IRS Update: Change in Income or Family Size During 2014 and the Advanced Premium Tax Credit (Subsidy)

For individuals that received an advanced premium tax credit (subsidy) to help pay for their 2014 health insurance premiums, it is important to report any change in their circumstances (such as in their income or family size) to the Health Insurance Marketplace (Exchange) where they obtained their insurance. This is important because any change in circumstances for an individual can affect the subsidy amount that was calculated when they first signed up for health insurance.

The subsidy is actually an advance of the 2014 premium tax credit which is paid directly to an individual’s health insurance provider each month. This amount will be reconciled with the actual premium tax credit that will be calculated on the individual’s 2014 federal return (which is based on the 2014 income and family size reported on it).

The impact of this reconciliation to the individual is as follows:

• A refundable credit will occur if the actual credit is greater than the subsidy received.
• An additional tax will be due if the subsidy received is greater than the actual credit.
• Read More

Click here to read the entire CrossLink Tax Update that includes further information on changes in income or family size during 2014 and how it affects the advanced premium tax credit subsidy.

IRS UPDATE: Modernized e-File (MeF) Delays Possible today

"Due to a high volume of submissions transmitters can expect delays with most service requests, including retrieving acknowledgements and States retrieving new submissions today."

(Posted at 11:00 a.m., Eastern on 4/15/2014)

Check the status of MeF here:

http://www.irs.gov/uac/Modernized-e-File-%28MeF%29-Status-Page

Status of Federal Tax Provisions Not Applicable for 2012 Tax Returns

As we informed you in May 2012, the “Extender” tax provisions expired at the end of 2011 and, as of right now, they are not applicable to 2012 Federal returns.

At the present time it is not clear when Congress will take action on the expired provisions. Since the Extender provisions are closely tied to “Bush Era Tax Cut” provisions (which expire at the end of 2012) including the automatic budget cuts (Sequestration) and the extension of the debt limit, it appears that the earliest they will be acted upon is late December 2012.

A total of 58 individual and business Federal tax provisions expired at the end of 2011. What follows is a list of the expired or changed provisions that will have the most impact to taxpayers on their 2012 Federal returns if they are not extended.

Provisions no longer applicable for Tax Year 2012 returns:

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

Provisions that changed significantly for Tax Year 2012 returns:

• Alternative Minimum Tax (AMT) exemption amounts revert to what they were in Tax Year 2000
• Maximum Section 179 Deduction amount has been reduced to $139,000 for 2012
• Read more

Click here to read the entire CrossLink Tax Update that includes further information on Federal Tax Provisions not applicable for 2012 tax returns.

IRS Identity Protection PIN

The IRS is expanding the number of taxpayers who will receive an Identity Protection Pin (IP PIN) for the upcoming season. All taxpayers that have had an identity theft indicator applied to their IRS tax account will receive an IP PIN that must be included on their 2012 Federal income tax return. This means that approximately 600,000 taxpayers will receive an IP PIN for the upcoming filing season.

The affected taxpayers will receive their IP PIN in a notice (Notice CP01A) from the IRS in December 2012. This notice will include their 6-digit IP PIN and information on the use of the IP PIN.

If you know that any of your customers have been the victim of identity theft you may want to inform them that they will be receiving this notice in December. They will need to keep it and bring it in with the rest of their tax information when they come to have their 2012 income tax return prepared.

Other changes to the IP PIN program that you need to know:

• If the taxpayer was issued an IP PIN they must include it and have it entered correctly on their 2012 Federal return or the IRS will reject their return. The inclusion of the IP PIN will allow the return to be processed normally and will not delay their refund.
• If the taxpayer loses the notice that includes their IP PIN they can call the IRS Help Desk. Once they have authenticated who they are, they will be issued with a replacement IP PIN.
• Click here to read more.

Click here to read the entire CrossLink Tax Update that includes further information on the IRS Identity Protection PIN.

