News and miscellaneous legal topics – 2016
The IRS announced the 2017 optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) will decrease by $.05 to $.53 1/2 per mile for business travel, and the rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction will decrease by $.02 to $.17 per mile.
The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, includes a new requirement for employers. They are now required to file their copies of Form W-2, submitted to the Social Security Administration, by Jan. 31. The new Jan. 31 filing deadline also applies to certain Forms 1099- MISC reporting non-employee compensation such as payments to independent contractors.
In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms. In addition, there are changes in requesting an extension to file the Form W-2. Only one 30-day extension to file Form W-2 is available and this extension is not automatic. If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as you know an extension is necessary, but by January 31.
IR-2016-143, Oct. 28, 2016
The IRS proposed increasing the offer-in-compromise (OIC) user fee from $186 to $300 for OICs submitted on or after February 27, 2017 10/19/16
The fee includes reviewing and monitoring the OIC, the IRS explained. No fee is charged if an offer is based solely on doubt as to liability or if made by a qualified lower-income taxpayer. The IRS reported that the full cost of providing an OIC is more than $2,000. The full cost of providing a service includes, but is not limited to, salaries, retirement benefits, rents, utilities, travel, and management costs, as well as an appropriate allocation of overhead and other support costs associated with providing the service.
Proposed Amendments of Regulations (REG-108934-16), published in the Federal Register on October 13, 2016.
The Missouri Legislation passed S.B 1025 to override the Governor's veto, providing that amounts paid for an "Instructional class", including any class, lesson, or instruction intended or used for teaching are not subject to Missouri sales tax. S.B. 1025, Laws 2016, effective October 14, 2016.
The IRS announced September 26, 2016 that it plans to begin private collection of certain overdue federal tax debts next spring and has selected 4 contractors to implement the new program:
- CBE Group 1309 Technology Pkwy Cedar Falls, IA 50613
- Conserve 200 CrossKeys Office park Fairport, NY 14450
- Performant 333 N Canyons Pkwy Livermore, CA 94551
- Pioneer 325 Daniel Zenker Dr Horseheads, NY 14845
The program enables designated contractors to collect, on the government's behalf, outstanding inactive tax receivables, on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts. The IRS will notify taxpayer and their representative in writting that their account is being transferred to a private collection agency. The IRS will send a second, separate letter to the taxpayer and their representative confirming this transfer.
These agencies will be able to identify themselves as contractors of the IRS collecting taxes, but must be courteous and respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act.
Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases.
Private collection agencies will NOT ask for payment on a prepaid debit card. Taxpayers will be informed about electronic payment options for taxpayers on IRS.gov/Pay Your Tax Bill. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.
The IRS will continue to keep taxpayers informed about scams and provide tips for protecting themselves. The IRS encourages taxpayers to visit IRS.gov for information including the "Tax Scams and Consumer Alerts" page. For more information visit the Private Debt Collection page on IRS.gov.
IRS testing expanded criteria for streamlined installment agreements processing through September 30, 2017 9/28/16
Under existing criteria, approximately 90% of individual taxpayers with a balance due qualify to use the IRS's Online Payment Agreement application.
During the test, expanded criteria for streamlined processing will be applied to installment agreement requests submitted to SB/SE Campus Collection Operations, including the Automated Collection System (ACS).
Expanded criteria will NOT be applied to installment agreement requests submitted to W&I Accounts Management, SB/SE Field Collection, or through the Online Payment Agreement application.
One expanded criterion being tested immediately is individual taxpayers with an assessed balance of tax, penalty and interest between $50,000 and $100,000 may experience accelerated processing of their installment agreement request if the taxpayers' proposed monthly payment is the greater of their total assessed balance divided by 84 or the amount necessary to fully satisfy the liability by the Collection Statute Expiration Date.
