IRS Resources for the Earned Income Tax Credit

As the 2014 filing season draws near, now is a good time to be reminded about the IRS EITC Central website and what valuable information it has to offer preparers that are completing returns claiming the Earned Income Tax Credit.

Here is an example of some of the useful information it contains:

• Frequently Asked Preparer Questions
  These frequently asked preparer questions have been categorized into eight areas to help the preparer narrow down what they are interested in. The categories are Age, Relationship and Residency, Basic Qualifications, Due Diligence, Earned Income, Divorced and Separated Parents, Fraud, Qualifying Child of More than One Person, and Other EITC related questions.
  When you click on a topic area it will display the preparer question and the IRS answer. As part of the answer the IRS has highlighted the newest due diligence requirements that were finalized at the end of 2011.
• Preparer Due Diligence
  This section provides links to IRS EITC due diligence law and regulation explanation, the importance of Form 8867 (Paid Preparer's Earned Income Tax Checklist), the consequences of filing incorrect EITC returns, and other resources for the preparer to review that are related to their due diligence requirements when preparing returns that claim the Earned Income Tax Credit.
• IRS EITC Preparer Compliance Activities
  Included in this category is information about what the IRS is doing to educate preparers on the most common EITC errors and what compliance activities the IRS is performing.
• Hot Topics for Return Preparers
  Hot Topics provides preparers with information on what the IRS is presently doing in the EITC area. Here, you will find the latest information about the IRS educational letters and visits that take place each fall, information about due diligence audits that take place each fall, and more.
• EITC Training and Videos
  The IRS provides the following training programs and videos to help educate preparers on what their earned income tax credit due diligence requirements are:
• IRS EITC Due Diligence Training Module
• Due Diligence Videos
• IRS EITC Schedule C and Record Reconstruction Training
• Other Educational Opportunities

2014 Tax Season to Open January 31

The IRS has officially announced that individual tax returns can begin to be electronically filed on Friday, January 31, 2014. The IRS stated in a press release:

"The new opening date for individuals to file their 2013 tax returns will allow the IRS adequate time to program and test its tax processing systems. The annual process for updating IRS systems saw significant delays in October following the 16-day federal government closure."

Read the full press release here: http://www.irs.gov/uac/Newsroom/2014-Tax-Season-to-Open-Jan.-31;-efile-and-Free-File-Can-Speed-Refunds.

CrossLink Business is Live and Available for Download

We are happy to announce that CrossLink Business is live and available for download! This year’s software includes several key updates including:

• 100% integration with CrossLink 1040 
• States to be released for CrossLink Business this coming tax season include: CA, FL, GA, IL, NY, TN, NJ, MS, AL, SC, MI, LA, NC, PA, AZ, OH, TX
• Import financial data from QuickBooks
• Year-to-year transfer of data
• Carryover K-1 information from CrossLink Business to CrossLink 1040

To learn more about CrossLink Business contact your CrossLink Team, or visit https://www.crosslinktax.com/products/crosslink_business.asp.

CrossLink 1040 is Live and Available for Download!

We are happy to notify you that CrossLink 1040 Professional Tax Software for Tax Year 2013 is LIVE and available for download! Go to the CrossLink Customer Portal to download it today.

Contact a CrossLink Team Member today to learn more.

IRS Resource to Help You Understand IRS Notices and Letters

The IRS website contains a helpful page called Understanding Your IRS Notice or Letter. This page gives the taxpayer and/or tax preparer valuable information about the different notices and letters that the IRS may send to the taxpayer regarding a federal return that they filed with the IRS.

Here is what you will find:

• Listing and link to some of the more common IRS notices with information on:
• What the taxpayer needs to do
• What the taxpayer may want to do
• Answers to common questions
• Tips for next year
• Example of what the letter looks like
• Listing and link for some of the letters a taxpayer may receive which provides information on:
• What the letter is telling the taxpayer
• What the taxpayer needs to do
• What happens if the taxpayer takes no action
• Who the taxpayer should contact if they have questions
• A list of eight things every taxpayer should know if they receive a notice
• How to identify where the number of the notice is located on the notice
• Link to a list of other individual filer notices that the IRS may send regarding their tax return
• Link to a list of other business filer notices that the IRS may send a business regarding their tax return

Reminder: Last days to file Tax Year 2012 returns

REMINDER: The final days to file your 2012 individual and business returns are:

Individual – November 23, 2013
Business – December 26, 2013

Also, remember that if any rejects are not resolved by the above dates you will have to file the return on paper.