IRS Update: Latest Information on Requirements for Tax Return Preparers

IRS Competency Testing

Remember that you only have until the end of 2013 to take and pass the IRS Competency Test.

With over 330,000 tax return preparers still needing to take and pass the test it is in your best interest to take the test as soon as possible. At the present time there are plenty of open spots at a Prometric testing site. However, if you wait until this time next year you may have difficulties making an appointment for the test. Read more

PTIN Renewal

A PTIN is good for each calendar year. The time to renew your PTIN for 2013 is approaching. To ensure that your PTIN is valid for 2013 you have from October 15 – December 31, 2012 to renew your PTIN. Read more

Click here to read the entire CrossLink Tax Update that includes further information on Testing and PTIN Renewal Requirements for Tax Return Preparers, as well as information on Continuing Education and Background Checks.

Changes to IRS Form 2848 (Power of Attorney)

The most recent revision (Rev. March 2012) of Form 2848 (Power of Attorney) has some changes that you should be aware of. As a reminder, this is the form that a taxpayer uses to authorize their tax return preparer to represent them before the IRS – usually regarding tax returns for specified years.

Below are the changes to Form 2848:

• In order to represent a married couple on a joint return, both the husband and wife must now complete and submit separate Forms 2848.
• If you wish to have the IRS send copies of all notices and communications to you, the box next to each representative’s name and address must be checked.
• Click here to read more.

Click here to read the entire CrossLink Tax Update that includes further information on the changes to IRS Form 2848 (Power of Attorney).

IRS Update: IRS to Give Greater Scrutiny to Compliance with IRA Rules

The IRS is about to begin a new initiative to go after taxpayers who make excess contributions to their Individual Retirement Arrangement (IRA) account or do not begin to withdraw funds from their traditional IRA account when they reach age 70.

Excess Contributions

Generally, an excess contribution is any amount made to a traditional IRA that exceeds $5,000 ($6,000 if 50 or older) per year. However, a taxpayer’s maximum IRA contribution may be less than this amount because a taxpayer cannot contribute more than their earned income. Click here to read more.

Required Withdrawals from Traditional IRA

Taxpayers with traditional IRAs must begin making withdrawals by April 1 of the year they reach 70. Failure to do so may result in a penalty of 50% on the required distribution.

According to the Treasury Inspector General for Tax Administration, there were approximately 255,000 taxpayers who failed to comply with the withdrawal requirements in 2006 and 2007 – costing the government approximately $174 million.

Click here to read the entire CrossLink Tax Update that includes further information on increased IRS scrutiny for IRA rules compliance.

IRS Update: EITC Warning Letters and Self-Employed Deductibility of Medicare Premiums

IRS Warning Letters for Tax Preparers Who Did Not Submit Form 8867 with EITC Returns

Beginning this filing season the Internal Revenue Service (IRS) requires that any tax return claiming EITC that is completed by a paid preparer must have the Form 8867 (Paid Preparer’s EIC Checklist) attached to it. The failure to comply with this requirement means that the paid preparer is not meeting their due diligence requirements and is therefore subject to a $500 penalty for each tax return that does not have Form 8867 attached to it.

The IRS has begun sending out warning letters to preparers who have submitted Tax Year 2011 EITC tax returns without attaching Form 8867. This letter warns the preparer that they did not meet their due diligence requirements in 2012. The IRS will not assess any penalties for the 2012 Filing Season. Click here to read more.

Self-Employed Taxpayers Can Deduct Medicare Premiums

The IRS Office of Chief Council has advised IRS attorneys that self-employed taxpayers may deduct Medicare premiums when calculating the self-employed health insurance deduction on Form 1040, line 29.

This reverses the IRS stance held before 2010 when the IRS stated that self-employed taxpayers could not include any Medicare premiums in the self-employed health insurance deduction. This decision also expands what the IRS permitted in 2011, allowing self-employed taxpayers to include only Medicare Part B premiums when calculating the self-employed health insurance deduction.

