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February 2017

January 2017

Changes to Installment Agreements

The IRS has a pilot program for expanded streamline installment agreements that runs September 2016 to September 2017. The SB/SE Campus Collection Operations, including the Automated Collection System (ACS), has expanded installment agreement criteria for individual taxes, self-employment taxes and out-of-business sole proprietors with assessed tax, penalty and interest between $50,000 and $100,000 and from 72 to 84 months automatic installment (if proposed monthly payment is the greater of their total assessed balance divided by 84 months or amount necessary to satisfy the liability before the collection statute expires). If the test is successful, it will provide easier access to installment agreements for more taxpayers and fewer IRS resources to manage. Installment agreements in SB/SE Field Collection (cases assigned by revenue officers), W & I Accounts Management or through the Online Payment Agreement Application do not qualify for this pilot program.

Effective Jan. 1, 2017, the IRS increased user fees for taxpayers to pay off their federal income tax debt. Under the revised schedule, affected taxpayers could lower the installment agreement fee by choosing an online payment agreement or direct debit from a bank account.

User Fee Category

Previous Fee

Fee as of Jan. 1, 2017

Regular installment agreement 1

$120

$225

Regular installment agreement with direct debit (DDIA) 2

$52

$107

Low income installment agreement (regular or DDIA)

$43

$43

Online payment agreement -- regular installment agreement 3

$120

$149

Online payment agreement -- Direct debit installment agreement (DDIA) 4

$52

$31

Restructured/reinstated installment agreement

$50

$89

Restructured/reinstated low income installment agreement (new fee)

--

$43

User fee table notes:

  1. Apply by submitting Form 9465, Installment Agreement Request (PDF), by contacting a telephone assistor or at an IRS walk-in office. Choose to make payments by means other than direct debit.
  2. Apply by submitting Form 9465, by contacting a telephone assistor or at an IRS walk-in office. Choose to make payments by direct debit from a bank account.
  3. Apply online. Choose to make payments by means other than direct debit.
  4. Apply online. Choose to make payments by direct debit from a bank account. Lowest cost choice.

In addition, the IRS has increased the Offer in Compromise (OIC) user fee from $186 to $300 for OICs submitted on or after Feb. 27, 2017. Pursuant to IRS proposed regulations, the increase is to bring the user fee closer to the IRS’ actual cost of processing an OIC, which is $2,450.

Read more:

https://www.federalregister.gov/documents/2016/10/13/2016-24666/user-fees-for-offers-in-compromise

https://www.irs.gov/businesses/small-businesses-self-employed/streamlined-processing-of-installment-agreements?_ga=1.206997840.254687510.1449240952


Preparer Due Diligence

The PATH Act of 2015 extended Form 8867, the Paid Preparer’s Due Diligence Checklist, to include not only claims for earned income tax credit (EITC), but also the child tax credit (CTC), the additional child tax credit (ACTC) and the American opportunity tax credit (AOTC) for the 2017 tax filing season. During a recent joint meeting, IRS representatives recommended that tax professionals access the IRS’ EITC Central and view the training module for clarification such as the definition of “interview” for checklist purposes. (A very general interpretation is that an interview can be conducted via written correspondence, email and telephone in addition to an in-person meeting.) There are substantial due diligence requirements under IRC section 6695 for preparers of returns containing these items and the IRS is vigorously enforcing compliance by preparers. The IRS can assess a penalty of $510 for each violation (indexed for inflation).

In addition, pursuant to the new law, refunds that include EITC or ACTC claims will be delayed until Feb. 15 to give the agency more time to screen the returns for fraud.

Read more:

https://www.irs.gov/pub/irs-pdf/f8867.pdf

https://www.eitc.irs.gov/Tax-Preparer-Toolkit/main

https://www.eitc.irs.gov/training/login/auth

https://www.irs.gov/uac/newsroom/new-law-sets-jan-31-w-2-filing-deadline-some-refunds-delayed-until-feb-15


More W-2s will Include Verification Codes for Filing Season 2017

The IRS has expanded its testing of the Forms W-2 authentication code for this tax season to combat return identity theft and refund fraud. The IRS collaborated with certain payroll service providers to include a 16-digit code and a new verification code field on approximately 50 million W-2 copies provided to employees.

Tax professionals are urged to look for the verification code field because its location on the form will vary. The code will be displayed in four groups of four alphanumeric characters, separated by hyphens: XXXX-XXXX-XXXX-XXXX. Some W-2s will have an empty verification code box where no action is required. Instructions indicate: “If this field is populated, enter this code when it is requested by your tax return preparer software. It is possible your software or preparer will not request the code. The code is not entered on paper-filed returns.

Learn more:

https://www.irs.gov/individuals/w-2-verification-code


Private Debt Collection Program Starts This Spring

In December 2015, Congress reauthorized under federal law the IRS’ use of third-party debt collection procedures. Four agencies have been contracted to pursue inactive delinquent accounts. The IRS will notify the taxpayer in writing (and their representative with a valid Form 2848) that the account has been referred to a collection agency, providing the name of the agency and a 10-digit identifying code. The agency will issue a separate letter to the taxpayer and any representative that the account has been transferred before making contact by phone. The collector calling has the same 10-digit code along with the taxpayer’s Social Security number and account balance. All payments will be made to the U.S. Treasury. Collectors must respect taxpayers’ rights and abide by the consumer protection provisions of the Fair Debt Collection Practices Act. These contractors cannot issue levies.

