The Scoop. Agenda 2/26/2018

Transcription

1 Center for Agricultural Law & Taxation The Scoop February 28, 2018 Agenda Potential new IRS Commission The Code is now 2 volumes Depreciation Error needs congressional change Extenders that can now be e filed Inappropriate Referrals to the IRS e help Desk are Causing Longer Hold Times 2017 Production Costs for Self Use Do Not Forget to Input W 2 Verification Codes What Should You Do if You Entered an Incorrect Routing or Account Number for Direct Deposit of a Refund? 2 1

2 Agenda Iowa Form 8582 Issue Iowa Perfection of the Return Do Not Rush to Amend Returns Already Filed to Include and Extender Provisions IRS Alerts Taxpayers About Corrected Forms 1095 A HealthCare.gov Electronic Logging Devices DOT Rules Medicare Extra Proposal Only Interest on Home Equity Loans Often Still Deductible Under New Law New CALT Employee 3 Potential New IRS Commissioner President Trump is expected to nominate Charles Rettig as IRS Commissioner Also, just received the Winter 2018 Internal Revenue Code in the mail, weighs about 10# (could be used as a paper weight) and is now 2 volumes and does include the new law I would wait to order regulations until next year 4 2

3 Depreciation Error We will need Congressional action to repair oversite Congress attempted to combine three types of improvement property eligible for depreciation under one umbrella qualified improvement property The law failed to assign it a cost recovery period intent was 15 years, but since this was not noted in the law the property is now 39 year property beginning in 2018 The expensing measure became effective for property with a recovery period of 20 years or less that was acquired and placed in service after September 27,2017 From September 28,2017 December 31, 2017 expensing is allowed as 15 year property 5 Extenders That Can Now Be E Filed IRS announced that taxpayers can now file returns claiming: Exclusion from gross income of discharge of qualified principal residence indebtedness (often, foreclosurerelated debt forgiveness), claimed on Form 982 Mortgage insurance premiums treated as qualified residence interest, generally claimed by low and middle income filers on Schedule A and Deduction for qualified tuition and related expenses claimed on Form 8917 Check your software for updates 6 3

4 Inappropriate Referrals to the IRS e help Desk are Causing Longer Hold Times Each filing season, the e help Desk receives phone calls from taxpayers because their tax preparer referred them for assistance resolving rejected returns, tax law and tax account matters The e help desk cannot help these callers and must direct them to other sources for assistance typically IRS.gov including Publication 5136, IRS Services Guide The EPSS e help Desk is intended specifically to assist tax professionals (Enrolled Agents, Reporting Agents, Electronic Return Originators, Certified Public Accountants, etc.) with non account related questions and issues concerning e products They do not provide support to individual taxpayers experiencing e filing issues Production Costs for Self Use 8 4

5 Do Not Forget to Input W 2 Verification Codes Verification codes will appear on more than 60 million tax year 2017 Forms W 2 That s nearly one out of every four Forms W 2. A Form W 2 with a verification code will display it in Box 9, newly labeled Verification Code A Form W 2 without a verification code may include a blank Box 9 or no Box 9 at all The verification code will be displayed in four groups of four alphanumeric characters, separated by hyphens. Example: XXXX XXXX XXXX XXXX 9 Do Not Forget to Input W 2 Verification Codes The only valid characters are the letters A F and the numerals 0 9 The verification code will appear on Form W 2 copies B ("To be filed with employee's federal tax return") and C ("For employee's records") Taxpayers without a verification code on their Form(s) W 2 may leave the verification code box blank in their tax software product 10 5

6 What Should You Do if You Entered an Incorrect Routing or Account Number for Direct Deposit of a Refund? The IRS assumes no responsibility for tax preparer or taxpayer error Please have your client verify the account and routing numbers with the financial institution and double check the accuracy of the numbers entered on the return prior to signing and submitting it Taxpayers should not request a deposit of their refund into an account that's not in their own name The IRS handles account or routing number errors the same for both split refunds and regular direct deposits 11 Scenario You omit a digit in the account or routing number of an account and the number doesn't pass the IRS's validation check In this case, the IRS will send a paper check for the entire refund instead of a direct deposit 12 6

7 Scenario You incorrectly enter an account or routing number and the number passes the validation check but the designated financial institution rejects and returns the deposit to the IRS The IRS will issue a paper check for that portion of the refund once received 13 Scenario You incorrectly enter an account or routing number that belongs to someone else and the designated financial institution accepts the deposit You must work directly with the respective financial institution to recover the funds 14 7