Click here or to read the entire CrossLink Tax Update that includes further information on EITC Warning Letters and Self-Employed Deductibility of Medicare premiums.

IRS Update: Revised IRS Procedures for Issuing ITINs

The IRS has announced that they will no longer accept notarized copies of the 13 acceptable documents that show proof of identity and foreign status when applying for an Individual Taxpayer Identification Number (ITIN) for the remainder of 2012.

The IRS will now only issue an ITIN when the application includes the original of the following documents:

• Passport
• US driver's license
• US military identification card
• National identification card
• Click here to read more.

Each document must be current and contain an expiration date. They also must show your name, photograph, and support your claim of foreign status.

If a certified acceptance agent is used, either original documentation or copies of original documentation certified by the issuing agency must be attached to the ITIN application.

Click here to read the entire CrossLink Tax Update that includes further information on the revised IRS procedures for issuing ITINs.

IRS Update: The Foreign Account Tax Compliance Act and Your Customer

As a reminder, the new reporting requirements under the Foreign Account Tax Compliance Act (FATCA) have been in effect for the past two filing seasons. It is important to understand the FATCA rules so that you can help your customers comply with these reporting requirements.

Below is a brief list of what is considered a foreign financial asset:

• Bank accounts maintained in a foreign bank
• Any interest in a foreign entity
• Click here to read more.

Under FATCA, a taxpayer must file Form 8938 (Statement of Specified Foreign Financial Assets) with their Federal income tax for each year that they meet the following foreign financial asset reporting thresholds:

• Foreign financial assets of more than $50,000 ($100,000 for joint taxpayers) on the last day of the year; or
• More than $75,000 ($150,000 for joint taxpayers) at any time during the year.

The penalty for not filing Form 8938 when it is required is a $10,000 fine. There is also an additional penalty of $10,000 per month (maximum of $50,000) if Form 8938 is not filed within 90 days after the IRS mails the taxpayer a notice of failure to file.

Click here to read the entire CrossLink Tax Update that includes further information on the Foreign Account Tax Compliance Act and how it affects your customers.

IRS Update: Who is a Supervised Preparer?

How is a supervised preparer different from a registered tax return preparer?

A supervised preparer:

• Must obtain a PTIN
• Does not have to pass the competency test
• Does not have to meet the yearly continuing education requirements

Who is considered to be a Supervised Preparer?

Under IRS Notice 2011-6 a Supervised Preparer is an individual who is:

• Employed by an attorney or CPA firm; or
• Employed by other recognized firms that are at least 80% owned by attorneys, CPAs or enrolled agents.
• Click here to read more

Click here to read the entire CrossLink Tax Update that includes further information on how a Supervised Preparer is different from a Registered Tax Return Preparer.

IRS Update: IRS “Fresh Start” Initiative and Changes to IRS Offer-in-Compromise Program

As part of their continuing “Fresh Start” initiative, the IRS has announced that they will be offering more flexible terms to its Offer-in-Compromise (OIC) program. This will enable some of the most financially distressed taxpayers to resolve their tax problems more quickly.

The IRS has made the following changes to the OIC program to more closely reflect real-world situations:

• When calculating a taxpayer’s reasonable collection period, it will now look at future income as follows:
• Offers paid in 5 or fewer months: 1 year (down from 4 years)
• Offers paid in 6 to 24 months: 2 years (down from 5 years)
• Allowing taxpayers to pay their student loans
• Click here to read more

The IRS “Fresh Start” Initiative began in 2008 and has included the following:

• In 2008: Lien relief for taxpayers trying to refinance or sell a home
• In 2009: New flexibility for taxpayers facing payment or collection problems
• Click here to read more

Click here to read the entire CrossLink Tax Update that includes further information regarding the IRS "Fresh Start" Initiative and Changes to IRS Offer-in-Compromise Program.