IRS Alert warns Against fake emails purporting to contain an IRS tax bill related to the Affordable Care Act 9/26/16
The IRS has received numerous reports around the country of scammers sending a fraudulent version of CP2000 notices for tax year 2015. Generally, the scam involves an email that includes the fake CP2000 as an attachment. The issue has been reported to the Treasury Inspector General for Tax Administration for investigation. The CP2000 is a notice commonly mailed to taxpayers through the United States Postal Service. It is never sent as part of an email to taxpayers. The indicators are:
- These notices are being sent electronically, even though the IRS does not initiate contact with taxpayers by email or through social media platforms;
- The CP2000 notices appear to be issued from an Austin, Texas, address;
- The underreported issue is related to the Affordable Care Act (ACA) requesting information regarding 2014 coverage;
- The payment voucher lists the letter number as 105C.
When you apply for assistance to help pay the premiums for health coverage through the Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year using information you provide. This information includes details about your family composition and your projected household income. It is important for you to report life changes - known as changes in circumstances - to your Marketplace to get the proper type and amount of financial assistance and to avoid getting too much or too little in advance. Reporting changes in circumstances will allow the Marketplace to adjust your advance credit payments. This adjustment will help you avoid getting a smaller refund or owing money that you did not expect to owe on your federal tax return.
The IRS launched a new web page - "Sharing Economy Center" 8/22/16
The site is directed at taxpayers participating in "on-demand", "gig" or "access economy", etc., online platforms available to rent a spare bedroom, vacation rental, provide car rides, or to connect and provide a number of other goods or services, noting the income is generally taxable even if you don't receive a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement, or some other income statement.
The site offers tips and resources on a variety of topics including filing requirements, making quarterly estimated tax payments, self-employment taxes, and special rules for reporting vacation home rentals.
The site notes that companies providing services in the sharing economy should consider several employment tax issues.
The IRS currently charges 3 rates for installment agreements:
- $120 for an installment agreement;
- $52 for a direct debit installment agreement (taxpayer authorizes monthly electronic funds transfer from taxpayer's bank account; and
- $43 notwithstanding the method of payment if the taxpayer is a low-income taxpayer (at or below 250% of the dollar criteria established by the poverty guidelines updated annually in the Federal Register by the U.S. Department of Health and Human Services. (Reg. §300.1).
- $50 for restructuring or reinstating an installment agreement that is in default. (Reg. §300.2).
As of Jan. 1, 2017, under the new proposed regs, the following fees would be charged for installment agreements:
- Regular Installment Agreements $225 - sets up in person, by phone, or by mail to make manual payments by mailing a check or electronically through the Electronic Federal Tax Payment System (EFTPS). (Prop Reg§300.1(b))
- Direct Debit Installment Agreements $107 - sets up by phone or mail to make automatic payments through a direct debit from a bank account. (Prop Reg §300.1(b)(1))
- Online Payment Agreements $149 - sets up by Online Payment Agreement application on http://www.irs.gov to make manual payments by mailing a check or electronically through the EFTPS. (Prop Reg §300.1(b)(2))
- Direct Debit Online Payment Agreements $31 - sets up by Online Payment Agreement application onhttp://www.irs.gov to make automatic payments through a direct debit from a bank account. (Prop Reg §300.1(b)(2))
- Restructured/Reinstated Installment Agreements $89 - modifies a previously established installment agreement or reinstates a previously established installment agreement on which the taxpayer has defaulted. (Prop Reg §300.2(b))
- Low-Income Rate remains at $43 - any type of installment agreement, other than a direct debit online payment agreement ($31), and when a low-income taxpayer restructures or reinstates any installment agreement. (Prop Reg §300.1(b)(3))
The Tax Court held a Chapter 11 debtor was liable for self-employment tax on self-employment income earned after filing for bankruptcy. The Court found that while the income tax arising from debtor's post petition earnings are the bankruptcy estate's liability of under Code Sec. 1398(c)(1), and Items included in the estate's gross income under Code Sec. 1398(e)(1) are not included in debtor's gross income. (Code Sec. 1398(e)(2)), there was no similar provision for self-employment taxes. Sisson, TC Memo 2016-143. he Court noted in its decision that its conclusion is consistent with Notice 2006-83, 2006-2 CB 596, but did not rely on that notice.
