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April 2020

TXCPA Urges Congress to Consider Additional Legislative Tax Provisions

Yesterday, the Texas Society of CPAs urged leadership of the U.S. Senate Finance and House Ways & Means committees to consider additional legislative provisions minimizing or deferring both individual and business taxpayers’ liabilities during this difficult time. Our recommendations include temporarily increasing the capital loss limitation and the percentage depletion allowance and providing a refundable tax credit for maintaining payroll through year-end. The letter also requests that IRC Section 501(c)(6) associations be included in the next phase of the Paycheck Protection Program and expanded application of economic stimulus payments to certain college students and dependent adults.

https://www.tscpa.org/docs/default-source/comment-letters/federal-tax-policy/2020/tax-changes-necessary-due-to-the-coronavirus-txcpa-letter.pdf?sfvrsn=bcebdfb1_6


TXCPA Committee Issues Letter for Broader COVID-19 Tax Relief

TXCPA’s Federal Tax Policy Committee urged Treasury Secretary Mnuchin and IRS Commissioner Rettig to address some additional concerns related to deadline extensions for the first quarter Form 941 payroll tax returns, processing powers of attorney with the CAF unit being out of service, expanded acceptance of digital signatures, expanded capability to electronically file additional tax forms and returns, and flexibility in renewing expired and expiring ITINs.

 https://www.tscpa.org/docs/default-source/comment-letters/federal-tax-policy/2020/ftp-request-for-broader-federal-tax-relief-amid-the-covid-19-pandemic.pdf?sfvrsn=3a83dfb1_4

 


Waiving Required Minimum Distributions

Here is a potential 2020 tax savings for elderly taxpayers. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed on March 27, 2020, permits taxpayers age 70 and 1/2 or older to elect not to receive their 2020 required minimum distribution from their IRA. If they have already received the distribution, they have 60 days from the date of the distribution to return the funds to their IRA. Taxpayers interested in this possibility should log in to their account to effect the change. 

https://money.usnews.com/money/retirement/401ks/articles/new-retirement-account-rules-in-response-to-coronavirus


Waiving Required Minimum Distributions

Here is a potential 2020 tax savings for elderly taxpayers. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed on March 27, 2020, permits taxpayers age 70 and 1/2 or older to elect not to receive their 2020 required minimum distribution from their IRA. If they have already received the distribution, they have 60 days from the date of the distribution to return the funds to their IRA. Taxpayers interested in this possibility should log in to their account to effect the change. 

https://money.usnews.com/money/retirement/401ks/articles/new-retirement-account-rules-in-response-to-coronavirus


The IRS and the Virus

By William R. Stromsem, J.D., CPA

Assistant Professor of Accountancy, George Washington University School of Business

 

As practitioners are coping with closed offices and trying to conduct business online, the IRS has similar problems with COVID-19. The IRS has had to close its offices in many locations and in certain service centers. For offices that are open, some staff have been told not to come to work to maintain social distancing requirements. Those who are at home are working remotely to the extent they can.

 

For information on IRS operations during the crisis, go to https://www.irs.gov/newsroom/irs-operations-during-covid-19-mission-critical-functions-continue.

 

Return Processing—Refunds for returns that were filed on paper are delayed indefinitely, but the IRS is routinely processing refunds on returns that were filed electronically. With the extended due dates, return processing centers have generally been able to keep up with fewer personnel at service centers. Most filed returns claim refunds, with taxes-due returns being held back for the extended payment date.

 

Correspondence with the IRS—With most employees not in the office, paper correspondence is languishing in in-boxes of empty desks or even mailrooms, so practitioners will have to wait for responses. If there is no one to receive mail in offices that are closed, it may be returned to the sender. Even when workers can return to their offices, long delays should be expected. For emails, teleworkers can access office emails, but unless you know who to address them to, you may be taking a shot in the dark trying to reach the right person.

 

Practitioner Services—Practitioner Priority Services and e-Services help line are closed until conditions improve. Transcripts can be received electronically for practitioners with e-Services, but paper transcripts are not available.  

 

Telephone Services for Taxpayers and Practitioners—Phone lines for both taxpayers and practitioners are not staffed at this time. Automated lines are still operating for taxpayer information. Even if you know who to contact by telephone, calls usually go directly to voicemail, with sometimes long delays in responding.  