IRS Update: Federal Tax Provisions Not Applicable for 2012 Tax Returns

As we move towards the 2013 Filing Season you will need to keep an eye out on what Congress does with regard to the “Extender” tax provisions that expired at the end of 2011.

Here are two lists of the provisions that will have the most impact on individual Tax Year 2012 Federal returns.

Provisions that are no longer applicable for Tax Year 2012 Federal returns:

• $250 Educator Expense Deduction – Form 1040, line 23
• Tuition and Fees Deduction – Form 8917
• Itemized Deduction for Sales Tax
• All personal nonrefundable tax credits allowed when calculating Alternative Minimum Tax
• Click here to read more

Provisions that changed significantly for Tax Year 2012 returns:

• Alternative Minimum Tax (AMT) exemption amounts revert to what they were for Tax Year 2000: Tax Year 2012 AMT exemption amount is:
• Single/Head of Household: $33,750
• Married Filing Joint: $45,000
• Married Filing Separate: $22,500
• Maximum Section 179 Deduction amount has been reduced to $139,000 for Tax Year 2012
• Click here to read more

Click here to read the entire CrossLink Tax Update that includes further information regarding Federal tax provisions that are not applicable or have been changed for Tax Year 2012 Federal tax returns.

IRS Update: Circular 230 and Registered Federal Tax Return Preparers

Remember registered Federal tax return preparers must follow the due diligence and ethical conduct requirements in IRS Circular 230 (Regulations Governing Practice before the Internal Revenue Service) when preparing tax returns. Enforcement of these regulations is performed by the IRS Office of Professional Responsibility (OPR).

As a registered Federal tax return preparer you will need to become familiar with all of Circular 230, however the following sections are especially important:

• Definition of practice before the IRS and what this means to registered Federal tax return preparers who are not CPAs, EAs or Attorneys:
• Section 10.2 – Definition of practice before IRS, Practitioner, and Tax Return Preparer.
• Section 10.3 (f) – What practice means for registered tax return preparers.
• Section 10.22 (Diligence as to accuracy) emphasizes that you must exercise due diligence when preparing all Federal tax returns.
• Section 10.27 (Fees) covers rules surrounding contingent fees and how a practitioner may not charge these types of fees for any services rendered in connection with any matter before the IRS which includes preparing a tax return.
• Section 10.30 (Solicitation) explains the rules covering advertising, solicitations and how and what fee information may be published.
• Click here to read more.

Click here to read the entire CrossLink Tax Update that includes further information regarding Circular 230 and how it affects Registered Federal Tax Return Preparers.

IRS Update: 2012 IRS Fact Sheets

The IRS Fact Sheets page on the IRS website provides information that you should be aware of and view periodically throughout the filing season. This information covers topics that the IRS is emphasizing for the given tax season.

Currently, the IRS Fact Sheets cover the following topics:

• A guide for taxpayers that have been a victim of identity theft.
• How a taxpayer can protect themself from becoming a victim of identity theft.
• When a taxpayer can expect their refund to be released by the IRS and factors that could affect the release of the refund by the IRS.

Click here to read the entire CrossLink Tax Update which includes more information on topics currently covered on the IRS Fact Sheets page as well as a link to the Fact Sheets page.

IRS Quick Alerts for Tax Professionals: Refund Status

The below information was sent out via today's IRS Quick Alert:

"The IRS has opened its filing season successfully this month, and refunds have started going out to many taxpayers. As with the start of any tax season, there are system validations that occur requiring some fine-tuning of our systems. As part of this, some taxpayers will receive refunds approximately one week later than initial projections they may have received, but these are still in line with historical refund delivery times.

The IRS reminds taxpayers that refund time frames provided by “Where’s My Refund” and tax providers are projected time frames and are subject to revision. Many different factors can affect the timing of the refund after the IRS receives the return for processing. The IRS apologizes for any inconvenience caused by the revised refund dates.

