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Archive for June, 2010

What You Need to Know About the 2010 IRS Nationwide Tax Forums

June 29th, 2010

The 2010 IRS Nationwide Tax Forums are about to begin! The tax forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues presented by IRS experts and partner organizations.

Here are nine things enrolled agents, certified public accountants, certified financial planners and other tax professionals need to know about the 2010 IRS Nationwide Tax Forums.

1. Forums are held June through August in Atlanta, Chicago, Orlando, New York, Las Vegas and San Diego.

2. Those who sign up early can qualify for discounted enrollment costs. Pre-registration ends two weeks prior to the start of each forum. The pre-registration dates for the July forums are quickly approaching. To qualify for discounted enrollment costs you must pre-register for the Chicago forum by June 29 and the Orlando forum by July 13.

Location Forum Dates Pre-Registration Deadline
 Chicago  July 13-15 June 29
 Orlando, Fla July 27-29 July 13

3. Forums offer an opportunity to receive up to 18 continuing education credits through a variety of training seminars and workshops.

4. Forums will offer 43 separate seminars and workshops on valuable and relevant tax topics.

5. Forums will also feature a two-day expo with representatives from the IRS as well as other tax, financial, and business communities offering their products, services, and expertise. 

6. Attendees can sign up to become an Authorized IRS e-file Provider.

7. Tax professionals attending a forum can bring their toughest unresolved case to meet with IRS personnel who may be able to help. 

8. Registering for a tax forum is easy!  Register by internet, fax or mail.

9. For more information or to register visit www.irstaxforum.com.

IRS Provides Tax Help, Guidance to Gulf Oil Spill Victims; Special Assistance Day Planned for July 17

June 28th, 2010

The Internal Revenue Service today provided guidance to individuals and businesses affected by the oil spill in the Gulf of Mexico and announced a number of new efforts to help affected taxpayers, including a special Gulf Coast Assistance Day on July 17.

“This is a very difficult time for many people affected by the oil spill in the Gulf of Mexico. As residents of the region cope with the evolving situation, I want to assure them that the IRS will be doing everything it can to provide tax help to those who need it,” IRS Commissioner Doug Shulman said. “We encourage anyone who has an issue with the IRS to contact us and explain their hardship, and we will work with them to find a solution. We’ll do everything we can under current law to help taxpayers.”

The guidance released today is based on current law, and it explains how recipients of payments from BP should treat the payments for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally are nontaxable.

Every person can have unique financial circumstances, so the IRS encourages taxpayers to review their tax situation or talk with their tax preparers about the implications of payments or compensation from the oil spill.

The new information is available in a question-and-answer format on a special section of the IRS website, IRS.gov. The IRS is closely monitoring the situation in the Gulf, and additional information will be added to IRS.gov as it becomes available.

To help people in the Gulf Coast area dealing with tax issues, the IRS also announced a special assistance day on July 17 in seven cities. Taxpayers and tax preparers will be able to work directly with IRS employees to resolve tax issues, including specific topics related to the oil spill. The IRS will hold the Gulf Coast Assistance Day in four states:

  • Alabama: Mobile. 
  • Florida: Panama City and Pensacola. 
  • Louisiana: New Orleans, Houma and Baton Rouge.
  • Mississippi: Gulfport.

Times and specific locations will soon be announced and will be available on IRS.gov.

In addition, taxpayers with problems related to the Gulf spill will soon be able to reach IRS personnel through an IRS toll-free telephone line. Specially trained IRS personnel will be available to help people with tax questions related to the oil spill. More information will be available soon about this telephone line.

The IRS encourages taxpayers in the Gulf struggling with payment or collection issues to contact the agency. The IRS continues to have a number of ways to help taxpayers dealing with oil spill issues or other economic hardship issues, including:

  • Assistance of the Taxpayer Advocate Service for those taxpayers experiencing particular hardship navigating the IRS.
  • Postponement of collection actions in certain hardship cases.
  • Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals having difficulty paying.
  • IRS employees will be permitted to consider a taxpayer’s current income and potential for future income when negotiating an offer in compromise.
  • Accelerated levy releases for taxpayers facing economic hardship.

Affordable Care Act Provides Expanded Benefits to Health Professionals in Underserved Areas

June 24th, 2010

The Internal Revenue Service announced that health care professionals who received student loan relief under state programs that reward those who work in underserved communities may qualify for refunds on their 2009 federal income tax returns as well as an annual tax cut going forward under a new provision in the Affordable Care Act.   Employers, including tax-exempt employers, in underserved areas can help eligible health professionals take advantage of this new benefit. 