Reminder to Renew Your PTIN for 2014

Last week the IRS began accepting renewals and new applications for PTINs for calendar year 2014.

All paid preparers of federal tax returns must renew their PTINs for 2014. This must be done before preparing 
2013 returns.

Although the US District Court enjoined the IRS from enforcing the oversight of return preparers who are not EAs, CPAs, or attorneys, they did not strike down the requirement that all paid federal tax return preparers register with the IRS and obtain a PTIN.

To renew your PTIN, go to the IRS Tax Professional PTIN System page on the IRS website, log onto your IRS PTIN account, fill out the information requested, and pay the $63 renewal fee.

For new paid preparers, the fee is $64.25.

Failure to renew or obtain a PTIN could result in being penalized under IRS Code § 6695.

Return preparers do not have to take a competency test or take continuing education for 2014. This is because the IRS is still in the process of appealing the US District Court's decision enjoining the IRS from oversight of return preparers.

Health Insurance Sign-up Date to Avoid Penalty Extended

The last day to sign up for health insurance and avoid an additional tax penalty has been extended to coincide with the open enrollment end date of March 31, 2014.  This was announced by the Obama administration on October 28, 2013.

Before this change, a person had to enroll by February 15, 2014 in order to ensure that their insurance went into effect before March 31, 2014 and avoid the possibility of being subject to a penalty for not having insurance for at least nine months out of the year under the Affordable Care Act.

IRS Outreach and Compliance Efforts for Education Credits

As part of a broader strategy to increase oversight on refundable tax credit claims, the IRS has begun to look more closely at claims for the American Opportunity Credit (AOTC) — one of the two education credits on Form 8863. As part of this effort, the IRS is expanding their educational outreach to taxpayers and preparers as well as increasing their scrutiny of returns that are claiming this credit.

Outreach Efforts to Preparers

The IRS has added a new section to their EITC Central website for Other Refundable Credits. One part of this new section is devoted to the AOTC and the Lifetime Learning Education Credit (LLC).

On the What You Need to Know about AOTC and LLC page, the IRS has provided the following to assist return preparers in understanding the American Opportunity and Lifetime Learning Education credits:

• Explaining the eligibility requirements, Form 1098-T, Form 8863, and how to avoid the most common errors related to the American Opportunity Credit.
• Links to relevant publications, forms, and instructions.
• Information on what questions a preparer should ask their customers about refundable credits.
• Education benefit videos.

Compliance Efforts

In an effort to reduce the number of errors that the IRS believes are occurring on returns that are claiming the American Opportunity Credit (AOTC), they have started to do the following:

• Implemented an Automated Questionable Credit Program to more closely review claims for which the AOTC is claimed for a student whose age is not typical of someone attending college before the refund is issued. This is mainly directed to claimants that are under age 13.
• Selecting returns for examination that are claiming the AOTC where the student(s) age is not typical of someone whom attends college.
• Sending educational letters to taxpayers explaining the eligibility requirements for the credit.

For preparers, the IRS will begin to focus their efforts on tax preparers who are preparing 25 or more returns that have claimed the AOTC and where it appears that the preparers have had errors associated with these returns as follows:

• Send educational letters to the preparers explaining the eligibility requirements for the credit.
• Modify the selection process for the Automated Questionable Credit Program to target more taxpayer returns that have been completed by preparers whom the IRS has determined are at high risk for completing inaccurate AOTC claims.

IRS Earned Income Tax Credit Compliance Efforts for Upcoming Filing Season

In a continuing effort to improve Earned Income Tax Credit (EITC) preparer due diligence, the IRS will be performing the following educational and due diligence audit activities this fall and during the 2014 Filing Season.

