5/30/2017. The Scoop. Agenda. New Medicare Cards Are on the Way

Transcription

1 The Scoop May 31, 2017 Agenda New Medicare Cards Are on the Way Fraudsters Exploited Lax Security at Equifax s TALX Payroll Division Opportunity Coming to Participate in New Correspondence Examination Digital Pilot Program Summary of CALT attendance at the Joint Committee on Taxation Committee Minnesota Tax Information for Military South Dakota First Time Homebuyer Program 2 New Medicare Cards Are on the Way Changes are coming to the Medicare card By April 2019, the card will be replaced with one that no longer shows the Social Security number Instead, the card will have a new Medicare Beneficiary Identifier (MBI) that will be used for billing and for checking eligibility and claim status And it will all happen automatically individuals won t have to pay anyone or give anyone information 3 1

2 New Medicare Cards Are on the Way Having the Social Security number removed from the Medicare card helps fight medical identity theft and protect medical and financial information But even with these changes, scammers will still look for ways to take what doesn t belong to them For more on the new changes to your Medicare card, visit Centers for Medicare & Medicaid Services 4 Here Are Some Ways to Avoid Medicare Scams If someone calling, claims to be from Medicare, and is asking for the Social Security number or bank information? Hang up. That s a scam First, Medicare won t call taxpayers Second, Medicare will never ask for the Social Security number or bank information If someone asks the taxpayer to pay for your new card? That s a scam The new Medicare card is free Is someone threatening to cancel benefits if the taxpayer does not provide information or money? Also a scam New Medicare cards will be mailed out automatically, there won t be any changes to the benefits 5 Fraudsters Exploited Lax Security at Equifax s TALX Payroll Division Identity thieves who specialize in tax refund fraud had big help this past tax year from Equifax, one of the nation s largest consumer data brokers and credit bureaus The trouble stems from TALX, an Equifax subsidiary that provides online payroll, HR and tax services Equifax says crooks were able to reset the 4-digit PIN given to customer employees as a password and then steal W-2 tax data after successfully answering personal questions about those employees 6 2

3 Fraudsters Exploited Lax Security at Equifax s TALX Payroll Division In a boilerplate text sent to several affected customers, Equifax said the unauthorized access to customers employee tax records happened between April 17, 2016 and March 29, 2017 Beyond that, the extent of the fraud perpetrated with the help of hacked TALX accounts is unclear, and Equifax refused requests to say how many consumers or payroll service customers may have been impacted by the authentication weaknesses 7 Opportunity Coming to Participate in New Correspondence Examination Digital Pilot Program The IRS Taxpayer Digital Communications (TDC) Secure Messaging pilot program has started with correspondence examinations involving Schedule A and has expanded to include some other issues During the pilot the IRS will invite approximately 8,000 taxpayers under correspondence examinations to communicate with the Service using secure messaging through digital communication channels 8 Opportunity Coming to Participate in New Correspondence Examination Digital Pilot Program The pilot program is by invitation only Taxpayers and their tax professionals with valid powers of attorney (POA) can participate only if the client receives a marketing insert or letter saying they are eligible If your client is invited, encourage him or her to volunteer for this pilot program Your POA must already be on file and showing on the Centralized Authorization File (CAF) system before you as a tax professional can participate 9 3

4 Opportunity Coming to Participate in New Correspondence Examination Digital Pilot Program After your client receives an invitation and registers via IRS Secure Access, you must also authenticate via IRS Secure Access under your own SSN and complete the Request Access verification process After IRS verifies the POA is authorized, you will have access to your own secure message mailbox in TDC to receive copies of messages and communicate with IRS 10 On, the Land Grant University group and additional groups met with select staff of the Joint Committee on Taxation in Washington, D.C The staff discussed their work and shared with the group issues associated with the status of the Affordable Care Act repeal and replace and the future of Tax Reform in the coming months For the most part everything is in flux, but they did give us some guidance on what to monitor 11 There is a lot of middle ground on both issues and ongoing hearings discussing the possibilities as Congress moves forward The Blueprint is still on the table In June 2016, Ways and Means Republicans led the effort to unveil a Better Way for Tax Reform This blueprint delivers a 21st century tax code built for growth the growth of families paychecks, the growth of American businesses, and the growth of our nation s economy 12 4

5 The Blueprint also provides unprecedented simplicity and fairness for taxpayers, which means most Americans will be able to file their taxes on a form as simple as a postcard With a simpler, fairer tax code, Americans need a simpler, fairer tax collector The Blueprint redesigns the Internal Revenue Service (IRS) into an agency with a singular focus: Service First 13 The House has passed their ACA repeal and replace legislation and the Senate has not yet announced a draft of their proposals The thought is the 2017 will be the year for ACA repeal and replace, but not before August of 2017, more than likely this will be later in the year Whereas 2018, will be the year for Tax Reform 14 The issue of 2018 elections could delay that though if not passed before Memorial Day 2018, as those up for election will leave Washington to campaign That could push Tax Reform into 2019 The push to be revenue neutral will be strong, and how to pay for credits and other programs could place key provisions on the chopping block 15 5