Form 1023-EZ User fee decreased 7/12/16
On July 1 the user fee to process the Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, was decreased from $400 to $275 (see Rev. Proc. 2016-32). You must submit the fee through www.pay.gov when you file a 1023-EZ application. You can pay the fee directly from your bank account or by credit/debit card.
2015 legislation added Internal Revenue Code §506, requiring an organization to notify the IRS of its intent to operate as a section 501(c)(4) organization.
Organizations who intend to operate under §501(c)(4) are now required to submit Form 8976, Notice of Intent to Operate Under §501(c)(4) to the IRS. Most organizations must submit this notice within 60 days of their establishment.
The Form 8976 Electronic Notice Registration System allows organizations to complete the notification process, keeps account information current and enables organizations to receive secure, digital communications from the IRS. Form 8976 may only be completed and submitted electronically. There is no paper form. This is a one-time notification. However, you will have to file annual information returns or notices (e.g., Form 990, Form 990-EZ, or Form 990-N) depending on your total assets and gross receipts. In addition to submitting the Form 8976 notice, 501(c)(4) applicants may also choose to file a complete Form 1024. Submission of a Form 1024 does not relieve an organization of the requirement to submit a Form 8976.
Failure to file this notice may result in penalties. To submit this form, you must create an online account, complete the online Form 8976, Notice of Intent to Operate Under §501(c)(4), and submit payment. The IRS will review your submission and provide an acknowledgement within 60 days if your submission is complete and correct.
See Notice 2016-9, 2016-6 IRB 306, 01/19/2016, IRC §506.
IRS Makes Electronically Filed Form 990 Data Available in New Forms 6/26/16
The Internal Revenue Service announced that the publicly available data on electronically filed Forms 990 will now be available for the first time in a machine-readable format through Amazon Web Services (AWS). IR-2016-87, June 16, 2016.
This data set includes Forms 990, 990-EZ and 990-PF which have been electronically filed with the IRS and is updated monthly in an XML format. The data can be used to perform research and analysis of organizations that have electronically filed Forms 990, 990-EZ and 990-PF. Forms 990-N (e-Postcard) are not available within this data set. Forms 990-N can be viewed and downloaded from the IRS web site.
Each electronic 990 filing is available as a unique XML file in the "irs-form-990" S3 bucket in the US East (N. Virginia) region.
A Program Manager Technical Advice (PMTA) has concluded that IRS has the authority to modify tax return forms and instructions under Code Sec. 6011(a) and Reg. §1.6011-1(a) to require the sole owner of a disregarded entity to provide the entity's Employee Identification Number (EIN) on the owner's tax return. A return filed without the additional EIN would still be a valid return for purposes of the statute of limitations and failure to file penalties. The activities of a disregarded entity are treated the same as a sole proprietorship, branch, or division of its owner. (Reg. §301.7701-2(a)) The income earned by a disregarded entity must be reported on the owner's income tax return and reported under the owner's Taxpayer Identification Number (TIN) (Reg. §301.6109-1(h)). However, disregarded entities can use an EIN for other purposes, such as for reporting employment taxes and other business taxes. (Reg. § 301.6109-1(d)(4)(ii)) Issue. Allowing a taxpayer to use two types of identification numbers (TINs and EINs) may cause problems for IRS in associating different types of returns with a single taxpayer. If a disregarded entity has an EIN, it typically does not appear on the owner's tax return. Certain information returns such as Forms 1099 that reflect income earned by a disregarded entity may reflect the entity's EIN and not the owner's TIN. This makes matching the income reported on such an information return to what is reported on an income tax return difficult. Program Manager Technical Advice 2016-008
IRS to notify taxpayer of audits by appropriate initial contact letters, not telephone contact 6/1/16
IRS Deputy Commission for Services and Enforcement, John Dalrymple in a May 20, 2016 memorandum to the Commissioners, Large Business and International, Small Business and Self-Employed, Tax-Exempt and Governmental Entities, and Wage and Investmen ordered that going forward, IRS employees must use the appropriate initial contact letters listed in the Internal Revenue Manual (IRM) to notify a taxpayer when a return is selected for examination (audit), and "will not make initial contact by telephone."