The IRS continues to use a risk based scoring model to classify preparers of EITC returns. Based on this score, a preparer may be subject to one of the following:

• Warning Compliance Letter 
  The IRS will send approximately 11,000 letters regarding specific errors that they observed on 2012 returns to medium risk preparers prior to the filing season that will include the following:
  • Inform the preparer that they may have submitted inaccurate returns
  • State the primary EITC issues the IRS observed
  • Explain the consequences to the taxpayer and preparer for filing inaccurate EITC returns
  • List what their due diligence requirements are
These letters are designed to help the preparers file more accurate EITC returns in the future. The IRS will be monitoring these preparers as the 2014 Filing Season begins and may do a follow-up with these preparers if they do not see improvement. This action may be a phone call, additional warning letter, or due diligence audit.
See Reaching Out To Preparers on the IRS EITC Central website for more information and to see examples of the letters.
• Educational Visit
  
  This fall, an IRS agent and criminal investigator will conduct educational visits to preparers whom the IRS believes have filed EITC claims with a high chance of error. The goal of these visits is to help preparers understand what the errors were and how to avoid them. They will also discuss the consequences of filing inaccurate returns and what their due diligence requirements are.
  No penalties are assessed during these visits; however, the IRS will be closely monitoring EITC returns filed by these preparers during the 2014 Filing Season. If the IRS does not see improvement the IRS will conduct a due diligence audit during the filing season.
  See Visiting Preparers Filing Highly Questionable Returns on the IRS EITC Central website for what occurs during these visits.
• Due Diligence Audits
  
  The IRS will again be conducting around 1,000 due diligence audits with 700 standard audits performed during the fall of 2013 based on 2012 EITC returns, and 300 real-time audits will be performed during the filing season based on 2013 EITC returns.
  The IRS conducts a due diligence audit on preparers whom they consider to be filing a large number of highly questionable EITC claims.
  See Auditing for Due Diligence Compliance on the IRS EITC Central website for more information on what occurs during a EITC due diligence audit.
  Since a Real-Time Due Diligence audit has some differences from the standard due diligence audit, see the Real Time EITC Preparer Pilot page on EITC Central website for what these differences are.

To learn more about the IRS EITC compliance program see the following on the IRS EITC website:

• EITC Preparer Compliance — Targeted, Tailored and Tiered
• EITC Preparer Due Diligence

IRS Change for Filing Federal Individual Returns for Same-Sex Couples

The IRS announced on August 29, 2013 that all legal same-sex married couples will be treated as married for Federal tax purposes (including income and gift and estate taxes) as of September 16, 2013.

The ruling contained in IRS Revenue Ruling 2013-17 implements the Federal tax aspects of the June 26, 2013 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

The new rule applies to legally married same sex couples regardless of whether they reside in a State that recognizes same-sex marriage or in a State that does not recognize the validity of same-sex marriages.

It does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.

For 2013 and beyond, same sex married couples must file their individual Federal return using either a filing status of married filing jointly or married filing separately. For 2012, this applies only if their original return for 2012 was filed on or after September 16, 2013. If the 2012 return was filed before September 16, 2013, they may choose (but are not required) to amend their 2012 Federal return.

This ruling is also retroactive to any prior open tax years if they were legally married during those years. As a result, they may file an amended return for Tax Years 2010, 2011, or 2012.

This ruling does not affect how a State individual return is filed if the State does not recognize the validity of same-sex marriages. We will continue to provide updates as more information on what filing status is available to same-sex married couples for State individual returns is released.

For more information see the following on the IRS website:

• IRS Announcement of August 29, 2013
• IRS Revenue Ruling 2013-17
• FAQs for Same-Sex Couples
• FAQs for Registered Domestic Partners and Individuals in Civil Unions

Additional 2013 Federal Tax Changes

In order to reduce taxpayer burden, the IRS has added the following new options to Schedule C and Schedule D:

Home Office Deduction — New Simplified Method
This new simplified method has been added to Schedule C and may be used by taxpayers that use 300 square feet or less of their home for business purposes.

Here are highlights of the simplified method:

• Uses flat deduction amount of $5 per square foot to calculate the expenses for business use of your home on Schedule C, line 30.
• If simplified option is used, then Form 8829 (Expenses for Business Use of Your Home) does not need to be completed.
• Allowable mortgage interest and property taxes may be claimed in full on Schedule A if the simplified method is used.
• A depreciation deduction may not be claimed for years that the simplified option is used.
• If the home office expense that is calculated using the simplified method is limited because it exceeds the business gross income, the excess may not be carried forward to a future year. Under the regular method any excess can be carried forward.
• You may choose to use either the simplified method or the regular method (complete Form 8829) for any taxable year. This means you can switch back and forth each year.

