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Congress was on break this week for President’s Day (as it turns out, our legislators can get not much done from the comfort of their districts just as well as they can from your nation’s capital), so most of the news is on the tax administration front.
| || LEGISLATIVE & TAX ADMINISTRATION NEWS|
Filing Season Update
Four weeks into the filing season, refunds are the hot topic. Despite all efforts from IRS and tax professionals to educate and prepare taxpayers for the new filing season, lower refunds are surprising some taxpayers. Pundits, such as UBS, are running complex models to predict what will happen and the media is focused on the cases that tug on our heartstrings. Politicians are retreating to partisan talking points. As usual, the truth gets lost and for taxpayers, the uncertainty can make filing a tax return feel like playing a game of Russian roulette.
Tax professionals know refunds are not the issue. The real question for taxpayers is did their total tax liability go up or down this year. For many taxpayers, apparently, tax planning has taken a back seat to cash flow concerns and refunds are the tail wagging the dog. Regardless, IRS has refund information guidelines for the tax preparation community to assist you and your clients.
It Would Be Unsportsmanlike to Say, “I Told You So”
Congressmen Neal and Lewis have requested information from IRS on the new Form 1040, the one that is supposed to fit on a postcard, and its six schedules. Reducing Form 1040 to the size of a postcard has been a political goal for some for many years. This year that goal was achieved but at what price? Is it usable?
National Taxpayer Advocate Nina Olsen has expressed concerns that the new “simplified” Form 1040 and its accompanying schedules may actually be more complex and error-ridden than the old form. In July 2018, our own President-Elect, Jerry Gaddis, EA, unpacked the “postcard,” and its half dozen schedules. He asked, after revealing the “postcard” in its fullness, whether it was really simpler and rather diplomatically answered “time will tell.”
Meanwhile, Chairman Neal and Congressman Lewis want to know how IRS developed the new form and what type of analysis or due diligence was done, and by whom, on its functionality.
Taxpayer Advocate Report
IRS Taxpayer Advocate Service (TAS) dropped its annual report to Congress late last week. The two-volume report and its accompanying list of legislative recommendations –the so-called Purple Book– clocks in at a hefty 800 plus pages. Many of its issues and recommendations may be familiar from past reports, though we find hiring an IRS Historian as a must-pass legislative recommendation a head-scratcher (have we already forgotten the last IRS historian?).
The report makes a number of interesting contributions to understanding IRS. For the first time, TAS lays out its recommendations consistent with the so-called IRS “Pipeline,” namely: pre-filing, filing, and post-filing (i.e., all the great stuff we cover at the National Tax Practice Institute™ (NTPI®): examination, notices, collection, and litigation). Writing the report in this fashion should help congressional policymakers and appropriators understand better how IRS does its work.
Additionally, the report points out how collections areas such as the Automated Collection System and correspondence audits should be operated and funded as more service-oriented accounts management functions. Too often over the last decade, executive and congressional budgeteers have starved these units when allocating resources, not realizing that by doing so they are harming taxpayers and their representatives who are in good faith attempting to contact the IRS to respond to notices and manage their tax bills. Finally, the report highlights the problems the president and Congress caused by shutting down the IRS (for example, increasing phone and correspondence wait times and hurting taxpayers in the midst of collection actions by the agency).
- IRS released the latest Internal Revenue Bulletin, I.R.B. 2019-8, on Tuesday, the most interesting feature of which is probably an AOD on whether a professional hockey team’s expenses for providing pregame meals were fully deductible.
- IRS reminds farmers and fisherman in IR-2019-19 to file their 2018 tax returns and pay all taxes by March 1, if they do not make quarterly estimated tax payments.
- Rev Proc. 2019-13 provides a safe harbor method for determining the depreciation deduction for passenger automobiles that qualify for the 100 percent additional first-year depreciation deduction and that are subject to the automobile depreciation limitations. Our friends at E&Y shed some light here.
- Publication 515 covers withholding guidance for U.S. source income paid to nonresident aliens and foreign entities.
- Applicable Federal Rates (AFRs) for March 2019 were issued in Rev. Rul. 2019-7.
- In a recent Technical Advice Memorandum (TAM), IRS clarified when meals provided by an employer are for the convenience of the employer and therefore, not includable in income.
The Arizona Department of Revenue has released information on changes to the process for claiming an individual income tax credit for charitable donations to public schools, qualified charitable organizations, and qualified foster care organizations.
Fourth quarter reports on cannabis tax collections is available for consumption.
The Indiana Information Bulletin No. 17 provides guidance on personal income tax exemptions in response to the changes made by the TCJA.
Governor Cuomo issued an executive order extending the deadline for paying property taxes by 21 days in municipalities impacted by recent winter storms.
The Virginia Department of Taxation issued Tax Bulletin 19-1 on February 15 in response to recent conformity legislation passed and signed by the governor.
The Division of Taxation’s Special Edition Tax Newsletter for the 2019 tax filing season covers the key changes in tax law, filing deadlines, and clarifications for changes to various tax provisions.
| || EVERYTHING BUT THE KITCHEN SINK|
Looking for your happy place? CNBC lists the 10 Most Tax Friendly States for middle-income taxpayers.
What’s that saying about those who don’t know history? According to a recent study, the only state with a majority of residents who can pass a U.S. citizenship test was Vermont.
Queens seem to have a problem with paying their taxes. Mary Boone, a veteran New York gallerist once lauded as the “Queen of the Art Scene,” has been sentenced by a federal judge to two-and-a-half years in prison for offenses connected to a tax fraud that prosecutors said had cost the government $3 million in revenue.
Some Things Never Change. Just like the underreporting of tip income, it appears workers in the so-called “gig economy,” such as Uber and Lyft drivers, are not fessing up either. According to a recent TIGTA Report, self-employment income reporting discrepancies among these workers have tripled.
Speaking of Keeping up with the Times. Ed Zollars delves into the tax implications of UberEats on employer-provided meals under the new Technical Advice Memo mentioned above.
Breaking Up is Hard to Do. The CPA Journal has released a handy guide to the tax implications of divorce, including impacts of the TCJA.
NOW ACCEPTING APPLICATIONS
for the annual NAEA Fly-In on May 14!
Applications are due March 22, 2019.
We hope to see you in D.C.
"Courage is fire and bullying is smoke."
—Benjamin Disraeli (1804-1881), British statesman
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NAEA E@lert | Volume 1: Issue 15
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