The Scoop. Agenda 2/12/2018

Transcription

1 The Scoop February 14, 2018 Happy Valentine s Day Agenda Bipartisan Budget Act of 2018 IRS Statement on Retroactive Extender Provisions New Tax Scam Alert- Iowa Minnesota Error Rejection Codes Minnesota and the Tax Cuts and Jobs Act Health Insurance Provider Fee: 2017 and 2019 Moratoriums Questions and Answers Changes to the Practitioner Priority Service and Form 2848 and 8821 What s New on 2017 Form 1065, Return of Partnership 2 Income 1

2 Agenda IRS Statement on Health Care Reporting Requirement Connecticut, New York and New Jersey Governors Launch Coalition to Sue over Tax Cuts and Jobs Act Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identity Theft Your Client Hasn t Received Their W-2 Yet? IRS Creates Special IRS.gov Page for Tax Reform Use Pub 2043 to Set Refund Expectations for Your Clients 3 FinCEN announces filing deadline for 2017 FBARs IRS Statement on Retroactive Extender Provisions The IRS is reviewing the legislation signed Feb. 9 that retroactively extended and modified numerous tax provisions covering 2017 We are assessing these significant changes in the tax law and beginning to determine next steps The IRS will provide additional information as quickly as possible for affected taxpayers and the tax community Forms will be revised as needed 4 2

3 President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns Extended through 2017 Exclusion from gross income of discharge of qualified principal residence indebtedness Mortgage insurance premiums treated as qualified residence interest Above-the-line deduction for qualified tuition and related expenses Indian employment tax credit Railroad track maintenance credit Mine rescue team training credit 5 President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns Extended through 2017 Classification of certain race horses as 3-year property 7-year recovery period for motorsports entertainment complexes Accelerated depreciation for business property on an Indian reservation Election to expense mine safety equipment2 Special expensing rules for certain film, television, and theatrical productions 6 3

4 President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns Extended through 2017 Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico Treatment of timber gains Empowerment zone tax incentives. The provision extends through 2017 the tax benefits for certain businesses and employers operating in empowerment zones American Samoa economic development credit 7 President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns Extended through 2017 Credit for nonbusiness energy property Credit for Residential Energy Property Credit for new qualified fuel cell motor vehicles Credit for alternative fuel vehicle refueling property Credit for 2-wheeled plug-in electric vehicles Second generation biofuel producer credit Biodiesel and renewable diesel incentivescreated from biomass. The provision extends through 2017 the fuel excise tax credit for biodiesel mixtures. 8 4

5 President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns Extended through 2017 Credit for energy-efficient new homes Extension and phaseout of energy credit Energy efficient commercial buildings deduction than beginning after the date of enactment. Waiver of Limitations With Respect to Excluding From Gross Income Amounts Received by Wrongfully Incarcerated Individuals Individuals Held Harmless on Improper Levy On Retirement Plans Modification of User Fee Requirements For Installment Agreements 9 President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns NEW SHORT FORM 1040SR for SENIORS for 2018 or 2019 Tax Year The provision requires that the IRS publish a simplified income tax return form designated a Form 1040SR, for use by persons who are age 65 or older by the close of the taxable year The form is to be as similar as possible to the Form 1040EZ The use of Form 1040SR is not to be restricted based on the amount of taxable income to be shown on the return This provision is effective for taxable years beginning after date of enactment 10 5

6 President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns Attorney Fees Relating to Awards to Whistleblowers The provision would allow an above-the-line deduction for attorney fees and courts costs paid by, or on behalf of, a taxpayer in connection with any action involving a claim under State False Claims Acts, the SEC whistleblower program, and the Commodity Futures Trading Commission whistleblower program The provision would be applicable in to taxable years beginning after December 31, President Trump signed the Bipartisan Budget Act of 2018, Includes Retroactive Extenders- Impacts 2017 Returns Modification of Rules Governing Hardship Distributions Modification of Rules Relating to Hardship Withdrawals from Cash or Deferred Arrangements Tax Home of Certain Citizens or Residents of the United States Living Abroad Treatment of Foreign Persons for Returns Relating to Payments Made In Settlement of Payment Card and Third Party Network Transactions Repeal of Shift in Time Of Payment Of Corporate Estimated Taxes 12 6

