Dallas CPA Society CPE Conference

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Curtis Flowers
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Dallas CPA Society CPE Conference What We re Going to Cover Section 7216 Brief History Only criminal penalty applicable to preparers Prohibits misuse of taxpayer

1 Dallas CPA Society CPE Conference What We re Going to Cover Section 7216 Brief History Only criminal penalty applicable to preparers Prohibits misuse of taxpayer information Regs 1/1/09 required advance written permission for any use other than tax preparation New guidance in late December 2009 satisfied many of our concerns

2 IRS Clarifications Advance approval not required for: Newsletters even if: Written and distributed by unrelated third party Filtered by type of client Disclosure of statistical data of practice i.e. in practice development activity Disclosures for Quality, peer review or conflict reviews Professional liability insurance matters Acknowledged normal course of accounting services exception May make return information available to: Taxpayers regarding changes in tax law and regulations Third parties such as stockholders, management, suppliers or lenders Next steps Continue to work with Treasury To provide further guidance on the normal course language What We re Going to Cover

3 Disclosure of Uncertain Tax Positions Background US v. Arthur Young (1984) gave IRS access to tax accrual workpapers Historical IRS policy of restraint 1/26/2010 IRS Commissioner Shulman introduced Announcement Fin 48 calculation is stated impetus for IRS proposal Proposal status not yet effective Would require most business tax returns to annually disclose uncertain tax positions 7 Disclosure of Uncertain Tax Positions AICPA Actions AICPA requested 60 day extension to submit comments Comments now due to IRS by 6/1/2010 Task Force preparing response AICPA will comment on both policy and technical aspects of proposal Input solicited from: Tax Technical Resource Panels and Committees Various AICPA teams outside Tax, including BIG AICPA members via special e mailbox 8 Disclosure of Uncertain Tax Positions Concerns Being Considered May alter traditional notion of voluntary and cooperative tax reporting system May cause taxpayers to seek non traditional preparers Possible effects on financial statement reporting Difficult to apply to factual situations Intercompany pricing Executive compensation 9

4 Going forward Gathering member input at MemberinputonAnnouncement2010 IRS extension allows time for AICPA development of its technical and policy concerns Talking to U.S. Chamber of Commerce regarding its coalition building work 10 What We re Going to Cover Tax Preparer Registration Drivers Driven by significant errors with refundable tax credits, i.e., EITC and home buyers credit IRS commenced a review to: Enhance competency, and Elevate the ethical conduct of preparers AICPA engagement was extensive Panel participation Written testimony Face to face meetings 12

5 Tax Preparer Registration Overview January 4 th IRS released proposal Commissioner announced his intent to implement: 1. PTIN 2. All preparers subject to Circular CPE component 4. Testing Phased in implementation not applicable to 2010 filing season Non signing preparer issue 13 Pronouncement and process points Commissioner issued pronouncement within his authority IRS must next issue guidance on implementation: Details on how it s going to work Comment period Tax Division and senior volunteers (including Tax Executive Committee, task forces and staff) fully engaged 14 AICPA Positions Support PTIN requirement Support Circular 230 requirement for all preparers AICPA succeeded in exempting CPAs from education and testing requirements Concern about the exam Concern about creating taxpayer confusion 15

6 Comparing CPA and IRS registered tax preparer requirements CPA requirements College graduate 150 hours college education Uniform CPA exam 120 hours CPE over 3 year period IRS requirements High school graduate 18 years old IRS exam level unknown 15 hours annual tax education 16 What others have said ABA Taxation Section supports. minimum qualifications for return preparers includ(ing) examination to test technical knowledge, competency to prepare returns... Sen. Carl Levin (D MI) For all other applicants, OPR could administer a tax return preparation competency test whose successful completion would be required to obtain initial licensure. 17 What others have said National Society of Accountants One of the minimum standards should be successfully passing a qualifying examination to test basic knowledge any paid preparer should know. If a barber or a beautician needs to pass a competency examination, then a tax preparer should as well, given that a poor effort by the preparer can have substantially worse effects on the client than a bad haircut. H&R Block The program must include a combination of examination and continuing education to demonstrate a minimum level of competence. 18

7 State Snapshot CPAs exempt in all four states Oregon Licensed Tax Consultant (1979) Also a Licensed Tax Preparer category must work under supervision California California Registered Tax Preparer (1997) Maryland Registered Individual Tax Preparer Passed in 2008 not yet implemented New York Tax Return Preparers Registration only for tax preparers effective 2010 Federal cascade to states possible 19 Threats to the CPA profession Minimize threat of credential that confuses and misleads the public Drive implementation solution that supports members practices and public interest Ensure CPAs not subject to fees used to cover non CPA testing or education 20 What We re Going to Cover

Health Care Taxes Health Care Individuals Health Coverage 1. No insurance then pay greater of $95 or 1% of income (2014) $325 or 2% of income (2015) $695 or 2.5% of income (2016) 2.

8 Health Care Taxes Health Care Individuals Health Coverage 1. No insurance then pay greater of $95 or 1% of income (2014) $325 or 2% of income (2015) $695 or 2.5% of income (2016) 2. Premium assistance (2013) Ranges between 2% 9.5% of income Available up to 400% of poverty level Health Care Individuals Medical Expenses 1. Hurdle for itemized deduction (2013) Increases from 7.5% to 10% AGI Transition rule for seniors thru Change in definition of medical expenses (2011) Over the counter medications Coverage for adult children

Health Care Individuals Other Provisions 1. Increase penalty on HSA distributions (2011) 2. Adoption credit Increases limit to $13,170 for 2010 Extends credit to 2011 3.

