Richard Rubin with The Wall Street Journal's Talking Taxes uses ice cream to explain how the new, larger standard deduction may impact refunds.
How to score a $10,000 §6673(a)(1) frivolous position penalty?
It's a good thing IRS will continue faxing transcripts because the Postal Service just increased the cost of a Forever stamp from $0.50 to $0.55 per letter, the largest price increase in cents in history.
SAVE THE DATE
NAEA's Annual Fly-In will be Tuesday, May 14, 2019. Registration details to follow soon.
We hope to see you in D.C.
"There are no right answers to wrong questions."
— Ursula K. LeGuin (1929-2018) American author
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NAEA E@lert | Volume 1: Issue 12
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