The Bipartisan Budget Act of 2015 repealed the TEFRA partnership audit rules and replaced them 4/6/16
The Act repealed the TEFRA uniform partnership audit rules and replaced them with a streamlined single set of rules for auditing partnerships and their partners at the partnership level.
The statute raises a number of questions, some of which might be considered for a technical corrections bill.
In general, adjustments to partnership income, gain, loss, deduction, or credit are determined at the partnership level, and any tax attributable to such adjustment is assessed and collected, and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any such item or share is determined, at the partnership level.
"Tax" resulting from a partnership’s audit’s increase in taxable income is levied on the partnership, not partners. Income, gain, loss, and deduction adjustments items are aggregated, the aggregate is modified in certain ways, and the modified aggregate is multiplied by the highest individual or corporation tax rate (not the highest rate applicable to a partner), and increased (or decreased) by each credit adjustment. The partnership owes the imputed underpayment plus penalties, if applicable, and apparently interest.
The IRS updated collection standards March 28, 2016 3/30/16
generally lowering some allowances slightly
IRS Payment P.O. Box Locations in Georgia and Missouri Have Changed 2/22/16
As of Jan. 1, payments mailed to closed payment P.O. boxes or lockboxes in the Atlanta and St. Louis areas are no longer being forwarded to the correct lockbox location. They will be returned to the sender. Go to Where to File on IRS.gov for current payment addresses.
The Missouri Department of Revenue ("DOR") is implementing additional security measures to ensure that individual income tax refunds are issued to legitimate taxpayers. These enhanced fraud prevention measures will result in additional processing time for refunds. Tips to help taxpayers prevent and report identity theft are available on the Identity Theft page of the department's website at http://dor.mo.gov/personal/individual/identity_theft.php. Tax Bulletin Vol. 5, Ed. 1, Missouri Department of Revenue, February 3, 2016. The page includes links to form 5593that can be emailed or faxed to DOR to advise DOR of possible fradulent tax returns.
TEFRA partnership audit rules eliminated effective for returns filed beginning after Dec. 31, 2017 1/20/16
The "Bipartisan Budget Agreement of 2015", P.L. 114-74, eliminates the TEFRA unified partnership audit rules and the electing large partnership rules, and replaces them with streamlined partnership audit rules, effective generally for returns filed for partnership tax years beginning after Dec. 31, 2017.
Many questions remain to be answered, and the new rules may result in the partnership agreement needing to be amended.
Under the TEFRA rules, the IRS conducts a single administrative proceeding for most partnerships with more than 10 partners (the rules don't apply if there are fewer partners), the tax treatment of any partnership item is generally determined at the partnership level, then the IRS recalculates each partner's tax liability.
Under the new rules the partnership pays the tax resulting from the tax unless one of several elections are made, e.g., for partners to amend their returns and pay the tax for the audit year, or for the partnership to send out amended K-1s.
Partnerships with 100 or fewer qualifying partners can elect out of the new rules for any tax year, and the partnership and partners would be audited under the general rules applicable to individual taxpayers. But, to qualify to elect out, partners can only be individuasl, C corporations, a foreign entity that would be treated as a C corporation were it domestic, S corporations, or estates of a deceased partner. Trusts are not listed. The partnership must notify its partners of the election.
"Due to an error, taxpayers are receiving Identity Protection PIN letters with an incorrect year listed. Taxpayers and tax professionals should be advised the IP PIN listed on the CP 01A Notice dated January 4, 2016 is valid for use on all individual tax returns filed in 2016."
"The notice incorrectly indicates the IP PIN issued is to be used for filing the 2014 tax return when the number is actually to be used for the 2015 tax return. The IRS emphasizes the IP PIN listed on the CP 01A notice is valid for the 2015 returns. Taxpayers and their tax professionals should use this PIN number for 2015 tax returns, which the IRS will begin accepting from taxpayers starting Jan. 19, 2016. The IRS apologizes for the confusion and any inconvenience."