9 Health Care Individuals Other Provisions 1. Increase penalty on HSA distributions (2011) 2. Adoption credit Increases limit to $13,170 for 2010 Extends credit to % excise tax on tanning (2011) Health Care Medicare Tax (2013) 3.8% on investments 0.9% on earned income Affects high income taxpayers >$200,000 of income (single) > $250,000 of income (joint) Health Care Taxes (cont d)

Health Care Cadillac Plans $10,200 single; $27,500 family Higher limits for high risk professions and over 55 40% excise tax Effective 2018 Health Care Taxes (cont d) Health Care

10 Health Care Cadillac Plans $10,200 single; $27,500 family Higher limits for high risk professions and over 55 40% excise tax Effective 2018 Health Care Taxes (cont d) Health Care Employer Requirements If no plan penalty $2,000 x (50 30) Exception for < 50 employees Effective 2013 Small business credits ( ) 100% premiums (<10 employees) 35% premiums (<25 employees)

11 Codification of Economic substance Included in health care legislation Applicable if no benefit other than tax savings Penalty 40% tax savings (20% if disclosed) Revenue increase $5.5 bil What We re Going to Cover Hiring Incentives to Restore Employment Act Benefits 1. Provides payroll and income tax incentives for hiring workers $13.04 bil New hire after 3/19/10 and before 1/1/11 Must be unemployed for more than 60 days 2. Extends 179 exp through 2010 $35 mil 3. Expands Build America Bonds $4.56 bil Subsidizes 65% interest payment to issuer

12 Hiring Incentives to Restore Employment Act New Hires Tax Breaks 1. Social Security Tax Exemption 6.2% of wages paid up to FICA limit of $106,800 (i.e., max. of $6,621) Would still owe Medicare tax 2. Income Tax Credit Up to $1,000 Must retain worker for 52 weeks 2010 benefit but taken on 2011 returns Hiring Incentives to Restore Employment Act Revenue offsets $18.62 bil 1. Increase estimated tax payments large ($1 bil assets) corporations 2. International related provisions 30% withholding penalty on foreign banks that do not disclose US accounts Penalty on taxpayers that fail to report foreign accounts 6 yr SOL for failure to report offshore transactions and income Clarification on when foreign trust has US beneficiary Treat substitute dividend payments to foreign persons as dividends for US withholding Delay world wide interest allocation What We re Going to Cover S 2917 Small Business Jobs Act Estate Tax Extenders Bill

13 Levin s List Estate tax Permit an election of 2009 or 2010 rules AMT 2 year patch Marginal rates Extend 2001 cuts for middle class (10,15, 25 and 28% rates) Bring back the 39.6% rate Extend unemployment benefits What We re Going to Cover S 2917 Small Business Jobs Act Estate Tax Extenders Bill S 2917 Small Business and Jobs Tax Act Benefits 100% exclusion of gains on small business stock Extension of Build America Bonds But Fed l payments would decrease from 35% to 30% by 2013 Exempt IDB from AMT Increase in start up expenses for 2010 and 2011

14 S 2917 Penalty Relief 6707A failure to report listed transaction Strict liability penalty $100k/individual $200k for other taxpayers IRS extended until June 1 its moratorium on collecting penalty and/or filing liens S 2917 reduce penalty to 75% tax benefit Retroactive to1/1/07 S 2917 Small Business and Infrastructure Jobs Act Revenue offsets 1099 s for expenses related to rental property Clamp down on federal contractors and vendors Minimum term of 10 years for GRATs Various international tax provisions Small Business Tax Relief House 100% exclusion from gain sale small business stock Purchase directly from Corp between 3/15/10 and 12/1/12 When corp has less than $50mil in assets Hold for 5 years Start up expenses Immediate deduction $20,000 (currently $5,000) bur reduce dollar for dollar to extent expenses exceed $75,000 Extend Build America Bonds to 2013 IDB bonds issued in 2011 exempt from AMT

15 What We re Going to Cover S 2917 Small Business Jobs Act Estate Tax Extenders Bill Estate Tax?? Temporary fix for confusion Permit an election to follow 2010 repeal or 2009 rates and exemption Exemption $5 mil Rate 35% New features Portability between spouses Conformity with gift, GST and special use valuations Exemption indexed to inflation What We re Going to Cover S 2917 Small Business Jobs Act Estate Tax Extenders Bill

16 Senate Extenders Bill Individuals Energy efficient home credits Standard deduction for real estate taxes Itemized deduction for sales taxes Qualified tuition deduction Charitable contributions from retirement plans Refundable low income housing credits Businesses R&D credit 15 yr life for leasehold, restaurant and retail improvements Charitable deduction for food inventory Offsets Repeal Black liquor credit $21.7 bil Increase reporting requirements for first time home buyer negligible Codify economic substance doctrine $5.5 bil Information reporting for rental property expense payments $2.5 bil Have a Great Conference! Senate Tax Bill Extend COBRA subsidy for workers laid off in 2010 Under funded pensions would have 15 years to catch up (now 7 years) Extend for 2010 Deductions College tuition State sales tax Teacher s supplies R&D credit IRA direct payouts to charities

17 Cobra benefits n/a if terminated after 2/28/10 even though benefits for those previously laid off were extended to 15 months

2012 TO 2013 TAX TRANSITIONS SUMMARY

2012 TO 2013 TAX TRANSITIONS SUMMARY September 2012 Individual Income Tax 2012 Law Scheduled 2013 Law* Green Book Q3 and Q4 2012 and Q1 2013 General Overview Lower rates with special treatment of qualified