3/6/2017. The Scoop. Agenda. Agenda

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1 The Scoop March 8, 2017 Agenda Farm Audits Alimony Audits ID Theft Lock Security Criminal Investigations 2016 Annual Report Trumps Address to Congress Confusion Still Reigns with IRS Decision on ACA Filing Season Stats thru February 24, 2017 IRS Guidance ACA-What Happening? QSEHRA Additional Guidance 2 Agenda Six-Month Extension Period for Calendar Year C Corporations IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return IRS Funding President Proposal GOP Tax Discussion Associated Press Stephen Ohlemacher Special Enrollment Examination Fee increase Proposed Legislation 3 1

2 SBSE Pilot Program Auditing Schedule F Expenses The pilot is expected to begin April 1, 2017 and conclude April 1, 2018 Totaling 50 cases from the year 2015 Purpose: This interim guidance communicates temporary procedures for a pilot program auditing Schedule F Expenses The pilot will focus on verifying certain Schedule F expenses 4 SBSE Interim Guidance on Alimony Recipient Non-Filer Pilot Program This memorandum issues guidance on a pilot program for Alimony Recipient Non-Filers for SB/SE Correspondence Examination This interim guidance communicates temporary guidance for a pilot program in which alimony recipients with potential tax liability without a return on record will be contacted in accordance with Non-Filer program procedures cases 5 Identity Theft Lock Security Reject issue is: Error Code IND-901: The Primary SSN in the Return Header has been locked because Social Security Administration records indicate the number belongs to a deceased individual 6 2

3 IRS Criminal Investigation Releases Fiscal Year 2016 Annual Report IR , Feb. 27, 2017 IRS CI initiated 3,395 cases in FY 2016 that focused on: Tax-related identity theft Money laundering Public corruption Cybercrime and Terrorist financing CI is the only federal law enforcement agency with jurisdiction over federal tax crimes. 7 IRS Criminal Investigation Releases Fiscal Year 2016 Annual Report This year, CI again boasted a conviction rate rivaling all of federal law enforcement at 92.1percent That conviction rate speaks to the thoroughness of the investigations CI is routinely called upon by prosecutors across the country to lead financial investigations on a wide variety of financial crimes including international tax evasion, identity theft, terrorist financing and transnational organized crime 8 IRS Criminal Investigation Releases Fiscal Year 2016 Annual Report 9 3

4 Trumps Address to Congress Focus on jobs and the economy Tax Reform a simpler and fairer tax code Debt reduction, shake things up and reenergize the economy Rebuild the military Repeal the Affordable Care Act Fix aging infrastructure Introduce America s First Energy Plan safe use of domestic resources Financial reform Expanding school choice Establish a task force on crime and public safety Develop a plan to defeat ISIS and identity a plan concerning Afghanistan 10 Confusion Still Reigns with IRS Decision on ACA Uncertainty concerning enforcement Silent returns Will IRS send follow-up letters after filing season to require taxpayer s prove coverage? IRS declines to say whether enforcement action will occur Possible track the silent returns to estimate non-compliance with ACA Tax professional are obligated to submit correct and complete returns per Circular about 4.3 million non-dependent taxpayers failed to report health coverage or claim an exemption IRS still analyzing those returns to determine how to proceed 11 Filing Season Stats thru February 24,

5 Summary Less returns received then last year at this time down 10%+ Average refund $3,164 very close to last year Web usage down as well 13 IRS Guidance - Stalled Due to Trump administration policy changes restricting new regulations Agencies must eliminate two Regulations for every new one issued Regulatory freezing pending administrative review No new revenue rulings or procedures to be issued Just routine administrative items may be released Updates on interest rates Mileage allowances, etc. Chief Counsel Memorandums Private Letter rulings 14 ACA-What Happening? Changes daily : Announcement last week: Repeal the medical device tax Cap the employer exclusion for health insurance costs Effective January 2020 Establish age-based healthcare credits Cadillac tax on high-cost healthcare plans would be repealed effective January 1, 2018 Retroactively repeal the individual and employer mandate penalties for persons without coverage, effective January 1, 2017 The tanning tax and the net investment income tax would be repealed effective January 1, 2017 Allow any unused healthcare credits to be advanceable into designated health savings accounts for individuals, except those with 15 seriously delinquent tax debts 5

