IRS Update Regarding Form 8863 Delay

Filers who need to attach Form 8863 used to claim the American Opportunity Tax Credit and the Lifetime Learning Credit to their tax return can prepare their return now but must wait to submit it in mid-February.
This applies to paper and electronic Forms 8863.

What you need to know:

• If the IRS received an electronic or paper tax return with a Form 8863 attached prior to Jan. 27, the IRS will hold it and push it through as soon as they are able to process Form 8863 in mid-February. Taxpayers/tax professionals do not need to take any additional action at this time.
• If you submitted an electronic tax return with a Form 8863 attached on Jan. 27 or later and the transmitter/taxpayer received a reject notification from the IRS tell the taxpayer they don't need to take any additional action. Tell them you will hold their return and resubmit it to the IRS as soon IRS is able to process it.
• If the IRS received a paper or e-filed F1040/1040A return with F8863 attached before Jan. 27, Where's My Refund will show the taxpayer that their return has been received. However, progress to the next phase: Refund Approved, will not occur before mid-February when the IRS can begin processing these returns. So taxpayers will not be given a refund date during this waiting period. Reassure taxpayers that this is expected due to the delayed processing of Forms 8863 and they do not need to contact the IRS about their return or take any other action.
• If the IRS received a paper F1040/1040A return with Form 8863 attached on Jan. 27 or later, the return will be held and will not show up on “Where's My Refund” until the IRS can begin processing Forms 8863. The taxpayer does not need to contact the IRS about their return or take any other action.
• If the IRS received an e-filed F1040/1040A with Form 8863 attached will debit payments be processed as scheduled for the F1040/1040A returns in suspense? Yes, since payments are processed separately from the returns (in paper and electronic) suspending the return will not interrupt the payment transaction. Payments should be debited as scheduled or processed as received.
• The IRS successfully opened the tax season for most taxpayers. The Jan. 30 opening includes people claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction. Forms that will be able to be filed later are listed on IRS.gov.

Updated information will be as it becomes available.

IRS Announces Delay in Form 8863 (Education Credits - American Opportunity and Lifetime Learning Credits)

The IRS has announced that they will not be accepting Form 8863 until late Feburary to early March 2013. This hold is industry-wide and will impact all transmitters and all tax preparers.

What you need to know:

• The IRS announced they will NOT be accepting Form 8863
• The hold is industry-wide direction from the IRS
• Form 8863 will be accepted by the IRS in the approximate timeframe: late February to early March 2013

“Like” us on Facebook at www.facebook.com/CrossLinkTax to receive the latest industry updates on this and other relevant topics.

Next Steps:

1. We are working with the IRS to determine the status of returns that have already been submitted with From 8863 and received acknowledgements. CrossLink will continue to keep you updated.
2. CrossLink has “blocked” Form 8863 until such time that the IRS is accepting this form. You CAN STILL SUBMIT RETURNS!
3. You will need to file an amended return once the IRS begins accepting Form 8863.

IRS To Accept Returns Claiming Education Credits by Mid-February

IR-2013-10, Jan. 28, 2013

WASHINGTON - As preparations continue for the Jan. 30 opening of the 2013 filing season for most taxpayers, the Internal Revenue Service announced today that processing of tax returns claiming education credits will begin by the middle of February.

Taxpayers using Form 8863, Education Credits, can begin filing their tax returns after the IRS updates its processing systems. Form 8863 is used to claim two higher education credits -- the American Opportunity Tax Credit and the Lifetime Learning Credit.

The IRS emphasized that the delayed start will have no impact on taxpayers claiming other education-related tax benefits, such as the tuition and fees deduction and the student loan interest deduction. People otherwise able to file and claiming these benefits can start filing Jan. 30.

As it does every year, the IRS reviews and tests its systems in advance of the opening of the tax season to protect taxpayers from processing errors and refund delays. The IRS discovered during testing that programming modifications are needed to accurately process Forms 8863. Filers who are otherwise able to file but use the Form 8863 will be able to file by mid-February. No action needs to be taken by the taxpayer or their tax professional. Typically through the mid-February period, about 3 million tax returns include Form 8863, less than a quarter of those filed during the year.

