2019 Sharon Kreider and Vern Hoven 1 Highlights for 2019 11-1 Taxpayer First Bill Signed into Law Due Diligence Requirements in 2019 Passport Application, Renewal and Revocation Update IRS Data Book Shows Decline in Audits, Collection, Personnel 2019 Sharon Kreider and Vern Hoven 2
Highlights for 2019 11-1 PTIN fees coming back Security Summit - Tax Security 2.0 Taxes-Security-Together Phishing/Phone Scams Aimed at Preparers Comprehensive Taxpayer Attitude Survey 2019 Sharon Kreider and Vern Hoven 3 Taxpayer First Act
11-1 New. Became law July 1, 2019 Aimed at modernizing and reorganizing IRS Many provisions direct responses to: NTA Objectives Report to Congress FY 2020 Treasury/IRS Budget Justification 2019 Sharon Kreider and Vern Hoven 4 Statutory Right to Appeals 11-1 IRS must provide taxpayer with
written notice of appeal including detailed explanation of facts and basis for decision (7803(e)(4)) Appeals mission statement Resolve Federal tax controversies without litigation on fair and impartial basis (7803(e)(3)) 2019 Sharon Kreider and Vern Hoven 5 Access to Files 11-2 Specified Taxpayers have access to case files in Appeals Means no FOIA required
Specified Taxpayer Natural person AGI $400,000 All others $5M 2019 Sharon Kreider and Vern Hoven 6 IRS Must Improve Customer Service 11-2 Customer service roadmap required 1. Provide secure assistance in format designed to meet reasonable taxpayer expectations
Best practices best services Online services Telephone call back services Employee training 2019 Sharon Kreider and Vern Hoven 7 IRS Must Improve Customer Service 11-2
Customer service roadmap required 2. Co-locate with other Federal services or offer self-service 3. Customer service proposals Current and next year Medium term: 3-5 years Long term: 10 years 2019 Sharon Kreider and Vern Hoven 8 IRS Must Improve Customer Service
11-2 Customer service roadmap required 4. Update training material for customer service employees Internal Revenue Manual 2019 Sharon Kreider and Vern Hoven 9 Taxpayer First Act 11-2
Low income taxpayers do not have to pay OIC fee (AGI 250% FPL) Innocent spouse equitable relief statute of limitation deadline for: Unpaid tax: before collection expires Paid tax: before claim statute Private debt collector cases will not be SSDI earners or AGI 200% FPL 2019 Sharon Kreider and Vern Hoven 10 Taxpayer Advocate 11-2
IRS must respond to Taxpayer Advocate Directive w/in 90 days IRS must explain rescinding or modifying directive Directives not honored will be reported to Congress 2019 Sharon Kreider and Vern Hoven 11 Taxpayer Advocate 11-3 Taxpayer Advocate will report only 10 most serious problems encountered by taxpayers
Previously reported at least 20 2019 Sharon Kreider and Vern Hoven 12 IRS To Be Reorganized 11-3 IRS reorganization plan by 09/30/2020 VITA will be eligible to receive up to $30M per fiscal year in matching grant funds 2019 Sharon Kreider and Vern Hoven
13 Taxpayer Whistleblowers 11-3 Ok to disclose tax return information Status of investigations/actions Notice when info leads to audit Notice when payments received 2019 Sharon Kreider and Vern Hoven 14
Taxpayer Whistleblowers 11-3 Protection against retaliation Reinstatement with same seniority 2X lost compensation plus benefits plus interest Special damages, including attorney fees 2019 Sharon Kreider and Vern Hoven 15 On Hold Info Channel
11-3 IRS On-Hold Music Changing! On-hold will now feature Info on tax scams Where & how to report tax scams Advice on how to protect against identity theft and tax scams 2019 Sharon Kreider and Vern Hoven 16