7 New Tax Scam Alert Iowa Department of Revenue Issues a New Scam Alert Another tax scam has surfaced, prompting alerts from the Iowa Department of Revenue (IDR) and the Internal Revenue Service (IRS) Here's how it works: It begins with cyber criminals stealing personal information, sometimes from computers of tax practitioners In a new twist, the fraudulent returns in a few cases used the taxpayers' real bank accounts for the deposit 13 New Tax Scam Alert A woman posing as a debt collection agency official then contacts the taxpayers to say a refund was deposited in error and asked the taxpayers to forward the money to her As a reminder, the Iowa Department of Revenue does not make these types of calls If you feel you have been the victim of identity theft, please report it to IDR immediately using the web form or if you do not have computer access by calling (515)

8 Minnesota Error Rejection Codes 15 Minnesota Error Rejection Codes error_rejection_codes.aspx 16 8

9 Minnesota and the Tax Cuts and Jobs Act How do federal changes impact 2017 Minnesota tax returns? Because Minnesota has not yet adopted the federal changes, adjustments must be made to the Minnesota individual and business tax returns to determine the 2017 Minnesota tax A list of provisions that may affect the 2017 Minnesota individual and business tax returns are included within the return instructions 17 Minnesota and the Tax Cuts and Jobs Act Recent updates have been made to Forms M2, M3, and M8, and Schedules KF, KPI, KS, and M1NC Since the release of the updated individual and business tax returns in January 2018, additional changes have been made to the following sections: Form M2, Income Tax Return for Estates and Trusts (Instructions Only) Form M3, Partnership Return (Instructions Only) Form M8, S Corporation Return (Instructions Only) Schedule KF, Beneficiary s Share of Minnesota Taxable Income Schedule Lines 8 and 16 Codes 18 9

10 Minnesota and the Tax Cuts and Jobs Act Schedule KPI, Partner s Share of Income, Credits and Modifications Schedule Lines 8 and 10 Codes Schedule KS, Shareholder s Share of Income, Credits and Modifications Schedule Lines 8 and 10 Codes Schedule M1NC, Federal Adjustments Line 3 Instructions Line 12 Instructions Line 10 Worksheet Medical and Dental Expense Deduction was also updated to clarify the amount on step 8 should not exceed the amount on step 7 19 Health Insurance Provider Fee: 2017 and 2019 Moratoriums Questions and Answers Q1: Under the 2019 moratorium, is there a health insurance provider fee in 2019? A1: No. There is no fee in 2019 Q2: Must Form 8963 be filed in the 2019 fee year? A2: No. Do not file Form 8963 in the 2019 fee year Q3: Do the 2017 or 2019 moratoriums affect the 2018 fee year? A3: No. Form 8963 for the 2018 fee year is due by April 17, The 2018 applicable amount is $14.3 billion and any required payment is due on September 30,

11 Health Insurance Provider Fee: 2017 and 2019 Moratoriums Questions and Answers Q4: Does the 2019 moratorium apply to fee year 2019 or data year 2019? In other words, does the moratorium apply to: (1) the fee paid in 2019 based on the 2018 data year or (2) to the fee paid in 2020 based on the 2019 data year A4: The 2019 moratorium applies to fee year 2019 Therefore, no fee will be due in fee year 2019 based on the 2018 data year Q5: How do the 2017 and 2019 moratoriums affect the filing obligation or fee amount for the 2018 fee year? A5: The 2017 and the 2019 moratoriums have no effect on the filing obligation or fee amount for the 2018 fee 21 year The applicable amount for fee year 2018 remains at $14 3 billi ( T R 57 4( )(3)) Changes to the Practitioner Priority Service If you ve called Practitioner Priority Service recently, you may have been asked to provide your SSN or other information Bottom line You had better have a copy of your tax return with you when you call 22 11