For more details see the Simplified Option for Home Office Deduction.

Aggregate Transaction Reporting on Schedule D
(Capital Gains and Losses)
For stock sales, if the basis that is reported on the Form 1099-B (Proceeds From Broker and Barter Exchange Transactions) is correct, then the totals of all of these transactions may be reported directly on Schedule D on new lines 1a or 8a instead of completing Form 8949 (Sales and Other Dispositions of Capital Assets).

Individual Requirement to Have Insurance and State Insurance Exchanges

As we near the open enrollment period for the individual insurance requirement, now is the time to become more familiar with what people without health insurance will need to do when October 1, 2013 arrives. Below are the highlights of what the Affordable Care Act requirements are for obtaining health insurance, how the enrollment process on a State Exchange will operate, and how the premium assistance subsidy will work.

Individual Requirement to Obtain Health Insurance

Everyone will be required to have health insurance that meets a minimum level of benefits beginning on January 1, 2014.

If a person does not obtain health insurance for 2014, they will be required to pay an additional tax when they file their 2014 Federal income tax return. The additional tax for 2014 will be calculated as the greater of:

• 1% of their income that exceeds their filing threshold based on their filing status; or
• $95 for the taxpayer and if applicable, the spouse and dependents not to exceed $285 for 2014. The additional tax for dependents under age 18 is $47.50 for 2014.

For a complete explanation of how the additional tax will be calculated, see the Individual Penalty for Not Having Health Insurance page on the CrossLink website.

State Exchanges and Premium Assistance Subsidy

People who do not have health insurance will be able to obtain it at the State Exchange located in their State of residence. The State Exchange will also determine the potential amount of premium assistance subsidy that individuals qualify for.

The subsidy is designed to help people pay for their 2014 health insurance premiums. It is essentially a pre-payment of the premium tax credit that will be calculated when they file their 2014 Federal income tax return.

Here is how the State Exchange will work:

• Most people will sign up with the exchange via the internet by creating an account and filling out an online application on their State Exchange's website.
• The Exchange will use the information from the application and their income from their 2012 Federal return to first determine if they are eligible for coverage under a government health insurance program such as Medicaid.
• If not eligible for a government program, the exchange will determine what their subsidy is.
• Finally, the person applying may select an insurance plan that is offered by their State Exchange.

For more information on State Exchanges, see the following pages on the Federal government's Healthcare.gov website:

• Welcome to the Marketplace
• Health Insurance Marketplace

Health Insurance Premium Subsidy
The Health Insurance Premium Subsidy is also known as the Advance Premium Tax Credit.

A person is eligible for a subsidy (advance premium tax credit) to help pay for their 2014 health insurance premiums if they obtain their insurance at a State Exchange and their income is between 100% and 400% of the Federal Poverty Line.

It is important to remind people that the subsidy does not pay for the entire premium and the subsidy is paid directly to the insurance company. Individuals must pay a minimum amount of the premium based on where they fall on the Federal Poverty Line.

The minimum amount a person must pay is calculated as a percentage of their income and it ranges from 2%, if they fall between 100% and 133% of the Federal Poverty Line, up to 9.5%, if they fall between 300% and 400% of the Federal Poverty Line.

For a more detailed explanation of how the subsidy is determined, see the Premium Assistance Subsidy page on the CrossLink website.

2013 Federal Tax Changes to Be Aware Of

Itemized Medical Expense Deduction Threshold Percentage Change
As part of the Affordable Care Act, the threshold percentage for when medical expenses are included as an itemized deduction on Schedule A was changed to:

• Taxpayers under 65: 10%
• Taxpayers 65 and older: 7.5%

Basic Changes
Business Mileage Rate for 2013: 56.5 cents per mile

Bonus Depreciation: 50% rate still applies

Capital Gains/Dividends Tax Rate:

• 0% for taxpayers in 10% or 15% tax brackets
• 15% for taxpayers in 25%, 28%, 33%, or 35% tax brackets
• New 20% rate for taxpayers in new 39.6% tax bracket

Standard Deduction

• Single: $6,100
• Married Filing Jointly: $12,200

For a complete listing of the basic yearly changes for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