6 QSEHRA Additional Guidance The IRS has issued guidance (Notice ) extending the deadline by which an employer must give its eligible employees an initial written notice regarding a qualified small employer health reimbursement arrangement (QSEHRA) under 9831(d) Per 9831(d), added to the code by the 21st Century Cures Act, an eligible employer -- usually an employer with less than 50 full-time employees that doesn't offer a group health plan -- may provide a QSEHRA to its eligible employees 16 QSEHRA Additional Guidance 9831(d)(4) generally requires an eligible employer to furnish a written notice providing specified information to its eligible employees at least 90 days before the beginning of a year for which the QSEHRA is provided For years beginning after December 13, 2016, 6652(o) imposes a penalty for failing to timely provide the required written QSEHRA notice 17 QSEHRA Additional Guidance An eligible employer that provides a QSEHRA for a year beginning in 2017 won't be treated as failing to timely provide the initial written notice if it's provided to its eligible employees by March 13, 2017, which is 90 days after the enactment of the Cures Act. Notice specifies that an eligible employer that provides a QSEHRA for a year beginning in 2017 is not required to provide the initial written notice pending further guidance 18 6

7 QSEHRA Additional Guidance That guidance will specify a deadline for providing the initial written notice that is no earlier than 90 days following the additional guidance 6652(o) penalties won't be imposed for failure to provide the initial written notice before the extended deadline specified in that guidance Employers that provide the QSEHRA notice to their eligible employees before further guidance is issued may rely on a reasonable good faith interpretation of the statute to determine the contents of the notice Tax Notes 19 Six-Month Extension Period for Calendar Year C Corporations A new revision of the Instructions for Form 7004, correctly reflects that calendar year C corporations are eligible for an automatic 6-month extension Although Internal Revenue Code 6081(b) provides a 5- month automatic extension period for calendar year C Corporations, the IRS is granting a 6-month automatic extension under 6081(a) instead This change is reflected in the new revision of the Instructions for Form IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return State-by-state estimates of individuals who may be due 2013 tax refunds: 21 7

8 IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return 22 IRS Funding President Proposal $1 billion cut = 14% cut Lost 13,000+ employees since 2010 Federal hiring freeze still in place 23 IRS Overall Staff 24 8

9 IRS Enforcement Staff 25 IRS Funding 26 GOP Tax Discussion Associated Press Stephen Ohlemacher Retirement savings safe Employer provided health insurance danger Capital gains and dividends safe Earned Income Tax Credit safe but could be changes Mortgage interest safe, could be changes to high priced homes Charitable deductions safe Child Tax Credit safe some proposal could increase or adjust Social Security and Retirement safe State and Local Taxes danger Property taxes - danger 27 9

10 Special Enrollment Examination Effective March 1, the fee for taking each of the three parts of the Special Enrollment Examination increased from $109 to $ The increase is due to a change to the vendor s portion of the fee by $2.94 The IRS portion of the fee is unchanged 28 Proposed Legislation 29 H.R. 407 Tax Free Health Insurance Act of 2017 Amends the Internal Revenue Code to allow an individual taxpayer a deduction from gross income of insurance premiums paid for the health care coverage of the taxpayer and the taxpayer's spouse and dependents The bill makes the deduction available whether or not the taxpayer itemizes other deductions 30 10

11 Health Savings Accounts H.R. 408 American Future Healthcare Act of 2017 Amend the Internal Revenue Code of 1986 to expand health savings accounts S. 403 Health Savings Act of 2017 To amend the Internal Revenue Code of 1986 to improve access to health care through expanded health savings accounts 31 H.R. 420 Promote Startups Act of 2017 Amends the Internal Revenue Code to increase the maximum tax deduction for business start-up expenditures from $5,000 to $15,000 and to increase the deduction for the organizational expenditures of corporations from $5,000 to $10,000 The bill also increases the ceilings for such expenditures over which the amount of the tax deduction is reduced 32 H.R. 521 Protection from Insurance Exchange Monopolies Act Amends the Internal Revenue Code to exempt from the requirement to maintain minimum essential health coverage any individual residing in a county with fewer than two health insurance issuers offering qualified health plans on an exchange 33 11

