NEWS from NSA

  • IRS: Taxpayers Must Have Bank Record or Written Statement of Donations to Charity

    Friday, December 05, 2014 2:31 PM | NCSA Website Manager (Administrator)
    Taxpayers must have a bank record or a written statement from a charity in order to deduct donation of money, regardless of amount, the IRS said in a reminder on tax law provisions that have taken effect in recent years.
     
    In addition, donors must get written acknowledgement from the charity for all gifts worth $250 or more, which must include, among other things, a description of the items contributed, according to the IRS News Release, IR 2014-110. Clothing and household items donated to charity generally must be in good condition to be tax-deductible, the IRS said. However, if the taxpayer claims a deduction of more than $500, this standard doesn't need to be met if a qualified appraisal of the item is included with the return.
     
    Contributions are deductible in the year made, the IRS said. Therefore, donations charged to a credit card before the end of 2014 count for tax year 2014, even if the credit card bill isn't paid until 2015. The same is true for checks. Checks count for 2014 as long as they are mailed in 2014.


  • Koskinen Says Tax Filing Season Likely to be OK if Extenders Bill Passes by Dec. 12

    Friday, December 05, 2014 2:29 PM | NCSA Website Manager (Administrator)
    The 2015 tax filing season likely won't be impacted if Congress reaches a deal on tax extenders that doesn't change the one-year package passed by the House, IRS Commissioner John Koskinen said.  "If there are no changes and that passes by the end of next week, we should be able to absorb it," Koskinen said on Dec. 4.


  • Tax Extenders Bill Approved In House; Expected To Be Signed Into Law Soon

    Friday, December 05, 2014 2:28 PM | NCSA Website Manager (Administrator)
    The House of Representatives on Wednesday passed legislation that would extend until December 31, 2014 dozens of temporary tax provisions that lapsed at the end of last year.  H.R. 5771, the "Tax Increase Prevention Act of 2014" (yes, we know, who makes up these names?).  The Senate is expected to approve the bill next week and President Obama will sign it shortly thereafter.
     
    H.R. 5771 largely mirrors a similar bill the Senate Finance Committee passed earlier this year. However, a key difference is that the Senate bill sought a two-year extension of the expired tax provisions and made some of the provisions, like section 179 expensing, permanent. Since the House bill only provides an extension to the end of this year, the extender issue will come up again next year.
     
    The bill includes extensions of the section 179 expensing, the research credit, the deduction for state and local sales taxes, the work opportunity tax credit, look-thru treatment of payments between related controlled foreign corporations, and numerous other incentives for clean energy and charitable donations. In addition to the extensions, the bill includes a set of technical corrections to previously enacted tax laws.
     
    The Ways and Means Committee has released a section-by-section summary of H.R. 5771 as approved by the Committee.  The summary is available here. Please note, however, that the House approved a floor amendment to also extend the credit for alternative fuel vehicle refueling property and make other technical changes to the bill.


  • IRS Issues Draft Instructions for S Corp Returns Including Schedule M-3 Filing Update

    Monday, November 17, 2014 10:49 AM | NCSA Website Manager (Administrator)

    The IRS on November 3 released new draft instructions for Form 1120S, U.S. Income Tax Return for an S Corporation, including updated information for companies that file the Schedule M-3 to reconcile their income and losses.

     

    The IRS notice said requirements have changed for some filers of the 2014 Form 1120S that also file Schedule M-3 (Form 1120S), Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More. The changes affect S corporations with less than $50 million in total assets at the end of the tax year, as well as S corporations that aren't required to file Schedule M-3 (Form 1120S) but do so anyway. 


    For tax years ending on or after Dec. 31, 2014, these S corporations must either: 

    • complete Schedule M-3 (Form 1120S) entirely; or
    • complete Schedule M-3 (Form 1120S) through Part I and complete Form 1120S, Schedule M-1 instead of completing Parts II and III of Schedule M-3 (Form 1120S).

    The IRS said S corporations aren't required to file Form 8916-A, Supplemental Attachment to Schedule M-3.

     

    The instructions offer further guidance if a corporation chooses to complete Form 1120S, Schedule M-1 instead of completing Parts II and III of Schedule M-3 (Form 1120S).

