Current Happenings in the Accounting Profession

IRS updates - TONS and TONS posted 1.25.12

IRS updates adequate disclosure rules for understatement and preparer penalties posted 1.20.12

Companies get ready for 1099-K forms posted 1.20.12

FAF releases "post-implementation review" of FIN 48 posted 1.12.12

IRS PTIN system continues to accept 2011 renewals posted 1.11.12

New Tax Provisions for 2012 posted 1.4.12

GAO Issued the Final 2011 Revision to Government Auditing Standards posted 12.22.11

Starting Jan. 1: Tax Preparers Need to File Due Diligence Checklist with All Earned Income Tax Credit Claims posted 12.22.11

TPAs Issued on SOC Reports (New SOC 1SM and SOC 2SM Guides) posted 12.20.11

TPAs Issued on SOC Reports (SSAE No. 16) posted 12.20.11

IRS Letters & Calls to Practitioners posted 11.28.11

SAS 70 - SOC posted 6.19.11

Private Company Financial Reporting

Current AICPA Exposure Drafts

Idaho State Tax Commission Education

Idaho State Tax Commission Motor Fuels Update

IRS Updates and News Releases

EITC Due Diligence Webinar on Video Portal

The popular, and informative, Meeting Your EITC Due Diligence webinar is now posted and available 24/7. Avoid penalties and learn the new requirements.

Sample Statement for Client Opting Out of Mandatory E-file

Rev-Proc 2011-25, Section 9, contains sample language (below) you may use when a client elects to have their return filed on paper instead of electronically. You are required to document the clients choice to file a paper return by having the client sign and date a statement of election not to have their return electronically filed and keep the statement in the client file.

My tax return preparer [INSERT PREPARER’S NAME] has informed me that [INSERT s/he] may be required to electronically file my [INSERT TAX YEAR] individual income tax return [INSERT TYPE OF RETURN: Form 1040, Form 1040A, Form 1040EZ, Form 1041, Form 990-T] if [INSERT s/he] files it with the IRS on my behalf (e.g., submits it by mail to the IRS). I understand that electronic filing may provide a number of benefits to taxpayers, including an acknowledgement that the IRS received the returns, a reduced chance of errors in processing the returns, and faster refunds. I do not want to have my return electronically filed, and I choose to file my return on paper forms. I will mail or otherwise submit my paper return to the IRS myself. My preparer will not file or otherwise mail or submit my paper return to the IRS.

Revised Form 2848, Power of Attorney and Declaration of Representative

The revised Form 2848 (PDF) and instructions issued in October 2011 include several changes of interest to tax-exempt organizations including:

a new requirement that practitioners enter their license, bar or enrollment number
a new designation for registered tax return preparers
a new location for the check box authorizing the IRS to send notices to the representative

PTIN Expiration Notices

We are in the process of issuing PTIN expiration notices to those individuals who had 2011 PTINs but have not renewed them for 2012. The notices began last week and will be issued on a staggered schedule through Jan. 30. For individuals with online accounts, the notices are delivered to their secure mailbox and an email is sent advising the recipient to check their mailbox. For people without an online account, the notices are sent by regular mail.

Beginning Feb. 21 anyone with an expired PTIN is removed from the list of valid PTIN holders until they renew. Any returns they file will be processed, but they can expect to be contacted by the IRS if they continue filing returns without renewing. We are still processing renewals and will continue to do so after Feb. 21.

PTIN Information Line

Primary Toll-Free: 877-613-PTIN (7846)

Toll Number for International Callers: +1 915-342-5655

Hours of Operation: Monday - Friday, 8:00 a.m. - 5:00 p.m. (CST)

Refund Cycle Chart

The IRS Tax Year 2011 Refund Cycle Chart

IRS Launches New Exempt Organization Online Search Tool

The IRS today launched a new online search tool, Exempt Organizations Select Check, to help users more easily find information about tax-exempt organizations. Users can now go to one location on IRS.gov to search for:

Organizations eligible to receive tax-deductible contributions (formerly listed in electronic Publication 78). Users may rely on this list in determining deductibility of contributions, just as they did with Pub. 78
Organizations whose federal tax exemption automatically revoked for not filing a Form 990-series return or notice for three consecutive years (Auto-Revocation List)
Form 990-N (e-Postcard) filers and their submissions

EO Select Check offers improved search options. Users can now look for organizations eligible to receive deductible charitable organizations (Pub. 78 data) by Employer Identification Number (EIN), which wasn’t possible previously. And this data is now updated monthly instead of quarterly.

