IRS, States, and Tax Industry Announce New Steps to Help Public Protect Personal Data in order to Prevent Tax Identity Theft

The IRS has just announced their new “Taxes. Security. Together.” campaign which is designed to help raise public awareness about how their use of the internet and their personal devices can affect the safety of their financial and tax data. It will urge individuals to take active steps to protect themselves and make them aware of just how sophisticated identity thieves have become.

Included in the “Taxes. Security. Together.” campaign is information about how the IRS, state tax administrators, and the tax software industry are implementing an expanded series of protections for the upcoming 2016 filing season to address tax related identity theft. These added protections will include asking individuals for additional information that will be included with their tax return. The additional information will help government agencies ensure that the return they are accepting is truly the taxpayer’s and not one that is being filed by someone who has stolen their identity.

The “Taxes. Security. Together.” campaign is a direct result of the IRS Security Summit, a collaborative effort started in March 2015 between the IRS, states, and the tax industry to help fight tax identity theft (of which CrossLink Professional Tax Software has been a part of).  This joint campaign will include YouTube videos, weekly Tax Tips, and local events across the country. This information will also be included on state websites and by the professional tax software community during this upcoming filing season.

For more information on this campaign, see the following on the IRS website:

• Taxes. Security. Together webpage – Explains how taxpayers, tax preparers, and businesses can help fight tax identity theft.

• IRS News Article 2015-129 (IRS, States and Tax Industry Announce New Steps to Help Public to Protect Personal Tax Data)

• IRS Fact Sheet 2015-23 (IRS, States and Industry Partners Provide Update on Collaborative Fight Against Tax-Related Identity Theft)

• IRS News Article 2015-117 (IRS, States, Industry Continue Progress to Protect Taxpayers from Identity Theft)

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)

Reminder of Recently Introduced Helpful Online Tools for Individuals

The IRS has released several online tools on their website in the past year. These tools allow an individual to make a direct debit payment online for estimated payments/amount owed with an extension/balance due on a current or prior year federal return, get the status of their amended return, or get information on a prior year federal tax return.

Direct Pay

If an individual would like to make a direct debit payment to the IRS for a current or prior year balance due or look up what payments they have made, they can use the Direct Pay online tool on the IRS website.

In order to make a payment, all the individual needs to do is:

• Provide their tax information
• Verify their identity
• Read more

Where’s My Amended Return?

If an individual has filed an amended return they can now find out where it is in the IRS processing stream by using the “Where’s My Amended Return?” look-up tool. The status will be available on this application three weeks after it was mailed to the IRS.

Three weeks after it has been mailed to the IRS, the following information is available about the amended return once the Social Security Number, date of birth, and ZIP code has been entered:

• Confirmation that the IRS received the amended return
• An update on the amended return’s current status
• Read more

Get Transcript (Prior Year Return Information)

If the taxpayer needs a copy of a federal return for a prior year, the IRS has made available an online tool that allows them to retrieve a copy of their return information for the three prior tax years (and current year after it has been filed). The taxpayer has the ability to download the return and/or print a copy of it immediately online. This new application eliminates the previous constraint to wait five to ten days while the IRS processed the request and mailed a copy of the taxpayer’s prior year return information.

Click here to read the entire CrossLink Tax Update that includes more information on helpful online tools for individuals.

IRS Security Summit

Petz Enterprises, LLC (PEI), your CrossLink Team, participated in the March 19, 2015 IRS Security Summit meeting with the IRS, state tax administrators, and tax industry companies. The meeting was held to discuss ways to address the critical issue of identity theft, refund fraud, and data security.

At the meeting the IRS indicated their willingness to work with the industry and states to discuss solutions to help combat the growing issue of identity theft fraud in the following areas over the next few months:

• Fraud prevention and detection, which includes authentication of the taxpayers
• Information sharing related to fraud between IRS and state department of revenues, as well as with the tax industry
• Data security safeguards

The goal of this collaboration is to discuss solutions that can be implemented for the 2016 filing season and beyond. As always, CrossLink remains committed to data security for our professional tax preparer customers and the tax industry as a whole.

New IRS Direct Deposit Limits

Beginning with the upcoming filing season the IRS will be limiting the number of refunds that may be electronically deposited into a single financial account or pre-paid debit card to three.

Any subsequent deposits will be automatically converted to a paper refund and mailed to the taxpayer at the address shown on the federal return.

If this occurs, the taxpayer will be sent a notice informing them the reason why the refund will not be direct deposited and that they will receive a paper check in approximately four weeks.

This new procedure has been instituted as part of the IRS’ continuing efforts to combat fraud and identity theft.

To read more about this new limitation on direct deposits see the Direct Deposit Limits page on the IRS website.

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: Changes to Small Business Health Care Tax Credit

Since 2010, the Small Business Health Care tax credit has been available to eligible small businesses that offer health insurance and have 25 or fewer employees. The purpose of this credit is to help small businesses pay for the premiums on health insurance for their employees.

The following changes have been made to this credit for tax years beginning in 2014:

• The maximum credit has increased to 50% of health insurance premiums paid.
• To be eligible for the credit, the small employer must purchase their health insurance through a Small Business Health Options Program (SHOP) offered through a health insurance exchange (marketplace).
• Read more

The credit will work with the new changes as follows:

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

An eligible employer claims the credit by completing Form 8941 (Credit for Small Employer Health Insurance Premiums) and including it with their federal return.

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

IRS Update: Qualifying Exemptions from the Requirement to have Health Insurance for 2014

Individuals who do not have health insurance for at least nine months in 2014 will owe an additional tax (penalty) when they file their 2014 federal income tax return unless they qualify for an exemption.

The following scenarios may qualify an individual for an exemption:

• The amount required to pay for the lowest price coverage is more than 8% of the household income
• Individual does not have to file a tax return because their income is too low
• Individual is not lawfully present in the U.S.
• Member of federally recognized Native American tribe
• Read More

If an individual does not qualify for one of the above exemptions they may qualify for a hardship exemption. Some of the hardship exemptions an individual may qualify for are:

• Filed for bankruptcy in the last six months
• Had medical expenses that the individual could not pay in the last 24 months
• Read more

The type of exemption an individual is eligible for can determine how they obtain the exemption. Some exemptions may be obtained only through the Marketplace (Exchange), others only from the IRS, and yet others from either the Exchange or the IRS.

Click here to read the entire CrossLink Tax Update that includes further information on qualifying exemptions from the requirement to have health insurance for 2014.

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.

Federal Tax Provisions Not Applicable for 2014 Tax Returns

This is a reminder that a number of tax provisions expired at the end of 2013.

Looking ahead to next year’s filing season, everyone will need to keep an eye out on what Congress does with regard to these expired tax provisions.

Below is a list of the most used provisions that have either expired or have significantly changed for Tax Year 2014.

Provisions no longer applicable for Tax Year 2014 returns:

• $250 Educator Expense Deduction - Form 1040, line 23
• Tuition and Fees Deduction - Form 8917
• Itemized Deduction for Sales Tax
• 50% Bonus Depreciation
• Read more

Also note that the following Section 179 Expense provisions have been reduced as follows:

• Maximum Section 179 Deduction amount: $25,000
• Maximum Cost before Section 179: $200,000
• Read more

Click here to read the entire CrossLink Tax Update that includes further information on federal tax provisions that are not applicable for 2014 tax returns.

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

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 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.

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.

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.