8 Scenario You requested a Refund Anticipation Loan (RAL) or Refund Anticipation Check (RAC) through the preparer or preparation software Usually this occurs when the client authorizes the fee for preparation to be taken from the refund Even if they didn't request a direct deposit, these types of refunds are directly deposited into the preparer s financial institution so the client will need to contact that institution for resolution 15 Scenario If the return hasn't already posted to the IRS system, you can ask IRS to stop the direct deposit You may call us toll free at , M F, 7 a.m. 7 p.m. Generally, if the financial institution recovers the funds and returns them to the IRS, the IRS will send a paper refund check to the last known address on file with the IRS 16 8

9 Scenario If the client has contacted the financial institution and two weeks have passed with no results, they will need to file Form 3911, Taxpayer Statement Regarding Refund, to initiate a trace This allows the IRS to contact the bank on the client s behalf to attempt recovery of the refund Banks are allowed up to 90 days from the date of the initial trace input to respond to the request for information 17 Scenario If funds aren't available or the bank refuses to return the funds, the IRS cannot compel the bank to do so The case may then become a civil matter between the client and the financial institution and/or the owner of the account into which the funds were deposited. If you are not licensed to represent the client you may have issues and your taxpayer may need to resolve Others will need a POA 18 9

10 Iowa Form 8582 Issue The form that is causing issues is a part of the Iowa return It is the federal form with this on the top IA Copy IA Amounts The numbers are present but the form will not print The statements for Iowa also will not print out Some programs will not allow e file of the return I have seen no response from Iowa concerning this issue, no s, no follow up calls Just do the best you can as we approach the March 1 deadline There still may be an update this week, monitor 19 Iowa Perfection of the Return Though most file federal and state together this change in Iowa processing could have an impact if federal and state are filed separately such as filing federal by due date but filing state on the April 30 due date The link below to an Iowa update might have been the cause of the Iowa message in Lacerte (Iowa put out a new e file guidance on 02/14/18, see page 9). 20%282%29.pdf 20 10

11 Iowa Perfection of the Return If you walk through their guidance, if you submit 11:50 pm on the due date, but that State of Iowa does not process the acceptance until 48 hours later, the return is not timely (the e postmark is Iowa s acceptance time) If IDOR s system is delayed in accepting beyond the 48 hours, the return is magically timely because the e postmark is based on the IRS acceptance, which is almost instantly under MeF Either way, this provides no assurance to anyone submitting on the due date even ignoring the ACH issue 21 Do Not Rush to Amend Returns Already Filed to Include and Extender Provisions Accommodations to some of the expired provisions on the current tax forms, such as Line 34 on the Form 1040, which IRS has marked as Reserved for future use If your client s return has already been filed and they are expecting a refund, do not file an amended return until the refund has been received It can delay the processing of both returns if an amended return is put into the system before the original return has been processed and the refund issued Make sure that your client is affected (and has not been phased out by income or other restrictions) by the extenders before taking additional steps 22 11

12 IRS Alerts Taxpayers About Corrected Forms 1095 A Taxpayers who receive corrected 2017 Forms 1095 A, Health Insurance Marketplace Statement, may need to file an amended return, if they have already filed, the IRS has reported The Service highlighted some corrections that may require an amended return The Service also instructed taxpayers what to do if they receive a "void" Form 1095 A Note: Taxpayers who believe that they received a corrected or void Form 1095 A by mistake should contact the Health Insurance Marketplace and not the IRS 23 IRS Alerts Taxpayers About Corrected Forms 1095 A Individuals with coverage through the Health Insurance Marketplace receive Form 1095 A from the Marketplace Form 1095 A describes the health coverage This includes the dates of coverage, the amount of the second lowest cost Silver plan premium (used to determine any premium assistance tax credit), and any amounts of advance payments of the credit 2017 Forms 1095 A were due to Marketplace enrollees by January 31,

13 IRS Alerts Taxpayers About Corrected Forms 1095 A Corrections Taxpayers who have already filed their 2017 returns should determine the impact, if any, corrections on Form 1095 A may have on their returns, the IRS advised The Service explained that corrections likely affecting a return include: Changes to the number of individuals covered, or their ages Changes to monthly premium Changes in the amount of the second lowest cost Silver plan premium Changes in advance payments of the premium assistance tax credit Changes in months of coverage 25 Void Forms 1095 A The Health Insurance Marketplace may also issue a "void" Form 1095 A Generally, this occurs when an individual applied for Marketplace coverage but did not complete his or her enrollment A "void" Form 1095 A would affect a taxpayer s eligibility for the premium assistance tax credit Only individuals who enroll in coverage through the Health Insurance Marketplace may claim the credit If a taxpayer did not complete enrollment in the Marketplace, he or she would be ineligible for the credit 26 13

14 HealthCare.gov tool/#/ 27 Electronic Logging Devices DOT Rules The electronic logging device (ELD) rule congressionally mandated as a part of MAP 21 is intended to help create a safer work environment for drivers, and make it easier and faster to accurately track, manage, and share records of duty status (RODS) data An ELD synchronizes with a vehicle engine to automatically record driving time, for easier, more accurate hours of service (HOS) recording 28 14