The IRS remains on track to open the tax season on Jan. 30 for most taxpayers. The Jan. 30 opening includes people claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction. Forms that will be able to be filed later are listed on IRS.gov.

Updated information will be posted on IRS.gov.

As written in IRS Press Release IR-2013-10 on 1/23/2013.

BREAKING: IRS Return Preparer Program Has Been Suspended

IRS Return Preparer Program Has Been Suspended

On Friday, January 18, the US District Court for the District of Columbia struck down the IRS’s registered tax return preparer program. They also enjoined the IRS from enforcing the return preparer regulations regarding the testing and continuing education requirements for tax return preparers.

The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents (EAs), enrolled retirement plan agents, or enrolled actuaries.

As a result of this ruling, the IRS has suspended all requirements for the registration, testing, and continuing education for registered tax return preparers effective immediately.

Therefore the IRS has:

• Stopped accepting renewals of PTINs
• Stopped accepting applications for new PTINs
• Will no longer allow preparers to schedule an appointment for the RTRP exam
• Made the continuing education requirement voluntary

To read more see the January 22 IRS Statement on Court Ruling Related to Return Preparers on the IRS website.

As soon as more information becomes available we will let you know.

NEWS UPDATE: IRS Statement on Court Ruling Related to Return Preparers

The IRS has released a statement regarding the Registered Tax Return Preparer court ruling from Friday, January 18th.

"As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program. It is considering how best to address the court’s order and will take further action shortly. Please continue to check this site as additional information becomes available."

As posted by the IRS at www.irs.gov on January 22, 2013

2013 EITC Awareness Day: 1 in 5 eligible do not claim the credit

Did you know that one in every five eligible people do not claim the Earned Income Tax Credit? That adds up to millions of taxpayers leaving up to $5,891 on the table.

According to the IRS, National Earned Income Tax Awareness Day is a one-day media event designed to reach out to a broad range of taxpayers who may be eligible and segments that typically under-claim.

This year's IRS EITC Awareness Day is one week away on Friday, January 25th, 2013. You can play a critical support role that will benefit your customers and ultimately your business.

The IRS suggests the following actions that your business can take:

• Issue a news release
• Send a letter to the editor of your local paper
• Appear on radio talk programs
• Conduct news interviews
• Tweet
• Blog
• ... and more

Follow the link below to see a list of key talking points and other resources.

http://www.eitc.irs.gov/ptoolkit/awarenessday/

IRS Update: Things to Know for the Current Tax Year

Recently Passed American Taxpayer Relief Act Details

We have added detailed information on the American Taxpayer Relief Act of 2012 that was signed into law on January 2, 2013 to the CrossLink Tax Resource Center.

The information is broken down into the following categories:

• Individual and business provisions that were extended for 2012 and 2013 — This section explains which of the provisions that expired at the end of 2011 were extended and continue to apply to Tax Year 2012 such as:
• Educator expense deduction
• Sales tax itemized deduction
• Click here to read more
• Extended and new provisions that begin in 2013 — This section explains which of the provisions that were set to expire at the end of 2012 were extended permanently, for five years, or one year. It also includes an explanation of the new provisions such as:
• New Tax Rate for high income taxpayers
• New 20% capital gains rate for high income taxpayers
• Click here to read more
• Changes to the Adoption Credit that began in 2012

Click here to read more about which provisions were extended for Tax Year 2012 and what the coming changes are for 2013 on the Things To Know for the Current Tax Year page in the CrossLink Tax Resource Center.

IRS Announcement: IRS Delays Start of the 2013 Tax Season

"January 8, 2013

WASHINGTON — Following the January tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), the Internal Revenue Service announced today it plans to open the 2013 filing season and begin processing individual income tax returns on Jan. 30.