New Provisions Affecting Higher Income Individuals
Individual Income Tax Rates

• Added new 39.6% rate when the AGI reaches:
• $400,000 - Single
• $450,000 - Married Filing Joint
• $425,000 - Head of Household
• $225,000 - Married Filing Separate
• The 10%, 15%, 25%, 28%, 33%, and 35% brackets were made permanent

Phase-Out of Itemized Deductions and Personal Exemptions
Beginning in 2013, the taxpayer's itemized deductions and personal exemptions will begin to be reduced when their adjusted gross income (AGI) reaches the following threshold amounts:

• $250,000 - Single
• $300,00 - Married Filing Jointly
• $275,000 - Head of Household
• $150,000 - Married Filing Separately

The reduction in Itemized Deductions will be calculated as the lesser of:

• 3% of the amount over the taxpayer's threshold amount; or
• 80% of the total itemized deductions

Personal exemptions will be reduced by 2% for each $2,500 (or fraction thereof) by which the taxpayer's AGI exceeds the applicable threshold amount.

For a complete listing of what Federal provisions have changed or what extender provisions are still in effect for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

Affordable Care Act Update - Employer Reporting and Penalty Provisions Delayed for One Year

The employer penalty and reporting provisions under the Affordable Care Act have been postponed for one year until 2015. The Administration explained that this delay was necessary in order to simplify the reporting requirements and to give employers more time to adapt their reporting systems and become familiar with the affordability and minimum value standards for the health insurance plans they offer their employees.

This means that for 2014, employers with 50 or more full-time employees will not be subject to a penalty if they do not offer health insurance to their employees, or if they do offer insurance and they fail to meet the affordability and minimum value standards.

Also for 2014, the employer reporting requirements relating to the health insurance an employer offers their employees will be voluntary. The employer reporting requirements will be required beginning in 2015.

It is important to note that this postponement of the employer penalty and reporting provisions does not affect the requirement that all individuals must obtain health insurance for themselves and their family beginning in 2014.

For more information, see the following:

• IRS Notice 2013-45 - Transition Relief for 2014 Under Sec 6055 and 6056 (Information Reporting) and Sec 4980H (Employer Shared Responsibility Provisions)
• July 2nd U.S. Department of Treasury Notes (Continuing to Implement ACA in a Careful, Thoughtful Manner)
• January 2nd White House Blog (We're Listening to Businesses About the Health Care Law)

IRS Update: Affordable Care Act: Employer Minimum Value Standard for Employer Health Insurance Plans

One of the requirements of the Affordable Care Act for a health insurance plan an employer offers their employees is that it meets the minimum value standard. If an employer plan fails to meet the minimum value standard, a large employer (50 or more full time employees) will be assessed a penalty.

The minimum value standard is met if the employer's plan pays 60% or more of the plan's share of the total allowed costs of the benefits provided under the plan.

Minimum value is calculated by dividing the anticipated covered medical spending of essential health benefits (EHB) coverage (for the population covered by a typical self-insured group health plan) by the total anticipated allowed charges for EHB coverage for a typical self-insured group health plan population. Read More

Click here to read the entire CrossLink Tax Update about the Employer Minimum Value Standard for Employer Health Insurance Plans.

Note: Modernized e-File (MeF) Scheduled Downtime - June 2013

This is a reminder that due to the current budget situation, the IRS plans to be closed on June 14, July 5, July 22 and August 30. The MeF system (Production and ATS) will not be available from 10:00 pm ET of the prior day until 9:00 am ET of the following day on these dates. For example, when the closure falls on a Friday, the system will be unavailable from 10:00 pm ET on Thursday until 9:00 am ET on Saturday.

MeF Production & ATS Downtime:
Shutdown is scheduled to begin on Thursday, June 13, 2013 at 10:00 pm ET and end at 9:00 am ET on Saturday, June 15, 2013.

IRS Update: Net Investment Income Tax for High Income Individuals

Beginning in 2013, a new 3.8% additional tax on net investment income will apply when a taxpayer's modified adjusted gross income exceeds the following thresholds:

• $250,000 for Married Filing Joint filers or Qualifying Widow(er)
• $125,000 for Married Filing Separate filers
• $200,000 for taxpayers that file Single or Head of Household

Modified adjusted gross income is defined as the taxpayer's adjusted gross income increased by the net amount of exempt foreign sourced income.