     

    For these taxpayers, Line 1 of Form 1120S, Schedule M-1 must equal Line 11 of Part I of Schedule M-3 (Form 1120S). In addition, the IRS said, any corporation that completes Parts II and III of Schedule M-3 (Form 1120S) must complete all columns, without exception. Taxpayers filing Schedule M-3 must check the "Check if Sch. M-3 attached" box.

     

    The draft instructions are available here. 


    The IRS on November 3 released new draft instructions for Form 1120S, U.S. Income Tax Return for an S Corporation, including updated information for companies that file the Schedule M-3 to reconcile their income and losses.
     
    The IRS notice said requirements have changed for some filers of the 2014 Form 1120S that also file Schedule M-3 (Form 1120S), Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More. The changes affect S corporations with less than $50 million in total assets at the end of the tax year, as well as S corporations that aren't required to file Schedule M-3 (Form 1120S) but do so anyway.


    For tax years ending on or after Dec. 31, 2014, these S corporations must either:

    • complete Schedule M-3 (Form 1120S) entirely; or
    • ?complete Schedule M-3 (Form 1120S) through Part I and complete Form 1120S, Schedule M-1 instead of completing Parts II and III of Schedule M-3 (Form 1120S).

    The IRS said S corporations aren't required to file Form 8916-A, Supplemental Attachment to Schedule M-3.
     
    The instructions offer further guidance if a corporation chooses to complete Form 1120S, Schedule M-1 instead of completing Parts II and III of Schedule M-3 (Form 1120S).
     
    For these taxpayers, Line 1 of Form 1120S, Schedule M-1 must equal Line 11 of Part I of Schedule M-3 (Form 1120S). In addition, the IRS said, any corporation that completes Parts II and III of Schedule M-3 (Form 1120S) must complete all columns, without exception. Taxpayers filing Schedule M-3 must check the "Check if Sch. M-3 attached" box.
     
    The draft instructions are available here.

    The IRS on November 3 released new draft instructions for Form 1120S, U.S. Income Tax Return for an S Corporation, including updated information for companies that file the Schedule M-3 to reconcile their income and losses.
     
    The IRS notice said requirements have changed for some filers of the 2014 Form 1120S that also file Schedule M-3 (Form 1120S), Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More. The changes affect S corporations with less than $50 million in total assets at the end of the tax year, as well as S corporations that aren't required to file Schedule M-3 (Form 1120S) but do so anyway.


    For tax years ending on or after Dec. 31, 2014, these S corporations must either:

    • complete Schedule M-3 (Form 1120S) entirely; or
    • ?complete Schedule M-3 (Form 1120S) through Part I and complete Form 1120S, Schedule M-1 instead of completing Parts II and III of Schedule M-3 (Form 1120S).

    The IRS said S corporations aren't required to file Form 8916-A, Supplemental Attachment to Schedule M-3.
     
    The instructions offer further guidance if a corporation chooses to complete Form 1120S, Schedule M-1 instead of completing Parts II and III of Schedule M-3 (Form 1120S).
     
    For these taxpayers, Line 1 of Form 1120S, Schedule M-1 must equal Line 11 of Part I of Schedule M-3 (Form 1120S). In addition, the IRS said, any corporation that completes Parts II and III of Schedule M-3 (Form 1120S) must complete all columns, without exception. Taxpayers filing Schedule M-3 must check the "Check if Sch. M-3 attached" box.
     
    The draft instructions are available here.

  • IRS Issues Draft Instructions for Adoption Credit Form

    Monday, November 17, 2014 10:48 AM | NCSA Website Manager (Administrator)

    The Internal Revenue Service has posted draft instructions for the 2014 Form 8839, Qualified Adoption Expenses, to its website. A copy is also available here. Form 8839 is used to calculate adoption credits and figure out any employer-provided benefits for adoption that can be excluded from income, the IRS said.

     

    The instructions provide information about the 2014 maximum adoption credit of $13,190 per eligible child. The amount phases out for taxpayers with a modified adjusted gross income of more than $197,880 and is completely phased out for taxpayers with a MAGI above $237,880, the IRS said.


    The Internal Revenue Service has posted draft instructions for the 2014 Form 8839, Qualified Adoption Expenses, to its website. A copy is also available here. Form 8839 is used to calculate adoption credits and figure out any employer-provided benefits for adoption that can be excluded from income, the IRS said.
     