Protecting Taxpayers Hit By Identity Theft 11-3 IP PIN will be available on request IP PIN across nation over 5 years ID theft victims will have IRS single point of contact & IRS advance notice Preparer penalties for disclosure of tax return information increased from $250 to $1,000 (max $10K to $50K) 2019 Sharon Kreider and Vern Hoven 17 Form 1099 Online Resources
11-4 IRS to provide online prep, file & distribution website on Form 1099s Available by 1/1/2023 Prep 2019 Sharon Kreider and Vern Hoven File Distribute 18 IRS Information Technology
11-4 New job IRS Chief Information Officer (IRS CIO) Oversees development, implementation, maintenance of IT. Responsible for ensuring IRS IT is secure IT personnel are eligible for streamlined critical pay 2019 Sharon Kreider and Vern Hoven 19 More Electronic Filing
11-4 1099/W-2 threshold for required e-file Current 250 2021 100 or more After 2021 10 or more 2019 Sharon Kreider and Vern Hoven 20 Electronic Signature 11-4
Electronic signature to be allowed on Forms 2848 and 8821 Standards & procedures to be issued by December 2019 Sign here: John Hancock 2019 Sharon Kreider and Vern Hoven 21 Exempt Org Returns Must Be File Electronically 11-4 Exempt organization returns must be filed electronically
Tax years beginning after 7/1/19 2-year transition relief for small orgs Less than $200K gross receipts, and Less than $500K assets 2019 Sharon Kreider and Vern Hoven 22 Taxpayer First Act 11-4 Pay tax by debit or credit cards But IRS cant pay fee or recoup fee from taxpayer Minimum failure to file penalty
increased from $205 to $330 2019 Sharon Kreider and Vern Hoven 23 Due Diligence Rules Added For HOH 11-4 TCJA added preparer due diligence requirements for head of household filing status Form 8867, Paid Preparers Earned Income Credit Checklist, expanded OR $530 (2019) preparer penalty 2019 Sharon Kreider and Vern Hoven
24 Due Diligence Rules 11-5 Complete 8867 truthfully Submit 8867 with return Knowledge requirement Ask adequate questions Document Q & A Review adequate information 2019 Sharon Kreider and Vern Hoven 25
Three-Year Document Retention 11-5 Copy of clients Form 8867 All worksheets for credits claimed All documents supporting credits How, when, and from whom info received All additional questions asked and all answers received 2019 Sharon Kreider and Vern Hoven
26 Transcripts 11-5 Tax professionals By mail to clients address of record E-services TDS masked individual and business transcripts Unmasked individual, business or Wage & Income: call IRS, fax 8821/2848, transcript placed in e-Services mailbox Unmasked W&I available for POA/TIA 2019 Sharon Kreider and Vern Hoven 27
Transcripts 11-5 Faxed transcripts ended 6/28/19 Still available by mail Get Transcript Online masked 2019 Sharon Kreider and Vern Hoven 28 Denial of Passport 11-6 Denial of passport renewals and
applications started Seriously delinquent tax debt = $52,000 (2019) in tax, interest, and penalty Notice CP508C required when delinquency reported to State Department 2019 Sharon Kreider and Vern Hoven 29 Before Passport Denied 11-6 Before denying passport, State Department will hold 90 days for: Certification issue resolved
FULL payment made, or Satisfactory payment arrangement entered 2019 Sharon Kreider and Vern Hoven 30 Prevent IRS Notification 11-7 Ways to fix before IRS notification: Pay in full Pay timely under Installment Agreement Pay timely under offer in compromise Pay timely on DOJ settlement Request Collection Due Process (CDP)