12 Information for Practitioners Concerning New PPS Procedures The IRS continues to review its procedures to better protect sensitive taxpayer data As part of this effort, the IRS will request additional information from tax professionals who contact them through the Practitioner Priority Service or any tollfree IRS telephone number This procedural change will require tax practitioners to provide personal information so that our customer service representatives may confirm their identities 23 Information for Practitioners Concerning New PPS Procedures This additional information may include data such as the Social Security number and the date of birth This personal information, in addition to the CAF number, is necessary to verify the identities of the person to whom they are releasing taxpayer information 24 12

13 Changes in Forms 2848 and Form 8821 IRS has also made an update to Form 2848, Power of Attorney, and Form 8821, Tax Information Authorization, that will require tax practitioners to inform the client if you are using an Intermediate Service Provider to access client transcripts via the Transcript Delivery System A box must be checked if you are using a third party IRS defines as Intermediate Service Providers as privately-owned companies that offer subscriptions to their software and/or services that the taxpayer s authorized representative can use to retrieve, store, and display tax return data (personal or business) instead of obtaining tax information directly from the IRS 25. Changes in Forms 2848 and Form 8821 The IRS must know who is using their tools; and taxpayers must know when a party other than their authorized representative is involved in accessing their sensitive data IRS relaizes there have been a number of changes for tax professionals in recent weeks Each change is intended to enhance protections for you and your clients Unfortunately, business as usual is no longer an option 26 13

14 Changes in Forms 2848 and Form 8821 Cybercriminals are well-funded, persistent and adept at stealing data from outside the IRS and using it to eventually file fraudulent tax returns As cybercriminals evolve, so must the IRS As part of IRS efforts, they have strengthened protections for IRS e-services If you are an e-services account holder, IRS urges you to immediately upgrade the account through the new two-factor identity verification process 27 Changes in Forms 2848 and Form 8821 Some may need to complete this process by mail which could add 10 days or more to the process Please, do not wait until you have an urgent need for one of the e-services tools before updating the account In the future, IRS will be asking each e-service user to sign a new user agreement intended to ensure that all tax professionals understand their security obligations They will share this information with you in advance 28 14

15 January 2018 Form What s New on 2017 Form 1065, Return of Partnership Income IRS has issued final versions of 2017 Form 1065, U.S. Return of Partnership Income, and the instructions to that form While the form itself is unchanged from the 2016 form, there are several changes to the instructions, including the following: Page 1, Box A. Principal business activity The Principal Business Activity Codes, located at the end of the Form 1065 instructions, have been updated and revised to reflect updates to the North American Industry Classification System (NAICS) 30 15

16 What s New on 2017 Form 1065, Return of Partnership Income Page 1, Signature The partnership return must be signed by a partner Beginning in 2017, any partner of a partnership or any member of a limited liability company may sign the return Page 1, Line 16, Depreciation The Tax Cuts and Jobs Act (TCJA) provides that 100% bonus depreciation applies to certain depreciable property acquired and placed in service after Sept. 27, 2017 For such property, the TCJA also eliminates the 31 requirement that the original use of the property start with the taxpayer What s New on 2017 Form 1065, Return of Partnership Income The TCJA also expands the definition of qualified property to include qualified film, television, and live theatrical productions released, etc. after Sept. 27, 2017 Address change for filing returns The filing address for partnerships located in some states has changed A complete list of filing addresses is on page 5 of the Form 1065 instructions 32 16