Investment income generally includes interest, dividends, capital gains, rental or royalty income, non-qualified annuities, income from businesses involved in trading financial instruments or commodities, and passive activity business income.

Click here to read the entire CrossLink Tax Update about the new Net Investment Income Tax.

Another tax season is behind us!

Another tax season is behind us!

From everyone at CrossLink, we would like to thank you for another successful tax season! Please make sure to follow us throughout the off-season for the most current CrossLink and tax industry updates in preparation for the 2014 Tax Season.

Follow us:

• Facebook: www.facebook.com/crosslinktax
• Google+: gplus.to/crosslink
• Twitter: @CrossLinkTax

IRS Update: Additional Medicare Tax for High Income Taxpayers

Beginning in 2013, the additional Medicare tax will apply to individuals with wage income, other compensation, and/or self-employment income that exceed the following threshold amounts:

• $250,000 for Married Filing Jointly
• $125,000 for Married Filing Separately
• $200,000 for taxpayers that file Single, Head of Household, or Qualifying Widow(er).

The additional Medicare tax is calculated as 0.9% of the total of wages, other compensation, and self-employment income that is in excess of the taxpayer's threshold amount.

For self-employed taxpayers, the Medicare portion of their self-employment tax will be calculated as follows:

• Net self-employment income up to the taxpayer's threshold amount will be . . . Read more
• Amount over the threshold amount will be . . . Read more

Click here to read the entire CrossLink Tax Update about the additional Medicare tax for high income taxpayers.

3-Month Filing & Payment Extension Announced by IRS After Boston Marathon Bombings

"WASHINGTON — The Internal Revenue Service today announced a three-month tax filing and payment extension to Boston area taxpayers and others affected by Monday’s explosions.

This relief applies to all individual taxpayers who live in Suffolk County, Mass., including the city of Boston. It also includes victims, their families, first responders, others impacted by this tragedy who live outside Suffolk County and taxpayers whose tax preparers were adversely affected.

“Our hearts go out to the people affected by this tragic event,” said IRS Acting Commissioner Steven T. Miller. “We want victims and others affected by this terrible tragedy to have the time they need to finish their individual tax returns.”

Under the relief announced today, the IRS will issue a notice giving eligible taxpayers until July 15, 2013, to file their 2012 returns and pay any taxes normally due April 15. No filing and payment penalties will be due as long as returns are filed and payments are made by July 15, 2013. By law, interest, currently at the annual rate of 3 percent compounded daily, will still apply to any payments made after the April deadline.

The IRS will automatically provide this extension to anyone living in Suffolk County. If you live in Suffolk County, no further action is necessary by taxpayers to obtain this relief. However, eligible taxpayers living outside Suffolk County can claim this relief by calling 1-866-562-5227 starting Tuesday, April 23, and identifying themselves to the IRS before filing a return or making a payment. Eligible taxpayers who receive penalty notices from the IRS can also call this number to have these penalties abated.

Eligible taxpayers who need more time to file their returns may receive an additional extension to Oct. 15, 2013, by filing Form 4868 by July 15, 2013.

Taxpayers with questions unrelated to the Boston tragedy should visit IRS.gov, or contact the regular IRS toll-free number at 1-800-829-1040."

(Source: IRS News Release IR-2013-43 "IRS Announces Three-Month Filing, Payment Extension Following Boston Marathon Explosions")

IRS Update: New IRS Tool to Check Status of Federal Amended Return

Taxpayers now have a way to find the status of their Form 1040X (Amended Tax Return) that they filed for the current year or three prior years via the IRS website. Learn more

They may do this by using the new IRS look-up tool “Where’s My Amended Return?”. Once they have mailed their amended return to the IRS, their status will be available in three weeks.

Click here to read the entire CrossLink Tax Update about the new IRS tool for checking the status of Federal Amended Returns.

Delays in Federal Return Acknowledgements

The IRS just released the following Quick Alert:

IRS QUICK ALERT

April 16, 2013

Due to the significant increase in federal and state submissions transmitted on April 15th, the length of time to create federal acknowledgments and make them available for retrieval is taking longer than expected. The IRS is closely monitoring the acknowledgment rates and is working to close the gap as a top priority.