When the IRS announced the opening of the 2012 filing season, it advised taxpayers who electronically file and select direct deposit that they could see their refunds in as few as 10 days and 90 percent of refunds are provided within 21 days. Some taxpayers are getting refunds much faster, but at this time taxpayers should expect refunds to be issued as indicated in the original IRS guidelines.

The one-week delay for some refunds relates to fine-tuning IRS systems to adjust for new safeguards put in place this tax season to provide stronger protection against refund fraud. The IRS is providing additional screening for fraud this year before issuing refunds, but the vast majority of taxpayers can still continue to expect to receive their refunds in a timely fashion."

IRS Update: Helpful IRS Tools for the 2012 Tax Season

Below are a couple of IRS look-up tools that should be useful to you and your taxpayers during the 2012 Filing Season:

Where's My Refund?

Remember that the information for a taxpayer’s refund status and when it will be direct deposited or mailed will not be available until 72 hours after the return has been accepted.

Also, this tool will indicate why a refund has been reduced (the taxpayer owed money to the IRS, a state, child support, etc.). Learn More

First Time Homebuyer Credit Account Look-Up

This tool is for taxpayers who need to repay the (up to) $7,500 credit received in 2008. This tool replaces the reminder letter that the IRS sent last year.

Affected taxpayers will need their SSN, Date of Birth, Street Address, and Zip code from the latest return they have filed in order to log in. Learn More

Click here to read the entire CrossLink Tax Update which includes more information on helpful tools for the 2012 Filing Season.

IRS Update: Reminders for the Upcoming Filing Season

As you prepare your tax office for the start of the 2012 Tax Season, there are some things that you need to know:

• The start of the filing season is Tuesday, January 17, 2012. To read more about the start date see the IRS 2012 Kick Off News Release.
• Acknowledgements will not be delayed at the beginning of the season.
• If preparers have not already done so, they must renew their PTIN before they begin preparing Tax Year 2011 returns.
• If preparers still need to renew their PTIN, they need to go to www.irs.gov/ptin.
• Form 8867 (Paid Preparer Earned Income Credit Checklist) will be transmitted with all returns that are claiming EITC this year.

Click here to read the entire CrossLink Tax Update which includes more reminders for the upcoming filing season.

IRS Update: New Applications for IRS PTINs Unavailable Due to Scheduled Maintenance

Due to previously scheduled maintenance on IRS systems, the Preparer Tax Identification Number (PTIN) system will be unavailable for new applications from 5:00 PM ET on Monday, December 26, 2011 until approximately 6:00 AM ET on Monday, January 9, 2012. Preparers are still able to renew existing PTINs during this window.

Regulations require all paid tax return preparers to obtain a PTIN. Preparers must renew their PTINs each year by December 31. Some preparers also need to pass a competency test and take continuing education courses. Click here to review the paid preparer requirements.

Click here to visit the CrossLink Tax Resource Center for additional resources on topics such as Federal Tax Return Preparer Registration, the Preparer Electronic Filing Mandate, and Helpful Tax Websites.

IRS Update: Additional Federal Updates for the Coming Filing Season

Below are changes that you should be aware of for the upcoming filing season:

Federal April Due Date

Tuesday, April 17, 2012 will be the Federal April due date for TY 2011 Federal returns. Taxpayers receive an extra day to file this year because of a District of Columbia holiday.

Self Employment Tax Deduction

For TY 2011, the Self Employed Tax Deduction has been revised to reflect an employer’s equivalent portion of self employment (SE) tax. The deduction is now calculated as follows on Schedule SE, line 6:

• Total SE tax is $14,204 or less – 57.51% of SE Tax
• Total SE tax is greater than $14,204 – 50% of SE Tax plus $1,067

Click here to continue reading the entire CrossLink Tax Update which includes detailed information on Self Employed Health Insurance and the Deferral of Reporting Requirement for Merchant Card Information on 2011 Schedules C, E, and F.