Innocent spouse elected/requested 2019 Sharon Kreider and Vern Hoven 31 Reasons IRS Wont Hold Up Passport 11-7 Exceptions Bankruptcy Deceased Victim of identity theft Not collectible because of hardship Located in federally declared disaster area Pending installment agreement (IA) or offer-in-compromise (OIC)
2019 Sharon Kreider and Vern Hoven 32 Passports 11-7 No temporary exception for open Taxpayer Advocate Services (TAS) cases from Sec. of State certification But IRS agreed to temporary exclusion 2019 Sharon Kreider and Vern Hoven 33 Tax No Longer Seriously
Delinquent - Notification 11-8 Reversal after resolution Full satisfaction 30 days Innocent spouse 30 days IA or OIC 30 days Erroneous certification as soon as practicable Expedited reversal shortens from 30 days to 14-21 days 2019 Sharon Kreider and Vern Hoven 34 11-8
ITINs 2019 Sharon Kreider and Vern Hoven 35 Early Renewal of ITINS Needed 11-8 Renewal applications: millions of ITINs expiring 12/31/19 If not used at least once in last 3 years Tax filers without SSN must use ITINs Non-residents with US source income
Submit completed Form W-7 to renew IR 2019-118 for more renewal info 2019 Sharon Kreider and Vern Hoven 36 11-9 IRS Exams & Collection 2019 Sharon Kreider and Vern Hoven 37 Audit Statistics Fiscal Year Overall Individual
Returns Income $200K to $1M without business income Income $200K to $1M with business income Income over $1M 2019 Sharon Kreider and Vern Hoven 11-10 2016 2017 2018 .7%
.62% .60% 1.0% .8% .60% 2.3% 1.6% 1.4% 5.8%
4.4% 3.2% 38 Audit Statistics Fiscal Year C corps assets under $10M C corps with assets above $10M S Corporations Partnerships 2019 Sharon Kreider and Vern Hoven 11-9
6. 11-10 Accuracy-related penalties Trade or business expenses - 162 Summons enforcement Gross income - 61 Appeal Collection Due Process Failure to file and pay penalties 2019 Sharon Kreider and Vern Hoven 40 Most Litigated Tax Issues 11-10
7. Federal tax lien enforcement 8. Charitable deductions 9. Schedule A deductions 10. Frivolous issues penalty 2019 Sharon Kreider and Vern Hoven 41 Timely Mailing Issues 11-10 Private postage label not good enough to show timely filing of Tax Court petition (Teri Jordan) Deficiency notice went to Last
Known Address (Damien Gregory) IRS needs Form 8822 to update address, not required to consult other forms, such as Form 2848 or Form 4868 2019 Sharon Kreider and Vern Hoven 42 IRS Collection Activity Down, Inventory Up Taxpayer delinquency investigations 11-12 2013 2014 2015 2016 2017 2018
7,018 8,191 8,696 Ending Inventory 11,721 12,410 13,371 14,005 14,080 13,186 2019 Sharon Kreider and Vern Hoven 44 11-12 Offer In Compromise Offer In Compromise 2017
2018 Number of offers received 62 59 Number of offers accepted 25 24 Percent accepted 40.32%
40.68% 2019 Sharon Kreider and Vern Hoven 45 11-13 DEALING WITH THE IRS 2019 Sharon Kreider and Vern Hoven 46 Preparer Tax Identification Number (PTIN)
11-13 IRS has reactivated PTIN system Can now charge fees for PTIN 2019 Sharon Kreider and Vern Hoven 47 National Taxpayer Advocate 11-13 Annual Report to Congress 5 Most serious problems 1. Tax law questions 2. Navigating IRS 3. False positives in EIC problems
Inflating Deductions or Credits Promises of Inflated Refunds Return Preparer Fraud Identity Theft Phone Scams Phishing 2019 Sharon Kreider and Vern Hoven 49 IRSs Dirty Dozen 11-15 8. Charitable Contributions 9. Improper Business Credits 10. Offshore Tax Avoidance