12 H.R.562 Obamacare Regressive Tax Relief Act Amends the Internal Revenue Code to reduce the penalties for individuals who fail to maintain the minimum essential health insurance coverage required by the Patient Protection and Affordable Care Act 34 H.R. 432 Small Business Tax Credit Accessibility Act Amends the Internal Revenue Code, with respect to the small employer health care insurance tax credit, to: (1) Revise the definition of "eligible small employer" to mean an employer with not more than 50 (currently, 25) full-time employees (2) Modify the phase-out formula for such credit to base such phase-out on number of employees and average annual wages (3) Extend from two to three consecutive taxable years the period during which an employer may claim such credit (4) Eliminate the requirement that employers contribute the same percentage of cost of each employee's health insurance and the cap limiting eligible employer contributions to average premiums paid to a state health insurance exchange 35 H.R. 561 Small Business Job Protection Act of 2017 Amends the Internal Revenue Code, as amended by the Patient Protection and Affordable Care Act, to redefine "applicable large employer," for purposes of the mandate requiring employers to provide health insurance for their employees, to mean an employer with at least 100 full-time employees (currently, 50) 36 12

13 H.R. 707 Health Care Choices for Seniors Act Establish the Medicare Alternative Voucher (MAV) Program, under which a voucher may be used as a contribution into a health savings account and for the payment of enrollment premiums under a highdeductible health plan The bill also suspends Medicare late enrollment penalties for an individual between ages 65 and H. R. 529 ABLE Account Improvement Act of 2017 Amends the Internal Revenue Code to modify the tax treatment of qualified tuition programs (known as 529 plans) and ABLE accounts The bill excludes from gross income a fringe benefit consisting of up to $100 per year (adjusted for inflation after 2017) of employer contributions to an employee's 529 or ABLE account The employer contribution must be made: (1) to an account for which the designated beneficiary is the employee or a member of the employee's family, and (2) in connection with a payroll deduction contribution program established by the employer 38 H. R. 529 ABLE Account Improvement Act of 2017 The bill also: (1) expands the tax credit for small employer pension plan startup costs to include the costs of establishing a payroll deduction contribution program for 529 plans and ABLE accounts (2) permits 529 funds to be used for education loan payments or charitable contributions without being subject to the additional tax for distributions that are not used for qualified higher education expenses (3) permits tax-free rollovers of funds between 529 and ABLE accounts for the benefit of the same beneficiary or a family member of the beneficiary 39 13

14 H.R. 531 S-Corp Access to Crowdfunding Act Amends the Internal Revenue Code, with respect to the taxation of S corporations, to exclude from the 100 shareholder limitation for such corporations individuals who acquired shares in an S corporation through (1) small public offerings, or (2) one or more crowdfunding offerings 40 H.R. 716 Enhancing Educational Opportunities for all Students Act Amends the Internal Revenue Code to: (1) allow payment of home school expenses from Coverdell education savings accounts 2) remove the dollar limitation on contributions to Coverdell education savings accounts and require such accounts to provide adequate safeguards to prevent contributions from exceeding the amount necessary to provide for the qualified education expenses of the account beneficiary (3) allow tax-exempt qualified tuition programs (529 tuition programs) to pay qualified pre-kindergarten, elementary, and secondary education expenses 41 H.R. 819 Tax Credit Accountability Act of 2017 Amends the Internal Revenue Code to deny the earned income tax credit to any alien individual who is in an unlawful immigration status at any point during the taxable year 42 14

15 H. R Amend the Internal Revenue Code of 1986 to deny the refundable portion of the child tax credit to individuals who are not authorized to be employed in the United States and to terminate the use of certifying acceptance agents to facilitate the application process for ITINs 43 H.R. 937 Universal Savings Account Act Amends the Internal Revenue Code to allow for the establishment of Universal Savings Accounts These accounts shall be tax-exempt and may be opened by any individual who is at least 18 years of age and a U.S. citizen or legal permanent resident Contributions to these accounts must be in cash and may not exceed $5,500 (adjusted annually for inflation) in any calendar year Distributions from a Universal Savings Account are excluded from the gross income of the account holder for income tax purposes 44 H.R. 516 Tax Benefit for Homeownership Clarification Act Amends the Internal Revenue Code to reduce the limitation on the mortgage interest deduction for the acquisition indebtedness of certain taxpayers Acquisition indebtedness is indebtedness that: (1) is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer; and (2) is secured by such residence It also includes refinancing of the debt in certain situations 45 15