In addition, the Auto-Revocation List may now be searched by EIN, name, city, state, ZIP code, country, exemption type, and revocation posting date, rather than only by state.

The EO Select Check site also contains search tips that offer suggestions on how to use the search application.

E-services Re-Engineering Results in Minor Changes to Functionality of Transcript Delivery System (TDS)

Please be advised that the Internal Revenue Service is updating the Transcript Delivery System (TDS) with an implementation date of January 9, 2012. The new TDS will have an updated look, feel and functionality.
The new TDS will:
- Improve delivery time of transcripts
- Increase capacity to compensate for the growing demand of the product
- Reduce downtime associated with maintenance problems

Highlights of these changes in the look, feel and functionality are included in the e-services On-line Tutorial located on the e-services Registration Services page. These changes may present a learning curve for some users. However, we are certain the improvements will be well worth the minor inconvenience as we strive to offer the best possible service.

Identity Theft Information

Your client may contact the Identity Protection Specialized Unit at 1-800-908-4490. The IPSU will assist taxpayers that are, or may become, victims of identity theft. There are also several new items to help taxpayers, including special tips on IRS.gov and YouTube videos as well as a large amount of helpful information for taxpayers on a special identity theft section of IRS.gov. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.

Fed State and Local Government FSLG Newsletter

To read the January 2011 Edition, please visit the Current Edition of the FSLG Newsletter page in the Government Entities section of the IRS.gov Web site. If you have a specific question about exempt organizations, call FSLG Customer Account Services at 1-877-829-5500.

Offshore Voluntary Disclosure Program Reopens

The Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes. The IRS also announced the collection of more than $4.4 billion so far from the two previous international disclosure programs.

National Taxpayer Advocate Delivers Annual Report to Congress

National Taxpayer Advocate Nina Olson released her annual report to Congress this week, identifying an expanding IRS workload and declining resources as the most serious problem facing taxpayers.

Read the News Release or full report for more information.

Revised Reporting Requirement for Foreign Agricultural Workers

The revised Form 943 Instructions, (on the first page. lower left corner - "Compensation paid to H-2A visa holders") explains that this type of income is now reported on a Form W-2 instead of a Form 1099-MISC. You will find more information on the updated page on irs.gov concerning the taxation of H-2A Foreign Agricultural Workers.

Innocent Spouse Relief

The Internal Revenue Service released new proposed guidelines designed to provide relief to more innocent spouses requesting equitable relief from income tax liability.

IRS YouTube Video: Innocent Spouse: English | Spanish | ASL
Podcast: Innocent Spouse

FY2011 Enforcement Results

The IRS Enforcement and Service Results for FY 2011 detail audit, collection and taxpayer service activities.

Revised Pub 15 (Circular E) now available

Pub. 15, (Circular E) Employer's Tax Guide, is updated to reflect the recent legislation temporarily extending the payroll tax cut for employees.

January 2012 IMRS Hot Issues

Check out January's Hot Issues report from the Issue Management Resolution System.

Enrolled Agent Renewal Processing Update

Renewals for SSNs ending in four, five or six - All correct and complete Forms 8554 submitted before November 28, 2011, have been processed and cards issued. All remaining Forms 8554 require further research.
Renewals for SSNs ending in seven, eight, nine, or none - We will begin processing these no later than January 30, 2012.
New applications on Forms 23 - We are working overtime to process the backlog created by the delayed renewal cycle. The Form 23 inventory should be current and back to the normal 60 day response time by January 30, 2012.

Phone and email delays - We have diverted the majority of our resources to processing renewals and applications. We're attempting to answer all contacts as they come in, all phone and email inquiries will be worked by January 30, 2012.

Fee Increase – Enrolled Agent Exam

Effective Jaunuary 5, 2012, the fee to take the Special Enrollment Examination to become an Enrolled Agent increased from $101 to $105 per part. The amount has been updated on IRS.gov and in the SEE Candidate Information Bulletin.