17 What s New on 2017 Form 1065, Return of Partnership Income New attachment to Form 1065 Certain U.S. persons that are the ultimate parent entity of a U.S. multinational enterprise group with annual revenue for the preceding reporting period of $850 million or more are required to file Form 8975 Form 8975 and its Schedule A (Form 8975) must be filed with the income tax return of the ultimate parent entity of a U.S. multinational enterprise group for the tax year in or within which the reporting period covered by Form 8975 ends These rules apply beginning with the 12-month reporting period that begins on or after the first day of a tax year of the ultimate parent entity that begins on or after June 30, What s New on 2017 Form 1065, Return of Partnership Income Form 1065, Schedule K-1 A new item was added to code G ( Contributions (100%) ) of Schedule K-1 (Form 1065), Box 13, to report qualified cash contributions for relief efforts in certain disaster areas Partnerships should use this new item to show each partner's distributive share of qualified cash contributions made for relief efforts in certain disaster areas that were paid after Aug. 22, 2017, and before Jan. 1, 2018 Partners can elect to use a 100% AGI limitation for these contributions 34 17

18 What s New on 2017 Form 1065, Return of Partnership Income Fiscal year partnerships TCJA rule changes The TCJA contains numerous provisions that change rules with respect to transactions that take place after Dec. 31, 2017 and thus may affect fiscal year 2017 returns Some of those provisions are unique to partnerships For transfers of partnership interests after Dec. 31, 2017, the definition of substantial built-in loss in 743(d), under the rules that require the adjustment of the basis of partnership property following the transfer of a partnership interest, has been revised 35 What s New on 2017 Form 1065, Return of Partnership Income No deduction is allowed for certain entertainment expenses, membership dues, and facilities used in connection with these activities for amounts incurred or paid after Dec. 31, 2017 Due date for Form 1065 The due date for a domestic partnership to file its Form 1065 has changed to the 15th day of the 3rd month following the date its tax year ended Information reporting by specified domestic entities For tax years beginning after Dec. 31, 2015, domestic partnerships that are formed or availed of to hold specified foreign financial assets ( specified domestic entities ) must file Form 8938 with their Form 1065 for the tax year Form 8938 must be filed each year the value of the partnership's specified foreign financial assets meets or exceeds the reporting 36 threshold 18

19 What s New on 2017 Form 1065, Return of Partnership Income A domestic partnership required to file Form 8938 with its Form 1065 for the tax year should check Yes to question 22 of Schedule B, Form IRS Statement on Health Care Reporting Requirement For the 2018 filing season, the IRS will not accept electronically filed tax returns where the taxpayer does not address the health coverage requirements of the Affordable Care Act The IRS will not accept the electronic tax return until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment In addition, returns filed on paper that do not address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed 38 19

20 IRS Statement on Health Care Reporting Requirement To avoid refund and processing delays when filing 2017 tax returns in 2018, taxpayers should indicate whether they and everyone on their return had coverage, qualified for an exemption from the coverage requirement or are making an individual shared responsibility payment This process reflects the requirements of the ACA and the IRS s obligation to administer the health care law Taxpayers remain obligated to follow the law and pay what they may owe at the point of filing 39 The 2018 filing season is the first time the IRS will not accept tax returns that omit this information IRS Statement on Health Care Reporting Requirement After a review of our process and discussions with the National Taxpayer Advocate, the IRS has determined identifying omissions and requiring taxpayers to provide health coverage information at the point of filing makes it easier for the taxpayer to successfully file a tax return and minimizes related refund delays 40 20

21 Connecticut, New York and New Jersey Governors Launch Coalition to Sue over Tax Cuts and Jobs Act A multi-state coalition has been launched to sue the federal government to challenge the recently enacted federal tax bill that eliminates the full deduction for state and local taxes The governors claim that this provision effectively preempts the states' ability to govern by reducing the ability to provide for their own citizens and unfairly targets them and similarly situated states in violation of the constitution 41 Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identity Theft The Internal Revenue Service announced steep declines in tax-related identity theft in 2017, attributing the success to the Security Summit initiatives that help safeguard the nation s taxpayers second year in a row This includes a 40 percent decline in taxpayers reporting they are victims of identity theft in 2016 Since 2015, the number of tax-related identity theft victims has fallen by almost two-thirds and billions of dollars of taxpayer refunds have been protected 42 21