15 ELD What Do You Need to Know? The ELD Rule applies to most motor carriers and drivers who are currently required to maintain records of duty status (RODS) The rule applies to commercial buses as well as trucks Canada and Mexico domiciled drivers are included, unless they qualify for one of the exceptions to the ELD rule 29 ELD Rule Exceptions The following are not required to use ELDs (but carriers may choose to use ELDs even if they are not required): Drivers who use paper logs no more than 8 days during any 30 day period Driveaway towaway drivers (were the vehicle driven is the commodity) or the vehicle being transported is a motor home or a recreation vehicle trailer (at least one set of wheels of the vehicle being transported must be on the surface while being transported) Drivers of vehicles manufactured before model year

16 Implementation Timeline 31 Center for Agricultural Law & Taxation Do You See A Problem? 32 16

17 How Long must Motor Carriers Retain Records of Duty Status (RODS) and Supporting Documents? Motor carriers must retain RODS and supporting documents for six months Bills of lading, itineraries, schedules, or equivalent documents that show the starting and ending location for each trip Dispatch records, trip records, or equivalent documents Expense receipts related to on duty/not driving periods (meals, lodging, fuel, etc.) Fleet management system communication records Payroll records, settlement sheets, or equivalent documents showing payment to a driver 33 Medicare Extra Proposal Only The Center for American Progress proposes a new system Medicare Extra for All Medicare Extra would include important enhancements to the current Medicare program: An out of pocket limit Coverage of dental care and hearing aids, and Integrated drug benefits Medicare Extra would be available to all Americans, regardless of income, health status, age, or insurance status 34 17

18 Medicare Extra Employers would have the option to sponsor Medicare Extra and employees would have the option to choose Medicare Extra over their employer coverage Medicare Extra would provide comprehensive benefits, including free preventive care, free treatment for chronic disease, and free generic drugs 35 The Plan Would Guarantee the Following Benefits Primary and preventive services Hospital services, including emergency services Ambulatory services Prescription drugs and medical devices Laboratory services Maternity, newborn, and reproductive health care Mental health and substance use disorder services Habilitative and rehabilitative services Dental, vision, and hearing services Early and periodic screening, diagnostic, and treatment services for children 36 18

19 Interest on Home Equity Loans Often Still Deductible Under New Law Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer s home that secures the loan Under the new law, for example, interest on a home equityloan usedto buildan addition to anexistinghome 37 Interest on Home Equity Loans Often Still Deductible Under New Law Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not As under prior law, the loan must be secured by the taxpayer s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements 38 19

20 Interest on Home Equity Loans Often Still Deductible Under New Law New dollar limit on total qualified residence loan balance For anyone considering taking out a mortgage, the new law imposes a lower dollar limit on mortgages qualifying for the home mortgage interest deduction Beginning in 2018, taxpayers may only deduct interest on $750,000 of qualified residence loans The limit is $375,000 for a married taxpayer filing a separate return These are down from the prior limits of $1 million, or $500,000 for a married taxpayer filing a separate return The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer s main home and second home 39 Examples Example 1: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home with a fair market value of $800,000 In February 2018, the taxpayer takes out a $250,000 home equity loan to put an addition on the main home Both loans are secured by the main home and the total does not exceed the cost of the home Because the total amount of both loans does not exceed $750,000, all of the interest paid on the loans is deductible However, if the taxpayer used the home equity loan proceeds for personal expenses, such as paying off student loans and credit cards, then the interest on the home equity loan would 40 not be deductible 20

21 Examples Example 2: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home The loan is secured by the main home In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home The loan is secured by the vacation home Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would not be deductible 41 Examples Example 3: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home The loan is secured by the main home In February 2018, the taxpayer takes out a $500,000 loan to purchase a vacation home The loan is secured by the vacation home Because the total amount of both mortgages exceeds $750,000, not all of the interest paid on the mortgages is deductible A percentage of the total interest paid is deductible 42 21

22 Bella is a New CALT Employee Helping Me Study 43 Questions 44 22

23 Up Coming Scoops 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 45 The CALT Staff Kristine A. Tidgren Director for the Center for Agricultural Law and Taxation Iowa State University 211 Curtiss Hall 513 Farm House Lane Ames, IA E mail: ktidgren@iastate.edu Phone: (515) Fax: (515)

24 The CALT Staff Kristy S. Maitre Tax Specialist E mail: ksmaitre@iastate.edu Phone: (515) Fax: (515) Tiffany L. Kayser Program Administrator E mail: tlkayser@iastate.edu Phone: (515) Fax: (515)