Updated Tax Gap Estimates

The Internal Revenue Service has released a new set of tax gap estimates for tax year 2006. The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time.The new tax gap estimate represents the first full update of the report in five years, and it shows the nation’s compliance rate is essentially unchanged from the last review covering tax year 2001.

The following table summarizes the new estimates, as compared to the 2001 estimates, along with the total tax liabilities in each year.

Technical Guidance

Notice 2012-09 restates and amends the interim guidance on informational reporting to employees of the cost of their employer-sponsored group health plan coverage initially provided in Notice 2011-28, 2011-16 I.R.B. 656, required under as part of the Affordable Care Act to provide useful and comparable consumer information to employees on the cost of their health care coverage.

Revenue Ruling 2012-05 provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code and the Income Tax Regulations, there under, for the 2012 plan year.

Notice 2012-08 provides a proposed revenue procedure that would update Rev. Proc. 2003-61, 2003-2 C.B. 296, which provides guidance regarding equitable relief from income tax liability under section 66(c) and section 6015(f) of the Internal Revenue Code.

Revenue Procedure 2012-15 updates Rev. Proc. 2011-13, 2011-3 I.R.B. 318 and identifies circumstances under which the disclosure on a taxpayer’s income tax return with respect to an item or a position is adequate for the purpose of reducing the understatement of income tax under section 6662(d) of the Internal Revenue Code and the purpose of avoiding the tax return preparer penalty under section 6694(a).

Revenue Ruling 2012-7 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274.

IRS updates adequate disclosure rules for understatement and preparer penalties

posted 1.20.12

The Internal Revenue Service issued its annual guidance update on when a taxpayer has adequately disclosed an item or position in an income tax return for purposes of the substantial understatement aspect of the accuracy-related penalty and the preparer penalty for understatement due to an unreasonable position. The new rules are effective for 2011 income tax returns. Read entire article in Appeared in JofA

Companies get ready for 1099-K forms

posted 1.20.12

Companies that receive payments from credit cards or third-party settlement agencies may have to keep an eye out for 1099-K forms this year. The forms will be sent to businesses that receive more than $20,000 in gross payments from at least 200 transactions annually. Companies that receive both a 1099-K and a 1099-MISC should make sure their income wasn't reported twice. Read entire article in Business Finance

FAF releases "post-implementation review" of FIN 48

posted 1.12.12

written by JofA

The Financial Accounting Foundation's first formal "post-implementation review" concluded that FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), generally achieves its purpose. The review, the first of its kind, also found concerns among some stakeholders about the standard's effectiveness and cost of implementation. Read JofA Article

New Tax Provisions for 2012

posted 1.4.12

written by Alistair M. Nevius, January 2, 2012, JofA

Inflation Adjustments

The applicable amounts for many tax items increased on Jan. 1, due to annual inflation adjustments. Revised tax tables are in effect, as well as an increased personal exemption amount (now $3,800) and standard deduction amounts. Various credits and other items also were adjusted (see Rev. Proc. 2011-52). Contribution limits and other amounts for pension plans retirement accounts were also changed for 2012 (see IR-2011-103). The Social Security wage base for 2012 is $110,100.

The standard mileage rate for business use of an automobile remains at 55½ cents per mile for 2012; for medical and moving expenses it decreases to 23 cents per mile (Notice 2012-1), down a half-cent from the second half of 2011.

Capital Gain and Loss Reporting

Taxpayers will have to report new information on Form 1040, Schedule D, Capital Gains and Losses, and file a new form, Form 8949, Sales and Other Dispositions of Capital Assets, to report gains and losses of certain capital assets. The information on Form 8949 will correspond to the new information being reported on 2011 Forms 1099-B, Proceeds from Broker and Barter Exchange Transactions.

Under Sec. 6045, as amended in 2008, brokers are required to report to the IRS and their customers the customers’ adjusted basis in securities sold and to classify the customers’ gain as long term or short term. This basis reporting applies to covered securities acquired in 2011 and later (certain corporate stock in 2011 and other securities starting in later years; see Sec. 6045(g)(3)(C)).

