Category Archives: IRS

IRS California Wildfires Tax Relief

I feel like almost all of my posts over the past few months have been regarding IRS disaster relief. Here’s one more, from today’s IRS E-News for Tax Professionals.

Victims of wildfires ravaging parts of California now have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today.

This includes an additional filing extension for taxpayers with valid extensions that run out this coming Monday, Oct. 16.

Currently, the IRS is providing relief to seven California counties: Butte, Lake, Mendocino, Napa, Nevada, Sonoma and Yuba. Individuals and businesses in these localities, as well as firefighters and relief workers who live elsewhere, qualify for the extension. The agency will continue to closely monitor this disaster and may provide other relief to these and other affected localities.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Oct. 8, 2017. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes originally due during this period.

This includes the Jan. 16, 2018 deadline for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

A variety of business tax deadlines are also affected, including the Oct. 31 deadline for quarterly payroll and excise tax returns. Calendar-year tax-exempt organizations whose 2016 extensions run out on Nov. 15, 2017 also qualify for the extra time.

In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due after Oct. 8 and before Oct. 23, if the deposits are made by Oct. 23, 2017. Details on available relief can be found on the disaster relief page on IRS.gov.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes firefighters and workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year) or the return for the prior year (2016). See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by these wildfires and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Source: IRS Gives Tax Relief to Victims of California Wildfires; Extension Filers Have Until Jan. 31 to File | Internal Revenue Service

IRS Webinar: Understanding Tax Relief for Victims of Disasters

In today’s IRS e-News for Tax Professionals, the IRS announced a 2-hour webinar — held twice, once on Oct 18 and again on Oct 19 — geared toward helping taxpayers and their preparers understand various tax relief provisions in the code and administrative rulings.

Following the recent natural disasters in various parts of the U.S., this timely web conference will discuss:

  • Statutory Tax Relief for Casualty Victims (Both Individual & Business)
  • Special Rules for Federally Declared Disaster Areas
  • IRS Disaster Assistance Administrative Relief
  • Calculating and Reporting Disaster Area Losses
  • Involuntary Conversions resulting from Disaster Losses
  • Disaster Related Tax Issues: Harvey, Irma & Maria

A live question and answer session will round out the webinar.

Register and Attend:

Oct. 18 – 11:00 a.m. Eastern

Oct. 19 – 11:00 a.m. Eastern

Closed captioning is offered for the Oct. 19 web conference only.

Source: Understanding Tax Relief for Victims of Disasters

IRS – Hurricane Maria Puerto Rico Relief

The IRS has announced Tax Relief for Victims of Hurricane Maria in Puerto Rico, similar to the announcements previously made for Texas and Florida hurricane disasters.

From this week’s National Association of Tax Professionals e-newsletter:

The IRS is offering a recap of key tax relief provisions affecting taxpayers who suffered losses resulting from Hurricanes Harvey, Irma and Maria.

In general, the IRS is now providing relief to individuals and businesses anywhere in Florida, Georgia, Puerto Rico and the Virgin Islands, as well as parts of Texas. Because this relief postpones various tax deadlines, individuals and businesses will have until January 31, 2018, to file any returns and pay any taxes due. Those eligible for the extra time include:

  • Individual filers whose tax-filing extension runs out on October 16, 2017. Because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.
  • Business filers, such as calendar-year partnerships, whose extensions ran out on September 15, 2017.
  • Quarterly estimated tax payments due on September 15, 2017, and Jan. 16, 2018.
  • Quarterly payroll and excise tax returns due on October 31, 2017.
  • Calendar-year tax-exempt organizations whose 2016 extensions run out on November 15, 2017.

A variety of other returns, payments and tax-related actions also qualify for additional time. See the disaster relief page on IRS.gov for details on these and other relief provisions the IRS has offered since these hurricanes began hitting in August.

NSAC Cooperative Learning Network – Upcoming Webinars

The National Society of Accountants for Cooperatives offers some great online learning resources from time-to-time, and in today’s e-newsletter update, a few in particular were listed that caught my attention. In particular, George Benson and Teree Castanias are excellent, knowledgeable presenters, and Don Frederick — himself a legend in the co-op tax world — does a great job introducing the concept of co-op taxation.

Current Cooperative Tax Developments
Thursday, October 19, 2017
11:00 AM EST / 10:00 AM CST / 09:00 AM MST / 08:00 AM PST

George Benson, Attorney, McDermott Will & Emery, LLP
The program will include a review of Section 199 developments, including pending Court cases. If there is anything definite to discuss with respect to tax reform, it will address the potential impact on cooperatives and their members. In addition, the program will review areas where historically there has been controversy between the IRS and cooperatives and discuss their current status.

MORE INFO    REGISTER NOW 

Book vs Tax vs Hybrid Basis of Paying Patronage
Tuesday, November 14, 2017
02:00 PM EST / 01:00 PM CST / 12:00 PM MST / 11:00 AM PST

Teresa (Teree) Castanias, CPA
A cooperative must return the profits of its patronage operation s to the member/patrons based on the business done with the cooperative for the year. But how that income is computed (book, tax or hybrid) will create very different results. How the cooperative addresses this issue can have important financial and member relations implications.

