IRS Update: 2015 Employer Shared Responsibility Payment (Penalty) Under the Affordable Care Act

As a reminder, the employer shared responsibility (penalty) portion of the Affordable Care Act will be applied beginning on January 1, 2015. Therefore, all large employers (generally employed 100 or more full-time employees during 2014) are required to offer affordable health insurance to their employees that provides minimum essential coverage. Large employers who fail to do so will be subject to a shared responsibility payment (penalty). Read More

For 2015 there is transitional relief from the penalty for businesses that employed between 50 and 100 full-time equivalent employees during 2014. To be eligible, an employer must meet the following conditions:

• Did not reduce the size of its workforce or overall hours of service of its employees during the period starting on February 9, 2014 and ending on December 31, 2014.
• Did not eliminate or materially reduce the health coverage it offered as of February 9, 2014 during the period beginning on February 9, 2014 and ending on December 31, 2015.
• Read more

If the employer does not meet these conditions, then the definition of a large employer is 50 or more full-time employees during 2014.

Generally, a large employer will be subject to a shared responsibility payment (penalty) for 2015 once at least one full-time employee receives a premium tax credit and:

• Employer does not offer health insurance coverage to at least 70% of their employees – Penalty is calculated as $2,000 x (Total number of full-time employees minus 30) which is prorated for each month that they did not offer coverage;

Or

• Employer offers health insurance coverage that is not affordable or does not meet the minimum value standards – Penalty is $3,000 for each full-time employee who opts out of the employer’s coverage and obtains their health insurance through a Marketplace and is eligible for a premium tax credit.

Click here to read the entire CrossLink Tax Update that includes further information on the 2015 Employer Shared Responsibility Payment (Penalty) under the Affordable Care Act.

IRS Update: Reminder to Renew Your PTIN for 2015

The IRS has begun accepting renewals and new applications for PTINs for calendar year 2015. Read More

All paid preparers of federal tax returns must renew their PTINs for 2015. Renewal must be completed before preparing any 2014 tax returns.

Although the IRS may not require federal tax return preparers who are not EAs, CPAs, or attorneys to pass a test and complete yearly continuing education, the IRS still has the authority to require that all paid federal tax return preparers register with the IRS and obtain a PTIN.

Click here to read the entire CrossLink Tax Update that includes further information on renewing or registering your PTIN for the 2015 tax season.

IRS Update: 2012 Health Insurance Rebates for Individuals

If you have customers that paid for their own insurance in 2011, they may be affected by a provision in the Affordable Care Act that requires health insurance companies to issue rebates to their customers. The rebates are required to be issued if health insurance companies do not spend a minimum specified percentage of their premium dollars on medical care and quality improvement activities. This is known as the Medical Loss Ratio standard. Read more

The Medical Loss Ratio provisions require insurance companies to spend at least 80% or 85% of premium dollars on medical care. If they fail to meet these standards they are required to provide a rebate to their customers starting in 2012. Read more

A taxpayer who received a rebate on their individual health insurance during 2012 may have to show the rebate amount as income on their 2012 Federal income tax return. The rebate will need to be reported as income if the taxpayer received a tax benefit on their 2011 Federal return because they included those insurance payments:

• In their total medical expenses reported on Schedule A; or
• As a deduction on Form 1040, line 29 for self-employed health insurance premiums.

Click here to read the entire CrossLink Tax Update about 2012 health insurance rebates for individuals.

Update on IRS Identity Theft Crackdown

The IRS, in conjunction with the Justice Department and other Federal, state, and local agencies, has intensified their efforts at preventing, detecting, and resolving identity theft and refund fraud. Read more

The identity theft and refund fraud effort has involved 734 enforcement actions in January involving 389 individuals. The effort included 109 arrests, 189 indictments and complaints, and 47 search warrants. Read more

In addition, the IRS began a special compliance effort that began on January 28, 2013. IRS auditors and criminal investigators will visit 197 money service businesses to help make sure that these businesses are not assisting identity thieves or refund fraud when cashing checks. These compliance visits took place in 17 high-risk areas identified by the IRS which included: New York, Philadelphia, Atlanta, Tampa, Miami, Chicago, Houston, Phoenix, Los Angeles, San Diego, El Paso, Tucson, Birmingham, Detroit, San Francisco, Oakland, and San Jose. Read more

Click here to read the entire CrossLink Tax Update about the IRS identity theft crackdown.

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.