    The instructions provide information about the 2014 maximum adoption credit of $13,190 per eligible child. The amount phases out for taxpayers with a modified adjusted gross income of more than $197,880 and is completely phased out for taxpayers with a MAGI above $237,880, the IRS said.
    The Internal Revenue Service has posted draft instructions for the 2014 Form 8839, Qualified Adoption Expenses, to its website. A copy is also available here. Form 8839 is used to calculate adoption credits and figure out any employer-provided benefits for adoption that can be excluded from income, the IRS said.
     
    The instructions provide information about the 2014 maximum adoption credit of $13,190 per eligible child. The amount phases out for taxpayers with a modified adjusted gross income of more than $197,880 and is completely phased out for taxpayers with a MAGI above $237,880, the IRS said.

  • Disbarred Attorney Working as Tax Preparer Not Required to Produce Documents for IRS

    Monday, November 17, 2014 10:46 AM | NCSA Website Manager (Administrator)

    The fallout from Loving v. Commissioner continues.

     

    James C. Section is a disbarred attorney who was working as a tax return preparer for Esquire Group LLC. The IRS Office of Professional Responsibility learned of his employment and sent a letter demanding he stop and that his employer provide certain documents. Rather than comply with the letter, Sexton and Esquire filed a complaint in May 2013 requesting a declaratory judgment that:

    • Sexton isn't a practitioner, and Hawkins and the IRS lack authority over him; and
    • The IRS is prohibited from regulating tax advice generally excepted as provided in 31 USC Section 330.

     

    Judge Richard F. Boulware II of the U.S. District Court for the District of Nevada granted an injunction on Oct. 30 against Karen Hawkins, director of the IRS Office of Professional Responsibility, barring Hawkins from: 

    • suspending or curtailing James C. Sexton Jr.'s ability to electronically file tax returns on behalf of clients of his employer; or
    • suspending Sexton's preparer tax identification number (PTIN) for not complying with the IRS's demands pending a determination of whether the IRS has authority over Sexton and Esquire.

    Judge Boulware further ordered that Sexton and his employer are not required to produce documents for or respond to inquiries by the IRS (Sexton v. Hawkins, D. Nev., 2014 BL 307343, No. 2:13-cv-00893, injunction granted 10/30/14).

     

    Although Sexton's complaint referenced the injunction against the enforcement of tax preparer regulations under Circular 230 in Loving v. IRS, 950 F. Supp. 2d 108, 2013 BL 27364 (D.D.C. 2013), affirmed 742 F.3d 1013, 2014 BL 36052 (D.C. Cir. 2014).  Boulware didn't cite Loving but said Sexton and Esquire pleaded sufficient facts to raise the question whether Sexton remained subject to the IRS's jurisdiction since he was merely a tax preparer and not acting in a representative capacity.


    The fallout from Loving v. Commissioner continues.
     
    James C. Section is a disbarred attorney who was working as a tax return preparer for Esquire Group LLC. The IRS Office of Professional Responsibility learned of his employment and sent a letter demanding he stop and that his employer provide certain documents. Rather than comply with the letter, Sexton and Esquire filed a complaint in May 2013 requesting a declaratory judgment that:
    ·?Sexton isn't a practitioner, and Hawkins and the IRS lack authority over him; and
    ·?The IRS is prohibited from regulating tax advice generally excepted as provided in 31 USC Section 330.
     
    Judge Richard F. Boulware II of the U.S. District Court for the District of Nevada granted an injunction on Oct. 30 against Karen Hawkins, director of the IRS Office of Professional Responsibility, barring Hawkins from:

    • suspending or curtailing James C. Sexton Jr.'s ability to electronically file tax returns on behalf of clients of his employer; or
    • suspending Sexton's preparer tax identification number (PTIN) for not complying with the IRS's demands pending a determination of whether the IRS has authority over Sexton and Esquire.
    Judge Boulware further ordered that Sexton and his employer are not required to produce documents for or respond to inquiries by the IRS (Sexton v. Hawkins, D. Nev., 2014 BL 307343, No. 2:13-cv-00893, injunction granted 10/30/14).
     
    Although Sexton's complaint referenced the injunction against the enforcement of tax preparer regulations under Circular 230 in Loving v. IRS, 950 F. Supp. 2d 108, 2013 BL 27364 (D.D.C. 2013), affirmed 742 F.3d 1013, 2014 BL 36052 (D.C. Cir. 2014).  Boulware didn't cite Loving but said Sexton and Esquire pleaded sufficient facts to raise the question whether Sexton remained subject to the IRS's jurisdiction since he was merely a tax preparer and not acting in a representative capacity.