MORE INFO    REGISTER NOW 

Basic Accounting & Auditing for Co-ops Seminar
Tuesday, December 12, 2017
11:00 AM EST / 10:00 AM CST / 09:00 AM MST / 08:00 AM PST

This 4-hour, 4-CPE credit course, is designed for new hires and other employees of cooperatives and firms serving cooperatives that can benefit from training in the unique nature of cooperatives.

Introduction to Cooperatives – Donald Frederick (11:00 am – 12:00 pm
During this presentation we explain the foundation for doing business on a cooperative basis, with special emphasis on the owner-customer role of a co-op’s members. We discuss the rich history of cooperatives in America, the many types of cooperatives in our communities, and conclude with an examination of the benefits of having businesses operate as cooperatives.

Equity Management & Inter-Cooperative Investments – Phil Miller (12:00 pm – 1:00 pm
The course discusses the various types of Cooperative Equity and introduces the concepts of Equity Redemption. It discusses the Components of Inter-Cooperative Investments and why Co-ops so often invest in each other. It covers Balance Sheet and Income Statement Presentation, Timing and Recognition issues, Footnote Disclosures, and Impairment Questions related specifically to Inter-Cooperative Investments.

Lunch (1:00 pm – 1:30 pm
The audio portion of the CLN will be suspended during this time.

Basic Cooperative Taxation – Donald Frederick (1:30 pm – 2:30 pm
During this session we discuss the unique Federal income tax treatment of cooperatives. We focus on how tax law supports equity accumulation by cooperatives, particularly the patronage refund. We conclude by providing a set of tools to facilitate tax planning by cooperatives and their professional advisers.

Co-op GAAP – Phil Miller (2:30 pm – 3:30 pm
The course discusses how all GAAP is applicable to co-ops, but also how some GAAP applies specifically to only co-ops. We will discuss the two single pieces of GAAP that form the basis for Co-op GAAP, plus one piece of GAAP that applies to electric co-ops. We will discuss how NSAC has contributed to the body of Co-op GAAP over the years and will finish with a discussion of the new FASB Codification and how Co-op GAAP is contained within the Codification.

MORE INFO    REGISTER NOW 

The full list of online webinars can be found at the NSAC Cooperative Learning Network.

Reconstructing Records After a Natural Disaster

In the wake of recent hurricanes, the IRS has issued a new Fact Sheet — FS-2017-11. It walks through the process of how to calculate Casualty and Disaster Tax Losses, as well as how to reconstruct records after a natural disaster, such as:

  • Tax records
  • Homes and other real estate
  • Vehicles
  • Personal property
  • Business records

AccountingWeb wrote up a nice summary of the fact sheet, but for the details, see the original at the IRS website: Reconstructing Records After a Natural Disaster or Casualty Loss; IRS Provides Tips to Help Taxpayers | Internal Revenue Service.

IRS Finally Offers Secure Messaging

This. Is. Amazing. In a Herculean effort to drag itself into the 21st Century, the IRS has finally implemented a “secure messaging” service. This means that instead of calling to discuss matters and playing phone tag — or snail mailing and faxing files to them — we can finally send messages and files via a new secure IRS e-mail system!

Now, lest you get too excited — from what I can tell so far, there are some serious limitations:

  • You must be INVITED to participate. Your IRS representative must invite you (the client) and you must register. As long as the accountant has a Power of Attorney on-file for that client, he/she (me!) may use it as well. Under “Tax Preparer Options” there is a “Request Access” button.
  • It will be down for maintenance every Friday from 8-11 pm EST.
  • It does not seem to be an actual portal or shared “space”, so we still have what is my biggest issue: I like to submit audit files in an organized format, whereby there is a folder that corresponds to each of the listed requests on the IRS letter — with documents in each folder that provide the various types of support being requested. (For example, a folder for “Revenue” that has copies of sales receipts, POS end-of-day scans, invoices, etc.; and a folder for “Fixed Assets” that has copies of packing slips, vendor invoices, depreciation schedules, etc.) It doesn’t look like this system will allow you to upload an entire folder structure, the way a portal or document-sharing system does. But I haven’t confirmed this yet.

Check it out for yourselves! This is real!
Welcome to Secure Messaging | Internal Revenue Service

IRS – Hurricane Irma Relief

From today’s National Association of Tax Professionals TaxPro e-newsletter, and Accounting Today‘s Tax Practice e-newsletter, some important announcements from the IRS:

NATP – Tax Relief for Victims of Hurricane Irma
Extended filing and payment deadlines

Hurricane Irma victims in parts of Florida have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments, the IRS announced in IR-2017-150.