6 So, as we move forward there are three possible tax proposals for reform we should be monitoring Trump proposal not much information here until the proposal is more clearly defined The Blueprint The possibility of small bills introduced for Congress to get a feel for which way to go 16 The first of those bills that were mentioned by the committee is the Invest Act of 2017 introduced by Senator Thune, John [R-SD] on May 17, The bill (S. 1144) introduces several tax reform proposals Unification and expansion of deduction for startup and organizational expenditures Modifications of gross receipts test for use of cash method of accounting by corporations and partnerships 17 Clarification of inventory accounting rules for small businesses Modification of rules for capitalization and inclusion in inventory costs of certain expenses Increase in gross receipts test for construction contract exception to percentage of completion method 18 6

7 Modifications of rules for expensing depreciable business assets 50-percent expensing made permanent Modifications of treatment of certain farm property. Secretarial requirement to reexamine economic depreciation for classes of depreciable property Modifications to depreciation limitations on luxury automobiles and personal use property 19 The Blueprint is still alive but House and Senate have different viewpoints As a reminder, there are still several bills that could be addressed during 2017, the Technical Correction Act, which makes significant corrections to the new Partnership Audit Regime Also, mentioned pending legislation on financial derivatives, the border adjustment tax and a possible future discussion on infrastructure may still occur at some point. 20 Tax Preparer Regulation Currently, Congress is not in favor of legislation to authorize IRS to regulate tax professionals They are concerned about compliance, bad tax advice, lack of service, identity theft returns and training for the tax professional community but, Congress must be convinced the regulation is necessary 21 7

8 Agriculture Some chief concerns with what has been proposed for Agriculture was discussed with a local lobby group The group supports replacing the current federal income tax with a fair and equitable tax system that also supports the agriculture community Concerns included: 22 Like-Kind Exchange - in existence since 1921 The House Republican tax reform blueprint is silent on 1031, though there have been previous discussions on possible repeal of the issue Capital gains and stepped up basis- the House Republican proposes taxing capital gains as ordinary income tax rates with a 50% reduction Since the blueprint lowers the individual tax rates, the top capital gain rate would be 16.5%, down from 20% 23 As for stepped up basis chief concerns are the fact that the blueprint is silent But concerns are justified if the estate tax is repealed and stepped up basis is not part of the discussion 24 8

9 Cash Accounting the House Republican blueprint does not address the continuation of cash accounting Effective tax rates the blueprint proposes lowering the top individual rates to 33% In addition, the corporate rate would be lowered to 20% and would create a new pass-through business rate of 25% The immediate expensing for business expenses is provided for with an indefinite carryforward that is adjusted for inflation 25 Estate Tax Repeal legislation has been introduced in two bills, that support estate tax repeal The first is H.R. 631 Death Tax Repeal Act of 2017, which will repeal estate tax but retains the stepped-up basis Sen. John Thune has introduced S. 205 which amends the Internal Revenue Code to: (1) repeal the estate and generation-skipping transfer taxes, and (2) make permanent the maximum 35% gift tax rate and the lifetime gift tax exemption The bill also provides for an inflation adjustment to such exemption amount. This legislation is a companion to S Deduction for Interest Expense Farming is almost completely debt-financed, approximately 95% The elimination of this deduction for business expense interest would result in a tax increase for the farming community 27 9

10 Border adjustment tax this is a key issue under discussion and as stated could be a lightening rod as Congress moves forward with tax reform The plan creates a territorial tax system that imposes taxes where a good or service is consumed rather than where it is produced Farmers could benefit from a properly structured border adjustment tax that follows international trade agreements In a nutshell, there would be no border tax on products exported, but those imported would lead to a larger tax liability 28 An integral element of this Blueprint will be to rebuild the IRS into a modern and efficient 21st century administrator of the nation s tax system The new IRS will have a streamlined structure aligned with the simpler and fairer tax system for families and individuals and businesses of all sizes Streamlined Taxpayer Service Agency with a dramatically simpler tax code, the Blueprint will create a new streamlined IRS dedicated to delivering world-class customer service The new IRS will be centered on three major units: families and individuals, businesses, and an independent small claims court unit 29 The families and individual s unit will focus on providing state of the art customer service so that taxpayers can get efficient help and answers to their tax questions The business unit will focus on administering the new tax code for businesses of all sizes and types, including specialists with expertise on the issues facing start-up entrepreneurs and small businesses and Specialists with expertise on the issues facing large domestic companies and American-based global corporations 30 10