Employers of eligible medical professionals who withheld and paid taxes under the Federal Insurance Contributions Act (FICA) on payments covered under the new exclusion may seek a refund of withheld FICA on the employee’s behalf. Also, because employers also pay a portion of the FICA tax, the employer also may be entitled to a refund as well.

For more information on the Affordable Care Act provisions as well as news releases and other legal guidance, go to IRS.gov.

IRS Issues Regulations on 10-Percent Tax on Tanning Services Effective July 1

June 15th, 2010

The Internal Revenue Service today issued regulations outlining the administration of a 10-percent excise tax on indoor tanning services that goes into effect on July 1.

The regulations were published today in the Federal Register. 

In general, providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services.  The provider then pays over these amounts to the government, quarterly, along with IRS Form 720, Quarterly Federal Excise Tax Return.

The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises.  The regulations also provide an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.  

The IRS and Treasury Department invite comments.

Top 10 First-Time Homebuyer Credit Tax Tips

June 10th, 2010

There is still time to claim the First-Time Homebuyer Tax Credit on your 2009 tax return. If you purchased or entered into a binding contract to purchase a home in 2009 or early 2010, you may be eligible to claim the First-Time Homebuyer Credit. Claiming this credit might mean a larger refund. Here are 10 things the IRS wants you to know about the First-Time Homebuyer Credit and how to claim it.

  1. You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.
  2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
  3. To be considered a long-time resident homebuyer, you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.
  4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
  5. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Though you cannot file electronically, you can still use IRS Free File or tax-preparation software to prepare your return. The return must then be printed out and sent to the IRS, along with all required documentation.
  6. If before May 1, 2010, you enter into a binding contract to purchase a home before July 1, 2010, and you are claiming the credit, attach a copy of the pages from the signed binding contract to make a purchase showing all parties’ names and signatures, the property address, the purchase price and the date of the contract. 
  7. New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Generally, a properly executed settlement statement shows all parties’ names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return — even in cases where the settlement form does not include a signature line.
  8. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
  9. Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
  10. If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.

PREPARED REMARKS OF DOUGLAS H. SHULMAN COMMISSIONER OF INTERNAL REVENUE BEFORE THE AMERICAN PAYROLL ASSOCIATION & THE AMERICAN ACCOUNTS PAYABLE ASSOCIATION 28TH ANNUAL CONGRESS MAY 27, 2010 GAYLORD NATIONAL RESORT & CONVENTION CENTER WASHINGTON, DC

June 8th, 2010

WASHINGTON — It’s an honor to be addressing The American Payroll Association’s and American Accounts Payable Association’s 28th Annual Congress. APA has a long history of providing valuable advice and feedback to the IRS as we have implemented a number of important tax laws that have played a prominent role in the economic development of our nation.

Your contributions have often been behind the scenes and they have not received the recognition they so richly deserve. I see that the theme of this year’s Congress is “pay heroes.”  This is an apt title as you have contributed so much to the larger tax community.

Indeed, we’re living through a very challenging time of breathtaking change and there’s a lot at stake for individual and business taxpayers…and APA is right in the thick of it. 

As you know, IRS is now administering many tax credits, such as those contained in the Recovery Act and the HIRE Act. And HIRE is a perfect example of the important role that APA is playing as the IRS implements the Act.

There are two new benefits available to employers who hire certain previously unemployed workers: the Payroll Tax Exemption, also known as the “Tax Holiday,” and the Retention Credit.

Given the quick implementation window, it was critical to get up to speed on form and programming changes. The members of the APA asked a number of helpful questions to make sure that there were no blind spots in implementation and made a number of good suggestions which resulted in FAQs posted on IRS.gov  So let me thank you again, and I look forward to keeping this good working relationship going as we move forward on other critical issues.

Today, I would like to spend some time with you discussing information reporting. There is general agreement both in the US and around the globe that withholding and third-party information reporting are powerful tools to improve and maintain taxpayer compliance. They streamline the process for the vast majority of people who are trying to pay the right amount of tax, and move on.  And at the same time they make it more difficult for those trying to game the system. 

Information reporting is nothing new to the IRS.  We’ve always been an information intensive enterprise. And organizing that information into useful data is one of the hallmarks of an effective and efficient modern tax system. 