11. Frivolous Tax Arguments 12. Abusive Tax Shelters 2019 Sharon Kreider and Vern Hoven 50 IRS Online Account Tool 11-15 New features: 18 months tax payment history Yearly payoff amounts & balance due Online transcripts Feedback & suggestions for improvement
2019 Sharon Kreider and Vern Hoven 51 IRS Identity Verification 11-15 Taxpayers must provide verification when calling IRS: prove who you are! Individuals must have: Current and prior years tax returns Birth dates of spouse and dependents Letters/notices received from IRS 2019 Sharon Kreider and Vern Hoven 52
PLR User Fees 11-16 Payment must be made electronically Checks rejected! Use Pay.gov Send letter ruling request by mail (or private courier) to IRS in Washington DC 2019 Sharon Kreider and Vern Hoven 53 Form 8879
11-16 Form 8879, e-file Signature Authorizat ion form used as signature on paper return after e-file rejected! Per IRM (and most IRS workers dont know, so send letter with IRM link) 2019 Sharon Kreider and Vern Hoven 54 TIGTA Amended Returns 11-17 $360M potentially erroneous refunds
Adjustments made w/o required forms Non-entitled deductions allowed Returns not sent to exam when required Credits adjusted incorrectly 2019 Sharon Kreider and Vern Hoven 55 11-18 Penalty Abatement
2019 Sharon Kreider and Vern Hoven 56 Penalty Abatement 11-18 Accuracy-Related Penalty Grow 10% 2015 2016 2017 2018 Number
11-18 When reasonable cause exists All facts and circumstances must be taken into account Advice cant be based on unreasonable assumptions Cant argue that regulation is invalid 2019 Sharon Kreider and Vern Hoven 58 Not Reasonable Cause 11-19
Cant rely on CPA tax professional when stupid King Solarman, Inc. Court upheld $2M deficiency for failure to use proper accounting method Down payment reported as total installment sales price ($2M / $8M) College-educated CEO All facts were provided to CPA preparer 2019 Sharon Kreider and Vern Hoven 59 Not Reasonable Cause 11-19 Doubtful testimony and bad records Phillip N. Rose
Court didnt believe testimony that taxpayers kept $56K rotating cash in safe Logs not credible (18.5 hrs working on Thanksgiving, 16.25 on New Years Day) Vague claims about relying on accountant no details provided 2019 Sharon Kreider and Vern Hoven 60 First Time Penalty Abatement 11-19 TAS Blog, April 11, 2019 Taxpayer Advocate says IRS often grants first time penalty abatement
without considering reasonable cause Also always ask for reasonable cause abatement 2019 Sharon Kreider and Vern Hoven 61 Penalties Require Managerial Approval 11-20 Determination of penalty must be approved by supervisor in writing No bargaining chip by examiners Penalty approval must occur before
notice of deficiency or IRS files answer or amended answer IRS counsel will concede penalty if documentary evidence not produced 2019 Sharon Kreider and Vern Hoven 62 11-20 Identity Theft & Client Data Security 2019 Sharon Kreider and Vern Hoven 63 Tax Identity Theft
11-20 Tax preparers are top target Security Summit, a coalition to combat cybercriminals impacting tax professionals and state and federal agencies 42 state agencies 20 industry officials IRS 2019 Sharon Kreider and Vern Hoven 64 IRSs Tax Professional Basic Security Steps
11-21 Deploy the Security Six measures Create a data security plan Educate yourself and be alert to key email scams Recognize signs of client data theft Create a data theft recovery plan 2019 Sharon Kreider and Vern Hoven 65 Deploy the Security Six Measures 1. 2. 3. 4.