16 H. R. 948 Common Sense Housing Investment Act of Amend the Internal Revenue Code of 1986 to replace the mortgage interest deduction with a nonrefundable credit for indebtedness secured by a residence, to provide affordable housing to extremely low-income families, and for other purposes 46 H.R. 895 Amend the IRC of 1986 to allow a credit against tax for qualified elementary and secondary education tuition 47 H. R. 999 Amend the Internal Revenue Code of 1986 to expand access to Coverdell education savings accounts Would raise the age and annual contribution limitations on Coverdell education savings accounts 48 16

17 H.R Amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system 49 H.R Halt Tax Increases on the Middle Class and Seniors Act 213(a) of the Internal Revenue Code of 1986 is amended by striking 10 percent and inserting 7.5 percent 50 H. R Technologies for Energy Security Act of 2017 Amend the Internal Revenue Code of 1986 to extend the credit for residential energy efficient property and the energy credit Through December 31, with phase-outs Solar energy property Qualified fuel cell property Qualified micro turbine property Combined heat and power system property Qualified small wind energy property Thermal energy property 51 17

18 H. R Tax Return Preparer 5 Accountability Act of To amend title 31, United States Code, to direct the Secretary of the Treasury to regulate tax return preparers 52 S. 482 Personal Health Investment Today Act of 2017 Amend the Internal Revenue Code of 1986 to treat certain amounts paid for physical activity, fitness, and exercise as amounts paid for medical care 53 S. 405 Amend the Internal Revenue Code of 1986 and the Higher Education Act of 1965 to provide an exclusion from income for student loan forgiveness for students who have died or become disabled 54 18

19 S 156 This bill directs the Internal Revenue Service to implement security measures, including the use of security questions, in the electronic tax return filing process to prevent tax refund fraud from being perpetrated through electronic identity theft 55 The Scoop Upcoming Dates March 22 April 5 April 19 May 3 May 17 May 31 June 7 June 21 July 5 Held at 8:00 am and 12:00 pm Central time 56 Upcoming Seminars Mark Your Calendar Final Dates May 11-12, 2017 Back to the Basics: A Foundational Income Tax Return Preparation Course Live and Webinar September 21, 2017 Ag Law Seminar, Live and Webinar September 22, 2017 Farm and Estate Tax Review, Live and Webinar S Corporation and Entity Review July 20-21, 2017, Live and Webinar Retirement and Social Security Issues(Webinar) = October 10-11,

20 Back to the Basics: A Foundational Income Tax Return Preparation Course Live and Webinar May Live and Online As new income tax return preparers enter the profession, they must quickly build a solid foundation of basic skills Some experienced tax preparers driven by a need to continually produce may also wonder if they have some holes in this allimportant foundation In response to this need, CALT is offering a new two-day introductory course focused on teaching the basics of federal income tax return preparation Our Back to the Basics: A Foundational Income Tax Preparation Course will teach basic tax return preparation skills all tax return preparers must know 58 Back to the Basics: A Foundational Income Tax Return Preparation Course Live and Webinar Attendees will receive two days of federal individual income tax return preparation training, as well as the opportunity to complete a comprehensive return from beginning to end Whether you re new to the profession or simply looking for a comprehensive refresher, we think this course will be of value. You ll experience personal interaction with knowledgeable instructors excited about the material and willing to field all types of questions This is a great program for new employees needing training in first and second-year tax law and procedures It should also serve as an excellent comprehensive refresher for others 59 Back to the Basics: A Foundational Income Tax Return Preparation Course Live and Webinar The interview process and tips for conducting an interview Determination of filing status, including a review of advantages and disadvantages of each Who must file Exemptions/Dependents rules and changes Taxable and nontaxable income - where to report Adjustments to Income Standard Deduction vs. Itemized Deduction Various Tax Credits including Child Tax Credit, Earned Income Tax Credit and the American Opportunity Tax Credit, along with associated forms. Form 1040, line by line Domestic Production Activity Deduction Itemized Deductions Due Diligence Requirements for Credits Child and Dependent Care Credit Schedule C Schedule E Schedule F Premium Tax Credit Overview Depreciation Business Expenses Standard Mileage vs. Actual Expenses Bonus Depreciation Form 4562 Sale of Business Assets and Form 4797 Casualty Loss Capital Gains and Losses, including Schedule D and Form 8949 Comprehensive Hands-On Problem 60 20

21 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 John D. Lawrence Interim Director Associate Dean, College of Agriculture & Life Sciences Extension Programs and Outreach Director, Agriculture & Natural Resources Extension 132 Curtiss Hall Iowa State University 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)