11 The small claims court unit will be independent of the new IRS This will allow routine disputes to be resolved more quickly, so that small businesses no longer spend more in legal fees to resolve a dispute with the IRS than the amount of tax that was at stake 31 Committee on Agriculture The group also met with the Committee on Agriculture as well as the USDA As for the committee, they discussed possible reduction in the Supplemental Nutrition Assistance Program (SNAP) and crop insurance based on agency budget projections But, the devil is in the details and there is much work to be done before any final budget details are firm 32 No major changes have been proposed to the crop insurance program, but they have 37 programs which have no baseline No Farm Bill is predicted for this year as the Blueprint for Tax Reform moves forward Any revenue neutral bill will then leave each agency a cut of the pie to determine where funds will end up 33 11

12 Bottom Line Unknown outcomes Much work to be done Congress will look to get a feel based on public response Timeframe a moving target once again 34 State News 35 Minnesota Tax Benefits Available to Military Members New in Military Pension Subtraction. Certain military retirement pay (including pensions) can be subtracted from the Minnesota taxable income Credit for Military Service in a Combat Zone. A taxpayer may qualify for this credit if they served in a combat zone or qualified hazardous duty area on or after January 1, 2013 Credit for Past Military Service. If the taxpayer is a veteran of the U.S. military, including the National Guard and Reserves, they may qualify for a tax credit of up to $750 for past service 36 12

13 Minnesota Tax Benefits Available to Military Members Active-Duty Military Pay Subtraction - Members of the military who are Minnesota residents may subtract federally taxable active-duty military pay when determining their Minnesota tax Filing Extensions. If the taxpayer is serving in the U.S. military and cannot file or pay their Minnesota income tax by the due date, they may be eligible for an extension Market Value Exclusion on Homesteads of Disabled Veterans. If the taxpayer is an honorably discharged veteran who has a service-connected disability rating of 70 percent or higher, they may qualify for a property tax exclusion on the homestead 37 South Dakota First Time Home Buyers Program SDHDA's Tax Credit is available through a Mortgage Credit Certificate (MCC), which reduces the amount of federal income tax paid, giving the taxpayer more disposable income With SDHDA's Tax Credit (MCC), a percentage of the mortgage interest can be used as a dollar-for-dollar reduction in the tax bill and the remaining interest paid is still eligible for the home mortgage interest deduction 38 The Scoop Upcoming Dates June 7 June 21 July 5 July 19 August16 August 30 Held at 8:00 am and 12:00 pm Central time 39 13

14 Up Coming Webinars Ethics Part 1 and Part 2 (June 6) Webinar: Part 1 - Form 3115 {Comprehensive Overview} June 8 Form Sale of a Business Asset, June 13 ACA - Where Are We with Repeal/Replace, Status Update and Other Issues - June 14 Part 2 - Form 3115 {Correcting Depreciation 481(a) Adjustment} June 15 My Client Dies, What s Next?, June 20 Webinar: The Fundamentals of Trusts - June 22 Payment of Wages with Commodities and Gifting Grain - June 27 Handling Tax Returns for Religious Groups Amish and Mennonite June Iowa Taxpayer Advocate June 7, 2017, Problem Resolution Day - Iowa Taxpayer Advocate Service, Cedar Rapids, Iowa Online Free Webinar: 4th Annual Taxpayer Advocate Town Hall Meeting - June 28, Upcoming Seminars Mark Your Calendar Final Dates S Corporation July 20-21, 2017, Live and Webinar September 21, 2017 Ag Law Seminar, Live and Webinar September 22, 2017 Farm and Estate Tax Review, Live and Webinar Retirement and Social Security Issues(Webinar) = October 10-11,

15 The Schedule is Finalized for the 44th Annual Federal Income Tax Schools November 2-3, 2017 Maquoketa, Iowa Centerstone Inn and Suites November 6-7, 2017 Le Mars, Iowa Le Mars Convention Center November 8-9, 2017 Atlantic, Iowa Cass County Community Center November 9-10, 2017 Mason City, Iowa North Iowa Area Community College November 16-17, 2017 Ottumwa, Iowa Indian Hills Community College November 20-21, 2017 Waterloo, Iowa Hawkeye Community College December 11-12, 2017 Ames, Iowa and Live Webinar Quality Inn and Suites The CALT Staff William Edwards Interim Director for the Beginning Farmer Center Interim Director for the Center for Agricultural Law and Taxation Heady 518 Farm House Ln Ames. Iowa Kristine A. Tidgren Assistant Director Phone: (515) Fax: (515) The CALT Staff Kristy S. Maitre Tax Specialist Phone: (515) Fax: (515) Tiffany L. Kayser Program Administrator Phone: (515) Fax: (515)