5. 6. 11-21 Anti-virus/anti-malware software Firewalls Two-factor authentication Backup software & services Drive encryption Virtual Private Netword 2019 Sharon Kreider and Vern Hoven 66 Tax Preparers Must Create Written Data Security Plan
11-22 FTC Safeguards Rule tax preparers Written plan requirements: Designate employee to coordinate Identify & assess risks Design, implement, monitor & test plan Service providers must have safeguards Evaluate & adjust program 2019 Sharon Kreider and Vern Hoven 67 Be Alert (Educated) to E-mail Scams
11-22 You are only as safe as your least educated employee. Separate business & personal e-mail Security software Never open/download from unknown senders Always use password/encrypted files 2019 Sharon Kreider and Vern Hoven 68
Recognize Signs of Theft 11-23 Client e-file returns rejected because SSN already filed Clients who havent filed get authentication letters Clients receive refunds but not filed Clients receive tax transcripts EFIN/PTIN show too many returns 2019 Sharon Kreider and Vern Hoven 69 Create Recovery Plan 11-24
Report data theft immediately to IRS Contact law enforcement Contact states by special e-mail in which you file Contact security experts to determine cause, stop & prevent future breaches 2019 Sharon Kreider and Vern Hoven 70 Process for Filing an Identity Theft Return 11-25 File Form 14039, Identity Theft
Affidavit File Form 8948, Preparer Explanation for Not Filing Electronically See: Taxpayer Guide to Identity Theft 2019 Sharon Kreider and Vern Hoven 71 11-29 Practice & Procedures 2019 Sharon Kreider and Vern Hoven 72 Installment Agreement
User Fees S/T <120 days $0 Phone or Mail $0 L/T >120 days & auto pay $31 $107 L/T >120 days $149
$225 Change Plan $10 $43 2019 2019 Sharon Kreider and Vern Hoven Online 11-29 73
Accuracy-Related Penalty 11-30 20% Substantial Understatement Avoid penalty if 1. Substantial authority (40% of winning) 2. Good faith & reasonable cause, or 3. Reasonable basis for item and adequately disclosed 2019 Sharon Kreider and Vern Hoven 74 Accuracy-Related Penalty
11-30 Adequate Disclosure does not always require filing Form 8275 List of items where properly completing return will suffice ( Rev. Proc. 2018-11) 2019 Sharon Kreider and Vern Hoven 75 Statute of Limitations & Fraud (6501) 11-30 No statute of limitations for fraud
Preparer was fraudulent, client was oblivious TP argued that it was not their fraud TP loses! Fraudulent return eliminates statute of limitations ( John & Joan Finnegan) 2019 Sharon Kreider and Vern Hoven 76 11-31 Innocent Spouse Relief 2019 Sharon Kreider and Vern Hoven 77
Innocent Spouse Relief 11-31 Three provisions 6015(b)Innocent spouseno knowledge 6015(c) Separate liabilitydivorced or separated 6015(f) Equitable relief When 1 and 2 dont apply 2019 Sharon Kreider and Vern Hoven 78 Innocent Spouse
11-32 Qualifications chart on pages 32-33 Taxpayer First Act created statutory time limits for 6015(f) claims Unpaid taxes: Request relief before collection statute expiration date Paid taxes: Request relief before date on which claim for refund can be filed 2019 Sharon Kreider and Vern Hoven 79 Innocent Spouse Relief 11-33 Denied: Not questioning large
negative income creates reason to know (Constance Briley) Denied: No relief for husband whose wife embezzled from his medical practice (where did you think the money for home and auto restoration came from?) [Thomas Francel] 2019 Sharon Kreider and Vern Hoven 80 11-34 Public Interaction with IRS 2019 Sharon Kreider and Vern Hoven
81 Every Americans Duty is to Pay Taxes 11-34 68% Completely Agree 27% Mostly Agree 3%Mostly Disagree 2% Completely Disagree 2019 Sharon Kreider and Vern Hoven 82 Acceptable Amount
To Cheat on Taxes 11-34 85% Not at all 10% A little here and there 3% As much as possible 2% No opinion 2019 Sharon Kreider and Vern Hoven 83 Satisfaction with Personal Interaction with IRS 11-34
33% Very Satisfied 47% Somewhat Satisfied 11% Not Very Satisfied 5% Not Satisfied At All 4% No Opinion 2019 Sharon Kreider and Vern Hoven 84 Enforcement vs Customer Service 11-34 47% Proper Balance 35% Too Much
Enforcement 10% Too Much Cust Service 7% No Opinion 2019 Sharon Kreider and Vern Hoven 85 Thank you! 2019 Sharon Kreider and Vern Hoven 86
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