This includes an additional filing extension for taxpayers with valid extensions to October 16, and businesses with extensions to September 15. This includes the September 15, 2017, and January 16, 2018, deadlines for making quarterly estimated tax payments. The IRS noted, however, that because individual tax payments related to 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

A variety of business tax deadlines are also affected including the October 31deadline for quarterly payroll and excise tax returns. Businesses with extensions also have the additional time including, among others, calendar-year partnerships whose 2016 extensions run out on September 15, 2017 and calendar-year tax-exempt organizations whose 2016 extensions run out on November 15, 2017. The disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866.562.5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details.

IRS – Hurricane Harvey Relief

From today’s National Association of Tax Professionals TaxPro e-newsletter, and Accounting Today‘s Tax Practice e-newsletter, some important announcements from the IRS:

NATP – Tax Relief for Victims of Hurricane Harvey
Extended filing and payment deadlines

Hurricane Harvey victims in parts of Texas have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments, the IRS announced in IR-2017-135.

This includes an additional filing extension for taxpayers with valid extensions that run out on October 16, and businesses with extensions that run out on September 15. This includes the September 15, 2017 and January 16, 2018deadlines for making quarterly estimated tax payments. The IRS noted, however, that because individual tax payments related to 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866.562.5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details.

 

Accounting Today – IRS loosens rules for retirement plans to lend money to Hurricane Harvey victims

The Internal Revenue Service granted additional relief to victims of Hurricane Harvey on Wednesday by allowing 401(k)s and other employer-sponsored retirement plans to give loans and hardship distributions to aid them without incurring penalties.

The IRS said 401(k) plan participants, along with employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans, can be eligible for the streamlined loan procedures and liberalized hardship distribution rules. While IRA participants are barred from taking out loans, they’re also eligible to receive distributions under the looser procedures.

Retirement plans can provide relief to employees and some members of their families who live or work in disaster area localities affected by Hurricane Harvey and designated for individual assistance by the Federal Emergency Management Agency. Currently, parts of Texas qualify for individual assistance, but the storm is spreading Wednesday to parts of Louisiana as well, and those areas may also eventually qualify. For a complete list of eligible counties, visit https://www.fema.gov/disasters. To qualify for this relief, hardship withdrawals must be made by Jan. 31, 2018.

Under the IRS relief, a retirement plan can allow a victim of Hurricane Harvey to take a hardship distribution or borrow up to the specified statutory limits from a storm victim’s retirement plan. Someone who lives outside the disaster area can also take out a retirement plan loan or hardship distribution if they want to use the money to help a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.

More details are available in Announcement 2017-11 on the relief to victims of Hurricane Harvey, which caused damage to parts of Texas. It permits easier access to victims’ funds held in workplace retirement plans and in IRAs, for the period beginning Aug. 23, 2017, and ending Jan. 31, 2018. Additional information about other tax relief related to Hurricane Harvey can be found on the IRS disaster relief page.

DIY Tax Software Not Always a Good Option

I have a dear friend who used to work as a developer for TurboTax, and I can say from many interviews with him and testing of the software that it technically works fine. There’s no major bug in it as far as I can tell (though it’s a crime that they won’t let you review your forms as you go through the interview, or before submitting them).

The big, glaring issue in my opinion is their marketing, as well as their tax prep interview language, which makes it sound like anyone can do their own taxes. This simply isn’t true.

If you have a non-complex tax situation and your life has not changed significantly from prior years, then by all means, use a DIY program. Side note: I used to like TaxAct best, when Kiplinger owned it, but now H&R Block does, and it’s filled with advertising, promo and pressure to pay more to contact them for extra bells & whistles (review, advice, audit protection, etc.).

But if you have a complex situation or things have changed since the prior year, you really should consult a professional. And when I say a “professional”, I mean make sure that an EA or a CPA is doing your taxes, not just having a high school kid prepare them and have the professional “sign off”.

There have been so many situations — including an unfortunate major audit — where I’ve reviewed client tax returns they prepared themselves using TurboTax and found glaring mistakes. They come to me to figure out what went wrong… and the obvious answer is that they shouldn’t have been doing their own taxes in the first place.

This isn’t an advertisement for my own services — I’m not even accepting new tax clients. This is a serious warning for your own good. Not everyone can do their own taxes. This court case is a great example of why — the defendant blamed the software for “luring him” into claiming deductions. So if you DO decide to do your own taxes and you mess up, keep in mind that the court won’t take “the software made me do it” as a defense.

Source: Why DIY Tax Software is Not a Good Option | AccountingWEB

2017 Professional Tax Software Survey Results

Yet again, Journal of Accountancy has issued results of its annual tax software survey, doing an always-stellar job of breaking down the results into easily-digestible charts and summaries, and going beyond the numbers into what they might mean. No matter what professional tax software package you use, it’s worth a read, and if you’re just starting out as a tax preparer, it’s required material.

They also published a related article on individual product survey responses… you can access the detailed survey responses on each product by clicking that product’s blue-highlighted heading in the article. This is especially helpful to see certain questions that only had a few respondents, so you can take the percentages with a grain of salt.

Source: 2017 tax software survey – Journal of Accountancy