  • FASB Votes to Finalize Rules to Eliminate 'Extraordinary Items' From GAAP

    Monday, November 17, 2014 10:45 AM | NCSA Website Manager (Administrator)

    The Financial Accounting Standards Board voted 4-3 on October 29 to finalize its proposal to eliminate the concept of "extraordinary items" from generally accepted accounting principles.


    The guidance will be effective for annual periods and interim periods beginning after Dec. 15, 2015, for both public and private companies. Earlier adoption is permitted.
     
    The board also reaffirmed its requirements that companies disclose qualitatively that they had a subsequent adjustment previously reported as an extraordinary item. Disclosure of quantitative impact would also be required, according to the discussions.
     
    "If we're going to have optional transition, you need to have quantitative information as to what the build-up is," said FASB member Thomas Linsmeier. "Some of it's going to be retrospective, some of it's going to be prospective," he said.
     
    The draft proposal to which FASB gave final approval was ASU No. 2014-220, Income StatementundefinedExtraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, issued July 15. The board is expected to issue the standard in December.


  • New Competence Section of Circular 230 Highlighted in OPR Webinar

    Monday, November 17, 2014 10:43 AM | NCSA Website Manager (Administrator)
    New Section 10.35 of Circular 230 on competence of tax preparers is designed to send a message to those who buy tax software and think they can let it do all the work, Karen Hawkins, director of the IRS Office of Professional Responsibility, said during an Oct. 29 Internal Revenue Service webinar. "You won't be competent if this is how you conduct your practice," Hawkins said.
     
    Section 10.35 requires, quite simply, that practitioners be competent, Hawkins said. Competent practice requires whatever skill level and preparation are necessary to provide the appropriate level of service for which the practitioner has been engaged. "This is a very flexible, principles-based concept," she said.
     
    Hawkins noted that practitioners can achieve competency in a number of ways. Based on experience, a practitioner may become familiar with issues related to a certain fact pattern. Researching, taking a class, or hiring others to consult with are also ways to become "competent," she said. But it is just as important for a practitioner to know when he or she isn't competent, she said. Part of a practitioner's responsibility in that case might be to send the client to someone else.
     
    In an addition to existing Section 10.82 of Circular 230, Hawkins also said OPR has been authorized to do expedited suspensions of practitioners who have been adjudicated by a third-party forum as unfit to continue to practice. For instance, she said the suspensions might apply to lawyers who have lost their license, certified public accountants whose certifications have been revoked, or enrolled agents who have been convicted of a tax crime.
     
    The process will be much the same as it is now, Hawkins said, only it will move faster


  • Preparer Education Program

    Monday, November 17, 2014 10:42 AM | NCSA Website Manager (Administrator)
    In addition, the IRS will contact preparers who have renewed their PTIN for 2015 and met the continuing education requirements for the new voluntary IRS Annual Filing Season Program, it said. The program is available to uncredentialed tax return preparers who voluntarily complete courses on basic tax filing issues, ethics, and other federal tax law topics. These preparers can elect to be included on an IRS.gov database that will be available to taxpayers beginning in January 2015, the IRS said. Campbell said the new Program "is about improving and sustaining preparer education and ensuring that those who prepare Form 1040 tax returns have a basic understanding of filing season requirements" and informing taxpayers about all of their options.
     
    A copy of IR-2014-100 is available here.


  • IRS Reminds Preparers to Renew, Obtain PTINs for 2015 Filing Season

    Monday, November 17, 2014 10:39 AM | NCSA Website Manager (Administrator)
    The IRS has issued a news release, IR-2014-100, reminding tax preparers that they must renew their PTINs for 2015 since all current numbers will expire on December 31.
     
    A valid PTIN must appear on all federal tax returns or claims for refund if someone was paid to prepare them, according to the news release. "We ask that you renew your PTIN as soon as possible to avoid a last-minute rush," said Carol A. Campbell, director of the IRS Return Preparer Office.
     
    The cost to renew a PTIN is $63 and the process can be completed online, the IRS said. First-time registrations also can be completed online for $64.25. Paper applications and renewals using Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal, will be processed in four to six weeks, the IRS said.


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