 

Residency Certifications—The IRS has suspended servicing residency certificates for the few employers who are hiring at this time.  

 

Audits—New field and office audits have stopped, and examinations that were in process before the IRS shut down are being handled online or by email to the extent possible, with no in-person meetings. Correspondence audits are commonly staffed in “boiler rooms,” so staff has been cut back to observe social distancing. This means that fewer correspondence audits are being initiated because personnel are not available to process them if a taxpayer disagrees. They may be making taxpayer contact but are being sensitive to the situation, and some current cases are being handled by phone or virtually.

 

Appeals—Mostly on hold, with no in-person appeals, but most appeals officers can work remotely. Appeals employees will continue to work their cases by phone or videoconference.

 

Collections—Collections have basically stopped, including those for back taxes in the automated collection system. Installment payments under existing agreements have been suspended, as have levies and liens. Referrals of cases to private debt collectors has been halted. Taxpayers are being given more time to negotiate offers in compromise. Again, they are being sensitive to the situation.

 

30- and 90-Day Letters and the Tax Court—For the most part, 30-day letters are not being sent because audits have stopped. New 90-day letters are not being sent, and for those that were sent before the IRS shut down, the IRS has extended the due date until July 15. Although the 90-day requirement is statutory, this IRS deferral shows great common sense because the tax courts are currently closed, with mail stacking up and no hand delivery available. The tax court may take some time to get back up to speed.

 

Statute of Limitations—The statute of limitations still runs, but the IRS has indicated that it will work with taxpayers or representatives to obtain an extension.

 

Exempt Orgs—Paper information returns for exempt organizations (Form 990 series) submitted after March 26, 2020, are not being processed because the service centers are closed. Applications for exempt status are being processed if they were filed electronically, but paper applications are on hold.

 

Almost All Due Dates Extended—The Texas Society of CPAs has written letters to encourage due date extensions for almost all types of returns and payments because of the impossibility of meeting with clients and conducting normal business. The IRS has generally been very reasonable in responding to our requests. Information on extensions and TXCPA’s efforts have been published separately to members.

 

Economic Impact Payments—The IRS has cleared the decks to process these payments to taxpayers expeditiously, with some checks starting to arrive in mid-April.

 

What does it all mean? Like everything else in our COVID-19 world, this depends on when the virus subsides so that the IRS can get back to work. When that happens, we can be certain that there will be major work backlogs in all areas, with substantial delays and with some work just being allowed to lapse. Audit rates will be lower than ever. Collections will be down. The deficit will jump with economic stimulus payments and delayed tax revenue. Practitioners will be frustrated in trying to work with IRS employees who lack time to respond thoughtfully to their issues. And if the virus does not subside soon, there is the possibility of further extended due dates.


IRS to Accept Digital Signatures and Receive and Send Documents Electronically

To help taxpayers and the tax professional community during this COVID-19 period, effective immediately, the IRS will begin temporarily accepting images of signatures (scanned or photographed) and digital signatures on documents related to the determination or collection of tax liability.

 

In addition, the IRS is allowing IRS employees to accept documents via email and to transmit documents to taxpayers using SecureZip or other established secured messaging systems.

 

This effort, described in an internal IRS memo, is in response to the coronavirus situation maximizing the ability of the IRS to execute on mission-critical duties where employees, taxpayers and their representatives are working from alternate, remote locations outside their office.

 

The taxpayer or representative must include a statement, either in the form of an attached cover letter or within the body of the email, saying to the effect:

  • “The attached [name of document] includes [name of taxpayer]’s valid signature and the taxpayer intends to transmit the attached document to the IRS.”
  • The choice to transmit documents electronically is solely that of the taxpayer.

 

The limited categories of documents in the scope of this effort include:

  • extensions of statute of limitations on assessment or collection,
  • waivers of statutory notices of deficiency and consents to assessment,
  • agreements to specific tax matters or tax liabilities (closing agreements), and
  • any other statement or form needing the signature of a taxpayer or representative traditionally collected by IRS personnel outside of standard filing procedures (for example, a case specific Power of Attorney).

 

The IRS is continuing to review standards for e-signing other documents and invites suggestions and comments as it pursues additional efforts designed to lessen the burden on taxpayers and professionals during this period.

https://assets.kpmg/content/dam/kpmg/us/pdf/2020/03/tnf-digital-image-signature-march31-2020.pdf