But before I get into the new approaches we are taking… and some of the important new tools we have at our disposal…let me provide a little background on the evolution of tax information reporting that has spanned decades and has taken some unusual twists and turns.

Modern day information reporting began with the Current Tax Payment Act of 1943, which established withholding and quarterly estimated tax payments.  And to meet this post-War surge in information, the IRS established the Processing Division in New York City with the Herculean task of assembling and sorting through the 150 million withholding and other documents and comparing them with annual returns. This was a highly labor intensive process consisting of basic document matching. 

And once the floodgates were open, information documents kept growing in sheer type and volume. In 1950, Form 941 was simplified and placed in use nationwide for payroll tax reporting. By 1960, information returns increased to 330 million. Most were still W-2s and 1099s. The Revenue Act of 1962 also set forth the first information reporting system to report dividends and income.

The 1970s saw the waning of the punch card era and the rise of new types of information technology. In 1971, IRS received 360 million information documents – enough to fill more than 35 boxcars. However, almost 70 million of these information documents were submitted on magnetic tape. A year later, the IRS announced plans to create a wage and other income information tape file that would incorporate all “useable” information documents and was seen as “a base for conducting more effective income and employment tax programs.”

The Information Returns Program was inaugurated to match the information returns of some individual taxpayers with their income tax returns to detect non-filing or underreporting of income. And speaking of underreporting, tips had to be reported for the first time.

The 1980s was a watershed decade for information reporting and information sharing.  The Social Security Administration received information from over 189 million W-2s.

The IRS began using information returns in selecting income tax returns for examination and for use in actual exams. IRS also notified over 2.1 million taxpayers of potential discrepancies between income reported on their tax returns and income reported on information returns; 1.4 million people who failed to file a tax return were identified.

The Automated Underreporter Program concept was unveiled in 1986 as a way to move the Underreporter Program to a paperless environment and better detect underreporting of income, or the failure to file a tax return. Through this new program, the IRS sent out 3.8 million notices to taxpayers on discrepancies.

The TEFRA Act of 1982 also granted IRS discretion in establishing payor reporting procedures. And there was an expansion of Form 1099, giving birth to a long line of alphabetical descendants, to report outside taxable income from other sources.

Closer to today, in 1992, the Automated Underreporter Program was established at the Ogden, Utah Service Center. Legislation generated even more information reporting, including securities, higher education and tuition, and charitable donations of property. The IRS also began using automated “soft notices” to allow taxpayers to correct underreporting issues outside of a more formal audit context.

Enough history…let’s talk about the next generation of information reporting which is a    cornerstone of our overall strategy of working smarter.

Albert Einstein once said that information is not knowledge. I agree. We can have all the information in the world…we can be bombarded with information 24/7… and it can mean nothing if we don’t know how to analyze and make the best use of it.

It’s the organization of data and ultimately the knowledge and intelligence we extract from the information that we receive that really matters … that’s the transformational step….whether it’s used by NASA scientists to plumb the deepest secrets of the universe, or by the IRS to find  innovative ways to reduce the tax gap and improve compliance.

However, to reach this new level of intelligence, we must adapt and make better use of technology. The technology revolution changed information reporting for both business and the IRS and creates opportunities and challenges for both of us. The better use of technology translates into better use of data – extracting knowledge and intelligence. So, we must invest in technology to keep up with new legislation, regulations and strategies in a more complex and interrelated global tax system.

We have some recent changes in the law that gave us new tools in our information reporting toolkit. The first applies to businesses that accept credit or debit cards, or other electronic payments.

Beginning in 2012, payment processors will be required to make an annual information report to the merchant and the IRS stating the gross amount paid to the merchant during a calendar year. This will help improve voluntary tax compliance by business taxpayers and help the IRS determine whether their tax returns are correct and complete. Let me dive down a little deeper into how this new law will benefit the tax system.

Imagine a business. At the end of the year, a merchant bank will send that business a 1099 reporting the dollar figure from credit and debit card purchases made by customers at his or her establishment. An identical information document is also sent to the IRS.

When the owner or tax practitioner fills out the business’ tax return, they will segregate the credit/debit card sales from cash sales….and this new report will make it easier to do so.  At this point, the IRS can see if the credit card dollar figure reported on the tax return matches the bank’s information return, and also see if the amount of revenue from credit cards makes sense in the context of firm’s overall business.