The IRS will begin accepting tax returns on that date after updating forms and completing programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted Jan. 2. The announcement means that the vast majority of tax filers -- more than 120 million households -- should be able to start filing tax returns starting Jan 30.

The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.

“We have worked hard to open tax season as soon as possible,” IRS Acting Commissioner Steven T. Miller said. “This date ensures we have the time we need to update and test our processing systems.”

The IRS will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit.

“The best option for taxpayers is to file electronically,” Miller said.

The opening of the filing season follows passage by Congress of an extensive set of tax changes in ATRA on Jan. 1, 2013, with many affecting tax returns for 2012. While the IRS worked to anticipate the late tax law changes as much as possible, the final law required that the IRS update forms and instructions as well as make critical processing system adjustments before it can begin accepting tax returns.

The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.

Who Can File Starting Jan. 30?
The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Who Can’t File Until Later?
There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.

The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances.

Updated information will be posted on IRS.gov."

(The above content is as it appeared in an official IRS press release distributed on January 8th, 2013.)

IRS Announcement: Modernized E-File (MeF) Delay for Some 2012 Business Returns

"The IRS continues to review the details and impact of the new tax law signed this week, but a number of these provisions will require changing forms and updating our processing systems involving non-1040 business returns. As a result, electronic filing of many business returns will be delayed while we update forms, related instructions and corresponding systems. This delay is not expected to significantly impact business filers since most of these returns with reporting periods ending Dec. 31, 2012, are not due until March or April 2013, depending on the form.

The IRS will not accept these business tax returns for processing through MeF at this time*:

• All 2012 tax year business forms (other than Forms 2290 and 7004)
• Form 8849, Schedule 3 - Certain Fuel Mixtures and the Alternative Fuel Credit
• Form 990 series (Tax Exempt tax returns)

Beginning Jan. 7, 2013, the IRS will accept these forms for processing through MeF:

• Fiscal year returns with a year ending prior to 12/31/2012
• All 2011 tax year and 2012 fiscal year business returns, including Form 1120 series
• 2012 tax year Form 2290, Heavy Highway Vehicle Use Tax Return
• 2012 tax year Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns

We will share additional information on when we can accept the remaining 2012 tax year business forms as soon as it becomes available. More information will also be available soon regarding 2012 individual 1040 tax returns impacted by this week’s legislation.

* Note: Business tax returns not processable through MeF at this time will also not be processed if submitted on paper."

(The above content is as it appeared in an official IRS Quick Alerts e-mail distributed on January 4th, 2013.)

IRS Update: Tax Relief Extension Act

Expired 2012 Federal Tax Provisions Extended by the Tax Relief Extension Act

Late on January 1, 2013, Congress passed HR 8 (Tax Relief Extension Act) which extended almost all of the Federal tax provisions that had expired at the end of 2011 and 2012.

Although the Tax Relief Extension Act contains many individual, business, and energy tax provisions that were extended or modified, the following are the ones that will have the most impact on taxpayers filing their 2012 Federal returns this coming filing season.

Alternative Minimum Tax (AMT)
The Alternative Minimum Tax (AMT) provisions were permanently extended as follows:

• The exemption amount will be indexed for inflation each year. For 2012 the exemption amounts are:
• Single/Head of Household: $50,600
• Married Filing Joint: $78,750
• Married Filing Separate: $39,375
• All personal nonrefundable credits may be used in calculating the AMT. This also means that the order these credits are taken against regular tax will remain as they currently are.

Individual and Business Provisions
The following individual and business provisions were extended and will apply to Tax Years 2012 and 2013:

• $250 Educator Expense Deduction – Form 1040, line 23
• Tuition and Fees Deduction – Form 8917 and Form 1040, line 34
• Read more

Section 179 Expense
The following Section 179 provisions were extended and will apply to tax years 2012 and 2013:

• Maximum deduction: $500,000
• Maximum cost before the limit is reduced: $2,000,000
• Read more

Click here to read the entire CrossLink Tax Update that includes further information on the Tax Relief Extension Act and Federal tax provisions that were and were not extended.