22 Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identity Theft Here are key calendar-year 2017 indicators: In 2017, the IRS received 242,000 reports from taxpayers compared to 401,000 in 2016 a 40 % decline This was the second year in a row this number fell, dropping from the 677,000 victim reports in 2015 Overall, the number of identity theft victims has fallen nearly 65 % between 2015 and 2017 The number of tax returns with confirmed identity theft declined to 597,000 in 2017, compared to ,000 in 2016 a 32 % decline Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identity Theft The amount of refunds protected from those fraudulent returns was $6 billion in 2017, compared to $6.4 billion in 2016 In 2015, there were 1.4 million confirmed identity theft returns totaling $8.7 billion in refunds protected Overall during the period, the number of confirmed identity theft tax returns fell by 57 % with more than $20 billion in taxpayer refunds being protected 44 22

23 Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identity Theft Cybercriminals Looking for New Lines of Attack Last year, multiple data breaches from outside the tax system means cybercriminals have basic information on millions of Americans, such as names, Social Security numbers and addresses Identity thieves are looking to steal more detailed financial information to help provide a more detailed, realistic tax return to better impersonate legitimate taxpayers 45 Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identity Theft Because they need more personal data, cyberthieves increasingly are targeting tax professionals, human resource departments, businesses and other places that have large amounts of sensitive financial information The IRS continues to see a number of these schemes in attempts to get taxpayer W-2 information from tax professionals and employers Use Security Software Watch out for scams Protect personal data 46 23

24 Your Client Hasn t Received Their W- 2 Yet? The employer should have sent Form W-2 to your client by January 31 If the client does not receive by the end of February, check with the employer Make sure they have the correct address If they still don t receive the Form W-2, they must still file on time Use Form 4852, Substitute for Form W-2, Wage and Tax Statement, instead of Form W-2 Estimate the wages and withholding on this form 47 Your Client Hasn t Received Their W- 2 Yet? Use a pay stub or similar statement to help estimate the amounts When the client finally receives the Form W-2 and discovers that the estimate was off, they will have to correct their tax return by filing Form 1040X, Amended U.S. Individual Income Tax Return The amended return can take up to 16 weeks to process Finally, if the client tried to get the Form W-2 from the employer and they still don t receive it by the end of February, they may call the IRS and we'll send a letter to the employer 48 24

25 IRS Creates Special IRS.gov Page for Tax Reform 49 Use Pub 2043 to Set Refund Expectations for Your Clients IRS Publication 2043, IRS Refund Information Guidelines for the Tax Preparation Community, is now available for 2018 The publication provides the latest refund information and guidelines including specific information for your clients claiming the Earned Income Tax Credit or Advance Child Tax Credit 50 25

26 FinCEN announces filing deadline for 2017 FBARs The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L , changed Form 114 s due date to April 15 to coincide with the due date for filing federal income tax returns The reminder also noted that this year s due date is April 17, 2018, the same due date for individual federal income tax returns because April 15 is a Sunday and April 16 is a holiday in the District of Columbia The legislation changing the FBAR due date also provides for an automatic six-month extension for 51 filing the form to Oct. 15, 2018 FinCEN announces filing deadline for 2017 FBARs Filers did not have to do anything to take advantage of the extension and need only file the return by Oct. 15 to comply Taxpayers who have a Form 114 filing requirement must file electronically on FinCEN s Bank Secrecy Act (BSA) E-Filing System website 52 26

27 Questions 53 Up Coming Scoops February 28, 2018 March 14, 2018 March 28, 2018 April 11, 2018 April 25, 2018 May 16, 2018 June 6, 2018 June 20, 2018 Held at 8:00 am and 12:00 pm Central time 54 27

28 Upcoming Webinars We are busy at the Center scheduling future webinars in our Summer and Fall-Winter Series Watch your s for future offerings Guest instructors New Law and many suggestions have been incorporated into our upcoming webinars 55 The CALT Staff Kristine A. Tidgren Director for the Center for Agricultural Law and Taxation Phone: (515) Fax: (515)

29 The CALT Staff Kristy S. Maitre Tax Specialist Phone: (515) Fax: (515) Tiffany L. Kayser Program Administrator Phone: (515) Fax: (515)