IRS Update: What to Expect for Federal Refunds for the 2013 Filing Season

What to Expect for Federal Refunds for the 2013 Filing Season

It is important to set your customers’ expectations for when the IRS will be sending refunds during the upcoming 2013 Filing Season and beyond.

Due to the increase in fraud and identity theft, the IRS is increasing their fraud filters during the processing of all individual returns. This means that a larger number of returns will be reviewed therefore, processing will take longer and the refund will be sent out later for these returns.

The IRS messaging for refunds for the upcoming filing season will be that refunds will be sent to the taxpayer within 21 days from the time the return has been accepted. This message will be the same on the IRS website, “Where’s My Refund?” page, and when a taxpayer calls the IRS help desk.

The refund cycle chart has been eliminated and replaced with an IRS Information Guidelines for the Tax Preparation Community publication. Click here to read more.

You will also notice the following changes to the “Where’s My Refund?” tool for the upcoming filing season:

• The expected date of when the refund will be sent will no longer be given when the return begins to be processed.
• The refund status will be presented by way of a status bar as follows:
• Return Received - Learn more
• Refund Approved - Learn more
• Refund Sent - Learn more
• Click here to read more.

Click here to read the entire CrossLink Tax Update that includes further information on what to expect for Federal refunds for the 2013 Filing Season.

IRS Update: Reminders for Year End and the Upcoming Filing Season

As we approach the end of 2012 and the start of the 2013 Filing Season, here are some reminders and things to know:

Start of Filing Season

The 2013 Filing Season will open on Tuesday, January 22, 2013. This is the day after Martin Luther King Jr.’s Birthday.

Renewing Your PTIN

If you have not already done so, you must renew your PTIN for 2013 before you begin to prepare 2012 returns. Click here to read more.

Continuing Education for Registered Return Preparers

It is very important to remember that all registered tax return preparers and return preparers with provisional PTINs must complete 15 hours of continuing education by the end of 2012. Click here to read more.

Increased Emphasis on Fraud by IRS

Due to the significant increase in the filing of fraudulent returns and identity theft, the IRS will be increasing their fraud filters for the upcoming filing season. Click here to read more.

Click here to read the entire CrossLink Tax Update that includes further information on reminders for year end and the 2013 Filing Season.

IRS Update: Changes to TY 2012 IRS Forms

As we wait for Congress to decide whether or not they will extend the provisions that expired at the end of 2011, the IRS has made changes to the following forms that are not related to late legislation:

Form 8867 (Paid Preparer’s Earned Income Credit Checklist) – Click here to read more.

Form 8863 (Education Credits) – Click here to read more.

Schedule 8812 (Child Tax Credit) – Click here to read more.

Click here to read the entire CrossLink Tax Update that includes further information on the changes to Tax Year 2012 IRS Forms.

IRS Update: Small Business Health Care Tax Credit

This is a reminder that the small business health care tax credit is available to businesses with 25 or fewer employees and who offer health insurance to their employees. Eligible small employers may claim this credit when they file their 2012 Federal return using Form 8941 (Credit for Small Employer Health Insurance Premiums).

This credit has been available since 2010 and its purpose is to help eligible small businesses pay for their health insurance premiums for their employees.

Here is how the credit works:

• The credit is available to employers with 25 or fewer full-time equivalent employees whose average annual salaries are not more than $50,000.
• The credit is calculated on a sliding scale with a maximum credit of 35% of the employer’s contribution toward their employees’ health insurance premiums.
• Read more

Click here to read the entire CrossLink Tax Update that includes further information on the Small Business Health Care Tax Credit.

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 Update: IRS EITC Preparer Compliance Update

The IRS is making changes to their ongoing EITC compliance efforts for the upcoming year. Beginning this month (October 2012), EITC return preparers that have been identified by the IRS as “at risk” for filing returns with EITC errors will receive compliance letters, educational visits, or be subject to a due diligence audit.

The IRS uses a risk-based scoring model to determine which preparers of EITC returns warrant one of the following types of actions from the IRS:

• Soft Compliance Letter - During October 2012 and November 2012 the IRS will be mailing 3,000 compliance letters to new and low-to-medium risk EITC preparers. Read More
• Knock and Talk (Educational Visit) - During December 2012, the IRS will conduct 100 educational visits to preparers whom the IRS has identified as filing highly questionable Tax Year 2011 EITC returns. Read More
• Due Diligence Audit Visit - Due diligence audits are performed on preparers whom the IRS has identified as being at the highest risk of preparing questionable EITC returns. Read More

Click here to read the entire CrossLink Tax Update that includes further information on IRS EITC Preparer Compliance.

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.

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.