The majority of state returns are linked to the acceptance of the federal return, so the length of time it takes to make the state return available for state retrieval has also increased. As the federal backlog decreases, the state submissions will then be ready for state pickup.

In the interim, please do not retransmit any submissions awaiting acknowledgment if the IRS has issued a receipt.

We thank you again for your patience and support.

IRS Update: April 15 Filing Deadline Reminders

This is a reminder that the Federal filing deadline for individual returns is this Monday, April 15, 2013.

April 15, 2013 is also the deadline for the following:

• To file an automatic six month extension (Form 4868). Remember the six month extension is for filing the return only. Any tax due must be paid by April 15, 2013 to avoid any penalty and interest.
• First individual estimated tax payment for 2013
• See more deadlines

Also, for returns rejected on April 15, 2013, the return will be considered timely filed if it is retransmitted and accepted by April 20, 2013.

Click here to read the entire CrossLink Tax Update about filing deadline reminders.

Six Tips for Taxpayer Clients with Foreign Income

Here are six tips provided by the IRS for taxpayer clients with foreign income:

1. Report Worldwide Income. The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of Specified Foreign Financial Assets, while others may need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, with the Treasury Department. See Publication 4261, Do You Have a Foreign Financial Account?, for more information.

3. Consider the Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.

4. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $95,100 of their wages and other foreign earned income they received in 2012. See Forms 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion, for more information.

5. Don’t Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.

6. Get Tax Help Outside the U.S. Taxpayers living abroad can get IRS help in four U.S. embassies and consulates. IRS staff at these offices can help with tax filing issues and answer questions about IRS notices and tax bills. The offices also have tax forms and publications. To find the nearest foreign IRS office, taxpayers should visit the IRS.gov website. At the bottom of the home page click on the link labeled ‘Contact Your Local IRS Office.’ Then click on ‘International.’

Additional IRS Resources:

• Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
• Report of Foreign Bank and Financial Accounts (FBAR)
• Publication 4261, Do You Have a Foreign Financial Account?
• Form 8938, Statement of Specified Foreign Financial Assets
• Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts
• Form 2555, Foreign Earned Income
• Form 2555-EZ, Foreign Earned Income Exclusion
• International IRS offices

(Source: adapted from IRS e-mail "IRS Tax Tip 2013-42:  Seven Tips for Taxpayers with Foreign Income")

IRS Update: Safeguarding Taxpayer Data

The IRS requires all tax professionals to implement safeguards to protect taxpayer data. This includes paper data as well as electronic data. Read more

Under IRS Revenue Procedure 2007-40 (rules governing e-file providers and the overall IRS e-file program), Section 5.03 states:

The security of taxpayer accounts and personal information is a top priority for the Service. It is the responsibility of each Authorized IRS e-file Provider to have security systems in place to prevent unauthorized access to taxpayer accounts and personal information by third parties . . . Read more

The IRS has created publications to provide guidance to the tax professional community to help them meet their responsibilities for safeguarding taxpayer data. Read the publications here.

Click here to read the entire CrossLink Tax Update about safeguarding taxpayer data.

IRS Late Payment Penalty Relief for Returns with Delayed Forms

The IRS is providing late payment penalty relief to individuals and businesses that file an extension to file their tax returns. However, the relief only applies to those who owe additional tax because their return includes a form that the IRS did not allow to be filed until after January 2013.

Individuals and businesses can qualify for this relief if they properly file an extension to file their 2012 tax returns. Eligible taxpayers do not need to make any special notation on their extension request; however, they must properly estimate their expected tax liability and pay the estimated amount by the due date of the return. Interest will still apply to tax due after the original due date.

Some examples of returns that qualify for this relief are returns that include the following:

·         Form 4562 (Depreciation and Amortization)

·         Form 4136 (Credit for Federal Tax Paid on Fuels)

·         Form 8863 (Education Credits)

·         Form 3800 (General Business Credit)

·         Form 5695 (Residential Energy Credits)

·         Form 8582 (Passive Activity Loss Limitations)

For a complete listing of all eligible forms see Exhibit 1 of Notice 2013-24

For more information see the March 20, 2013 Relief Available to Many Extension Requesters Claiming Tax Benefits article on the IRS newswire page.