The information we receive is an important window into underreporting. It can also help us better understand tax compliance and trends in different industry sectors.

The second tool Congress gave us imposes basis reporting requirements for publicly traded securities. Under current law, a broker is required to file with the IRS annual information returns generally showing only a customer’s gross proceeds from certain transactions. The same information is furnished to taxpayers to help them file accurate and complete returns.

Here’s the problem. GAO estimates that as many as seven million taxpayers – more than one in three who sold securities – may have misreported capital gains and losses. And around half of them did so because they misreported their basis.

This new provision – effective January 1, 2011 – will go a long way to reducing this problem and making things easier for investors. I don’t know about you, but I have spent far too much time digging through old records, trying to find the basis for securities I sold.  I think investors…and I count myself one …will welcome getting this new, easy-to-understand information from their brokers.  

Basis reporting can also help us work smarter. As the GAO points out, knowing the basis for taxpayers’ security sales will allow us to get a better bead on taxpayers’ income for security sales through our document matching program. In other words, basis reporting creates knowledge.

Congress also recently passed a new information reporting provision requiring expanded information reporting on payments made from businesses to corporations, and on payments businesses make for goods.  This new information reporting requirement applies if businesses pay a single entity $600 or more per year in aggregate for these types of transactions starting in 2012.

While businesses do not need to file information returns on these payments until January of 2013, business groups – particularly those that represent small businesses – have raised concerns about the burden that this new provision may impose.  I want to assure the business community that the IRS will look for opportunities to minimize burden and avoid duplicative reporting.  That is why we will be spending the next several months soliciting input from businesses of all types and sizes before proposing regulations to implement the law.  We will also look to service providers who help those businesses understand and adapt to new laws and regulations, to help us craft a process that is as efficient as possible.  We know that there is no “one-size-fits-all,” so we want to hear your ideas.

At the risk of getting ahead of the game, I wanted to share with you just one example of how we are analyzing this provision, and looking for opportunities to streamline implementation and minimize burden.  We plan to use our administrative authority to exempt from this new requirement business transactions conducted using payment cards such as credit and debit cards.  These transactions will already be covered by reporting requirements on payment card processors, so there is no need for businesses to report them as well.  So, whenever a business uses a credit or debit card, there will be no new burden under the new law. 

I realize that this exemption covers a specific set of transactions, and you probably have lots more questions.  But I share this idea with you as an example of where we are headed, not as a complete implementation plan.  For that we will look forward to dialog and input from the business community in the coming months.  As we proceed with our planning, we won’t hesitate to consider alternate approaches, including working with Congress to address any potential implementation issues that may arise during this process. 

Information reporting may have had a modest start in the US, but it is now firmly rooted in the global economy. The globalization of tax administration is now everybody’s business. In the case of the IRS, we want to ensure that business taxpayers do not use international capital markets and tax code complexities to push tax planning beyond acceptable bounds. And for individuals, we want to better ensure that US taxpayers with overseas assets pay what they owe.

Information reporting and sharing is critical to our international efforts and we cannot afford a go-it-alone strategy.  We are bound together with other nations with real economies and real tax systems in a common cause. We must build and strengthen relationships with these partners across the globe.

By allowing the exchange of information between the world’s tax authorities, tax treaties are a critical tool in the fight against global tax evasion. The Treasury Department has made information exchange agreements a priority, and has been signing more and more treaties. We routinely exchange information filed with treaty partners regarding foreign persons’ US source income subject to withholding, while matching similar information received from our partners. 

The US continues to work with countries around the world that want to come into the new paradigm of transparency and information exchange. 

Beyond a cooperative spirit, we will need enhanced information reporting tools to combat tax evasion and abusive tax avoidance, with a special focus on banks, wealthy individuals and offshore activities in bank secrecy jurisdictions.

We already have some good ones at our disposal, such as the Qualified Intermediary Program which gives us an important line of sight into the activities of foreign banks and other financial institutions.

One of the most important developments in international information reporting was the enactment this year of the Foreign Account Tax Compliance Act which creates more transparency in the offshore financial market. Some of the key elements include: 

  • Encouraging the reporting of US citizens’ worldwide  income by withholding 30% on payments for foreign financial institutions, unless they identify and report the US citizens who own the accounts.
  • US-owned accounts would include accounts beneficially owned through shell foreign entities.
  • Requiring US taxpayers to report on their tax returns offshore assets worth an aggregate of $50,000 or more. This is in addition to existing law that requires the filing of a so-called FBAR form if the aggregate of their foreign accounts is over $10,000.