Individuals will be required to report both short-term and long-term gains and losses of capital assets in the following three situations:
1 - When basis was reported in box 3 of Form 1099-B;
2 - When basis was not reported on Form 1099-B; or
3 - When no Form 1099-B was received.

The information from Form 8949 must then be transferred to Part I of Schedule D, which has been redesigned for 2011.

Veterans Work Opportunity Credits

The Three Percent Withholding Repeal and Job Creation Act, P.L. 112-56, extended the work opportunity tax credit (now called the returning heroes and wounded warriors work opportunity tax credits) for businesses that hire certain military veterans. Employers will be eligible for a credit of up to $9,600 for each qualified veteran that they hire after the law’s enactment date (Nov. 21, 2011) and before Jan. 1, 2013.

Under the returning heroes tax credit, an employer may be eligible for a credit of up to $2,400 for hiring a veteran who has been unemployed for at least four weeks and up to $5,600 for hiring a veteran who has been unemployed for more than six months. Under the wounded warriors tax credit, an employer may be eligible for a credit of up to $9,600 for hiring a veteran with a service-connected disability who has been unemployed for more than six months and up to $4,800 for hiring a veteran with a service-connected disability (who does not meet the returning hero credit requirements) or who qualifies as a food stamp recipient.

Foreign Asset Reporting

Under the Foreign Account Tax Compliance Act, individuals are required to report interests in specified foreign financial assets when filing their federal income tax returns (Sec. 6038D). This requirement was suspended until the Form 8938, Statement of Specified Foreign Financial Assets, was released (Notice 2011-55). The IRS posted the final version of the form and its instructions in December; taxpayers subject to the reporting requirement must file the form in 2012 for 2011 tax years. In addition, taxpayers who would have been required (except for the suspension of the requirement) to file Form 8938 in 2011 for a tax year that began after March 18, 2010, must file it for the prior year with their return for the current tax year.

Bonus Depreciation

The 100% first-year bonus depreciation provision expired on Dec. 31, but 50% bonus depreciation is available for property placed in service in 2012. (100% bonus depreciation does still apply in the case of certain longer-lived and transportation property placed in service before 2013.)

Estate Tax

Estates of decedents who died in 2010 have until Jan. 17, 2012, to elect not to have the estate tax apply and to have heirs’ bases in assets they inherit determined under the modified carryover basis rules in Sec. 1022. This election is made by filing Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent. (For more on the Form 8939 requirements, see Cantrell, "Preparing and Filing Form 8939," The Tax Adviser, November 2011.)

The estate and gift tax lifetime exclusion increases to $5.12 million for 2012.

EITC Due Diligence

The penalty for failing to meet the Sec. 6695(g) earned income tax credit (EITC) due diligence requirements increased from $100 to $500, effective for returns required to be filed after Dec. 31, 2011.

Voluntary Classification Settlement Program

A new voluntary classification settlement program (VCSP) introduced in September (Announcement 2011-64) allows eligible taxpayers to voluntarily reclassify their workers as employees for federal employment tax purposes for future tax periods while receiving relief for part of the tax liability relating to the past treatment of the workers as nonemployees. Taxpayers are eligible if they have consistently treated the workers as nonemployees, filed all required Forms 1099 for the previous three years, are not currently under IRS audit, are not currently under audit by the U.S. Department of Labor or a state agency, and complied with the audit results if the taxpayers were previously audited by the IRS or the Department of Labor.

The VCSP limits the tax liability to 10% of the employment tax liability that would have been due on the compensation paid to the workers in the most recent tax year, as calculated under the reduced rates of Sec. 3509. Interest and penalties are not charged on the liability.

The classification of these workers for prior years is not subject to an employment tax audit, but the statute of limitation on assessment of employment taxes is extended from three to six years for the first, second and third calendar years beginning after the date the taxpayers begin treating the workers as employees under the VCSP closing agreement.

Final Yellow Book Issued

posted 12.22.11

Today, the GAO issued the final 2011 Revision to Government Auditing Standards (a.k.a. the Yellow Book). This update replaces the "Internet Version" that the GAO issued in August. As expected, the changes are limited in nature and mainly relate to refining the standards due to the ASB Clarity Standards (i.e. SAS Nos. 122 -124) issued in October. For more information on the new Yellow Book go to www.gao.gov/yellowbook.