 

Preparers should be aware that this is another potential market for fraudsters. Red flags would be if the taxpayer did not receive an initial referral notice from the IRS, if the caller asks for the taxpayer’s Social Security number (collector will already have this) or if the caller asks that payment be made to an individual, to a company or through an unusual transaction such as prepaid debit cards. A taxpayer and/or their representative concerned that the call is not legitimate should contact the IRS at the phone number on the letter or decline to work through the private agency. Collectors have no recourse and will refer the case back to the IRS.

 

See link for list of agencies:

https://www.irs.gov/uac/newsroom/new-private-debt-collection-program-to-begin-next-spring-irs-to-contract-with-four-agencies-taxpayer-rights-protected


National Taxpayer Advocate Recognizes TSCPA Federal Tax Policy Committee

National Taxpayer Advocate (NTA) Nina Olson recently released her 2016 Annual Report to Congress. In the report, Olson recognized the quality work of TSCPA’s Federal Tax Policy (FTP) Committee by referencing its appeals letter to the IRS in May and specific FTP committee member testimony from the NTA San Antonio public forum in August.

TSCPA members Jaime Vasquez, CPA-San Antonio, and Jim Smith, CPA-Dallas,* were both quoted in the annual report from their public forum testimony regarding problems within the Taxpayer Advocate Centers and the Taxpayer Advocate Service. Congratulations to the FTP Committee on this well-deserved recognition from the NTA!

*Jim Smith’s testimony is misattributed to Jim Oliver, CPA-San Antonio, in the Report to Congress

https://www.tscpa.org/docs/default-source/advocacy/taxpayer-advocate-forum-jim-oliver-jaime-vasquez-ken-horwitz.pdf?sfvrsn=2

https://taxpayeradvocate.irs.gov/Media/Default/Documents/2016-ARC/ARC16_Volume1.pdf


Beware of Another Email Scheme Disguised as a Potential Tax Client

The IRS is warning of a new phishing scheme targeting accounting and tax preparation firms nationwide.

 

These latest phishing emails come in typically two stages. The first email may appear to be from a taxpayer shopping for professional services, such as "I need a preparer to file my taxes." If the preparer or staff responds, the cybercriminal sends a second email with an embedded web address or a PDF attachment that has an embedded web address. Emails may also appear to come from a legitimate sender or organization (perhaps even a friend or colleague) because they also have been victimized.

 

With one click, instead of downloading or accessing a site with a potential client's tax information, your email address, password and possibly other information has been compromised.

 

The IRS urges practitioners and tax preparation firms to consider creating internal policies or obtain security experts' recommendations on how to address unsolicited emails seeking their services.

https://www.irs.gov/uac/newsroom/security-summit-alert-new-two-stage-email-scheme-targets-tax-professionals


IRS Allows Automatic Tangible Property Method Changes for Additional Year

Last month, the IRS released Notice 2017-6 to extend the dates for making the automatic accounting method changes required under IRC section 263(a), the tangible property regulations, to include tax years beginning before Jan. 1, 2017. This allows taxpayers that have not made these changes to do so and comply with the final tangible property regs. This also allows taxpayers to comply without incurring the user fees that would otherwise be required. (2017-3 IRB)  

https://www.irs.gov/pub/irs-drop/n-17-06.pdf  


New Due Date for FBARs

The new annual due date for filing Reports of Foreign Bank and Financial Accounts (FBAR), FinCEN Form 114, for foreign financial accounts is April 15. This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41. Specifically, section 2006(b)(11) of the Act changes the FBAR due date to April 15 to coincide with the federal income tax filing season. It also mandates a maximum six-month extension of the filing deadline. FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to Oct. 15 each year. Requests for this extension are not required. The due date for FBAR filings covering calendar year 2016 is April 18, 2017, consistent with the federal income tax due date. 

https://www.fincen.gov/news/news-releases/new-due-date-fbars-0


Congress Enacts Law Allowing HRAs Under the Affordable Care Act

Last month, President Obama signed into law the 21st Century Cures Act, which, among other things, permits certain employers to offer health reimbursement arrangements to employees without running afoul of the Patient Protection and Affordable Care Act's market reform provisions. TSCPA’s Federal Tax Policy and IRS committees have been involved in commenting on this issue. In April 2015, they sent a letter to the Treasury and prepared letters sent on behalf of TSCPA to Congress in September 2015.

http://www.journalofaccountancy.com/news/2016/dec/congress-enacts-law-allowing-hras-under-aca-201615674.html

https://www.tscpa.org/docs/default-source/default-document-library/treasurysec4980dexcisetax.pdf?sfvrsn=2

https://www.tscpa.org/docs/default-source/comment-letters/tscpa/tscpa-letter-regarding-small-business-healthcare-relief-act-2015.pdf?sfvrsn=2