As you can see, this is a significant and meaningful step towards combating US tax evasion, bank secrecy and other illicit financial practices.

In conclusion, let me thank you again for inviting me to share some thoughts with you today on the evolution of information reporting.  We are entering a very exciting new phase of information reporting with great potential for improving compliance and the effectiveness and efficiency of our tax system.  I look forward to working with the APA and its members as we move forward.  Thanks for listening and best wishes for a highly successful 28th Congress.

IRS presents IRS Live – New Requirements for Tax Return Preparers – Learn the Who, What, When and How

June 4th, 2010

The Internal Revenue Service will debut its latest educational program for tax professionals, the webinar IRS Live, on June 9, 2 p.m. ET. The topic is “New Requirements for Tax Return Preparers – Learn the Who, What, When and How.”

IRS Live’s hour-long programming will feature IRS and industry experts, and cover tax-related topics.

In the June 9 broadcast, tax professionals will learn about the new requirements for paid return preparers, including:

  • Preparer Tax Identification Numbers
  • Competency testing
  • Preparer tax compliance verification checks
  • E-file mandate

The broadcast will be a good opportunity for return preparers to learn about upcoming requirements and get the latest information from the lead IRS executive.

Panelists for the June program are David R. Williams, executive lead for Return Preparer Regulations Implementation, IRS; Conrad Davis, Ueltzen & Company LLP; and Bill Parrish, Private Practice Group, LLC.

IRS Live is the newest addition to IRS’s suite of outreach delivery venues and is aimed at educating tax professionals on the most current and complex tax issues affecting them and their clients. Tax professionals are encouraged to watch the free program and submit questions by e-mail during the webinar.

Viewers can register online via IRS.gov. Tax professionals who need continuing education credits are eligible to receive a Certificate of Completion, often equal to one CPE credit, by registering and viewing the June 9, webinar.

Also as a part of its outreach delivery suite, IRS offers National Phone Forums and other webinars  and video and audio presentations on a variety of tax topics. All are free.

Tax professionals are also encouraged to subscribe to IRS’s newsletter; e-News for Tax Professionals. It’s one of the best ways for the tax professional community to get the latest national and local IRS news.

IRS Nationwide Tax Forums

Tax professionals can learn more about new federal requirements of paid tax return preparers by attending one of six tax forums this summer around the country hosted by the IRS.

The IRS Nationwide Tax Forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues presented by IRS experts and partner organizations. The forums offer an opportunity to receive up to 18 continuing education credits through a variety of training seminars and workshops.

Open House Saturday June 5 to Help Taxpayers Solve Problems and Respond to Notices

June 3rd, 2010

The Internal Revenue Service will once again host a special nationwide open house on Saturday, June 5 to help taxpayers solve tax problems and respond to notices from the IRS.

Approximately 200 IRS offices, at least one in every state, will be open June 5 from 9 a.m. to 2 p.m. local time. IRS staff will be available on site or by telephone to help taxpayers work through their problems –– especially recently received tax notices –– and walk out with solutions.

“We’ve helped thousands of taxpayers resolve their problems the same day at these open houses,” IRS Commissioner Doug Shulman said. “If you have a question regarding a notice, a problem with your taxes or difficulty resolving a tough tax issue, we encourage you to come in and work with us.”

IRS locations will be equipped to handle issues involving notices and payments, return preparation, audits and a variety of other issues. At a previous IRS open house on May 15, close to 7,000 taxpayers sought and received assistance. About 97 percent of the taxpayers who came in for help had their issues resolved the same day.

At the June 5 open house, someone who has received a notice seeking additional information can speak with an IRS employee to get a clear explanation of what is necessary to satisfy the request. A taxpayer who cannot pay a tax balance due can discuss with an IRS professional whether an installment agreement is appropriate and, if so, fill out the paperwork then and there. Assistance with offers-in-compromise — an agreement between a taxpayer and the IRS that settles the taxpayer’s debt for less than the full amount owed — will also be available. Likewise, a taxpayer struggling to complete a certain IRS form or schedule can work directly with IRS staff to get the job done.

The open house on June 5 is the second of three events scheduled after tax season this year. The first was held on May 15. The next event, previously scheduled for Saturday June 26, will be held later this fall. Details regarding that event will be available later.