IRS PTIN system continues to accept 2011 renewals

posted 1.11.12

The IRS online system to apply for a new preparer tax identification number (PTIN) is back up and running after a two-week hiatus for maintenance. In addition, the system is continuing to accept 2011 PTIN renewals even though the Dec. 31, 2011, renewal deadline has passed.

The IRS has also posted online troubleshooting tips to help practitioners who encounter various problems in applying for or renewing a PTIN.

Starting Jan. 1: Tax Preparers Need to File Due Diligence Checklist with All Earned Income Tax Credit Claims

posted 12.22.11

WASHINGTON — The Internal Revenue Service issued final regulations requiring paid tax return preparers to file a due diligence checklist, Form 8867, with any federal return claiming the Earned Income Tax Credit (EITC). This is the same form that is currently required to be completed and retained in a preparer’s records.

The due diligence requirement, enacted by Congress over a decade ago, was designed to reduce errors on returns claiming the EITC, most of which are prepared by tax professionals. The IRS created Form 8867, Paid, Paid Preparer's Earned Income Credit Checklist, to help preparers meet the requirement by obtaining eligibility information from their clients. Preparers have been required to keep copies of the form, or comparable documentation, which is subject to review by the IRS.

TPAs Issued on SOC Reports (New SOC 1SM and SOC 2SM Guides)

posted 12.20.11

TIS section 9530, Service Organization Controls Reports, in AICPA Technical Practice Aids has been issued to include TPAs 9530.01–.22 to provide nonauthoritative guidance on reporting on controls at a service organization relevant to subject matter other than user entities’ internal control over financial reporting, specifically controls at a service organization relevant to the security, availability, or processing integrity of a system or the confidentiality or privacy of the information the system processes. This engagement uses the Trust Services criteria to evaluate the attributes of a system. These TPAs provide information about and differentiate the three SOC engagements included in the SOC report series (SOC 1SM for Statement on Standards for Attestation Engagements No. 16 engagements, and SOC 2SM and SOC 3SM for reporting on controls over the attributes of a system using the Trust Services criteria).

TPAs Issued on SOC Reports (SSAE No. 16)

posted 12.20.11

Technical Questions and Answers 9520.12–.26 have been issued to provide nonauthoritative guidance regarding Statement on Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service Organization (AICPA, Professional Standards, AT sec. 801). This Technical Practice Aids (TPA) provides guidance for service auditors reporting on controls at a service organization relevant to user entities’ internal control over financial reporting, and also to user auditors who audit the financial statements of entities that use a service organization. SSAE No. 16 supersedes the guidance for service auditors that is in Statement on Auditing Standards No. 70, Service Organizations (AICPA, Professional Standards, AU sec. 324). The guidance for user auditors will remain in the auditing standards. TPAs 9520.01–.11 replace TIS section 9520, Service Organization Standards and Implementation Guidance, in AICPA Technical Practice Aids. The section is now titled SSAE No. 16, Reporting on Controls at a Service Organization.

IRS Letters & Calls to Practitioners

posted 11.28.11

Quick background

We’ve called this IRS program the “10,000 letters” program in the past, and we’re now referring to it as the “IRS Preparer Compliance Initiative.” The program started last year when 10,000 practitioners (not just CPAs) received letters and requests for 2500 visits from the IRS during tax season. Needless to say, it caused angst among practitioners.

This year, the IRS heeded the profession’s concerns about tax season timing (the good news), and has sent letters to 21,000 return preparers in approximately the past two weeks. According to the letter, the IRS selected the recipients based on the kinds of returns that typically contain errors, with an emphasis on individual tax returns that include Schedules A, C and E.

IRS to begin calling soon to schedule visits

The IRS has announced that it will begin to call approximately 2100 return preparers (10% of the total number) soon. These calls will ask the practitioner for a time to meet with an IRS agent, preferably before busy season. <

When these calls start, we expect that state societies and the AICPA will hear from even more members who receive these calls.

Resources to help you

The AICPA’s Tax Team has just posted a new web page which includes:

Suggestions should you get calls from the IRS about visits
Background on the issue
AICPA comment letters about the IRS “letters” initiative
FAQs from the IRS