Tax Update: Voluntary Continuing Education Program for Unenrolled Tax Return Preparers

The IRS started a new voluntary program that allows tax return preparers to show the IRS and their customers that they are keeping up with tax law changes and increasing their tax knowledge by completing tax related continuing education courses each year. It is called the Annual Filing Season Program. Preparers who choose to participate will receive a Record of Completion from the IRS, provided that they complete the required hours of continuing education, have an active PTIN, and consent to adhere to specific obligations under Circular 230.

Any preparer who receives a Record of Completion for the 2016 Filing Season will have limited representation rights before the IRS. This means that they will be able to represent their clients, whose returns they have signed, before revenue agents, customer service representatives, and similar IRS employees. All other unenrolled return preparers will have no representation rights and will only be allowed to complete returns and sign them.

Another advantage for tax return preparers who participate in the Annual Filing Season Program is inclusion in the database of tax return preparers on the IRS website.

This is how the program works:

In order to receive an Annual Filing Season Program – Record of Completion for calendar year 2016, most preparers must meet the following requirements by December 31, 2015:

• Complete 18 hours of continuing education which must include:
• A six hour Annual Federal Tax Refresher course that covers filing season issues and federal tax law updates. The course must also include a knowledge-based comprehensive test (that the tax preparer must pass) that is given at the end of the course by the continuing education provider.
• Seven hours of other federal tax law topics
• Two hours of ethics
• Renew their PTIN
• Consent to adhere to specific practice obligations outlined in Circular 230, Section 10.51

All continuing education courses must be taken from an IRS approved CE provider and completed by the end of each calendar year.

Unenrolled preparers who passed the Registered Tax Return Preparer test, are an established participant in a state based return preparer program, are a VITA volunteer, or have met a limited number of other criteria will be considered exempt. This means their continuing education hours requirement will be 15 hours. For more details on which unenrolled preparers are exempt and the details of their requirements, see the Reduced Requirements for Exempt Individuals on the IRS website.

For more information on the IRS Annual Filing Season Program see the following:

• Main Annual Filing Season Program page on the IRS website
• General Requirements
• Chart of Annual Filing Season Program CE Requirements

Tax Update: New Tax Benefit for the Disabled - ABLE Accounts

The Achieving a Better Life Experience (ABLE) Act of 2014 was signed into law in December 2014. This new provision authorizes any state to offer its residents the option of setting up an ABLE account. The ABLE account allows people with disabilities, and their families, the ability to save and pay for disability related expenses.

These accounts are modeled after Section 529 college savings plans. Once a state enacts legislation, a qualified ABLE account may be set up by a taxpayer. The account will then be maintained by the state and managed by a financial institution. Contributions to an ABLE account are not tax deductible for federal income tax purposes. However, the earnings on the account are not taxable either. An eligible individual is limited to one ABLE account.

Key points for ABLE accounts are:

• An individual is eligible for an ABLE account if that person is diagnosed with blindness or a disability prior to their 26th birthday.
• The yearly contribution limit is the amount of the annual federal gift tax exclusion, which is currently $14,000.
• States must either pass legislation that allows ABLE accounts to be set up or contract with another state that offers ABLE accounts.
• Distributions are tax-free as long as they are used to pay qualified disability expenses.
• Beneficiaries of ABLE accounts can save up to $100,000 in the plan without losing Medicaid and Supplemental Security Income benefits.

At the present time, each state’s legislature is considering legislation to allow the setup of ABLE accounts. As of the end of June, here is the status of ABLE legislation in each state:

• Enacted (23): Alabama, Arkansas, Colorado, Connecticut, Delaware, Florida, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia
• Still considering (13): California, Hawaii, Illinois, Iowa, Michigan, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Wisconsin
• Will not consider until 2016 (14): Alaska, Arizona, Georgia, Idaho, Indiana, Kentucky, Maine, Mississippi, New Hampshire, New Mexico, Oklahoma, South Carolina, South Dakota, Wyoming

Later in the year, we will be giving additional updates on the status of the legislation in each state and additional details on ABLE accounts once the regulations are finalized. The IRS has just recently released proposed regulations that will govern ABLE accounts. We will update you when these become final later this year.

For more details on ABLE accounts see the following on the IRS website:

• Tax Benefit for Disability
• Proposed Regulations Offer Guidelines for New State-Sponsored ABLE Accounts for People with Disabilities announcement and details on ABLE accounts
• Proposed IRS Regulations for ABLE Accounts (June 19, 2015)