Wednesday, November 18, 2020

Update from the Chapter President

 

Ronald Fisher, EA, President
Massachusetts/Rhode Island NATP Chapter

Well, thankfully, the strangest and longest tax filing season of all time has finally ended.  If you were like me, you had plenty of work right up through October 15th since many clients that knew they had more time to file took full advantage of it.  2018 brought massive tax changes, 2019 was a breather year and then 2020 brought us even more challenging times with the Covid 19 virus,  and the IRS shut down and processing delays that still exist even now.  And, for 2021, it is clear the virus will continue to influence the way we operate our professional and personal lives.

As I begin my third year as your President, I again pause and reflect on our members (you) who are loyal, helpful friends who are there for and take care of each other.  A big “Thank You” to all of you for your continued membership and your support.  The Board and I are honored to help you manage your business and serve your clients.  This chapter has many opportunities to enjoy learning and laughing together and I urge all of you to take full advantage.  Education is the essence of this chapter and we have great leaders that plan and bring us the educational programs.

I want to take a moment here to recognize the board members that are responsible for leading this organization.  This dedicated group or professionals is engaged, invested and passionate about the responsibilities they have taken on.  I personally thank each and every one of them.  This chapter would not be the what it is without them.

The Covid 19 virus has caused the need for temporary educational opportunities solely by virtual means as an equivalent to “face to face”.  I will miss seeing you all and I am hopeful this will be over shortly and we can all meet once again in person. Be sure to check your chapter website for information and to register for the virtual seminars:  http://www.massrinatp.org/.  

I hope that each of you are staying safe and should you have any questions regarding the chapter or just want to share any thoughts or ideas, please contact me at 508-735-6607 or at rfishertax@aol.com.  I would love to hear from you.

Ron Fisher, EA
President

Monday, October 26, 2020

Last Chance to Register for The Annual Meeting




Our MA/RI Annual Meeting is tomorrow - October 27th, 2020 from 10-11 a.m. The meeting will be held virtually, so if you have not already registered, please take a moment to register now. By registering today, you will ensure you space at the meeting and get the log on information, be able meet the current board and vote for our new directors for the 2021 Calendar Year.

Thank you for your support of our chapter!

Thursday, October 22, 2020

IRS Reminds Tax Professionals to Renew PTINs Now For 2021


WASHINGTON — The Internal Revenue Service reminds the nation's more than 780,000 active tax return preparers to start the upcoming 2021 filing season smoothly by renewing their Preparer Tax Identification Numbers (PTINs) now. All current PTINs will expire December 31, 2020.

"Large segments of the taxpaying public rely on tax return preparers to assist them in complying with their filing and payment obligations," said IRS Return Preparer Director, Carol A. Campbell. "Obtain or renew your PTIN now so you will be prepared to assist when filing season opens."

Anyone who prepares or helps prepare a federal tax return for compensation must have a valid PTIN from the IRS before preparing returns, and they need to include the PTIN as the identifying number on any return filed with the IRS.

Tax preparers must pay a fee of $35.95 to renew or obtain a PTIN for 2021. The PTIN fee is non-refundable.

Tax preparers with a 2020 PTIN should use the online renewal process, which takes about 15 minutes to complete. Form W-12 PDF, along with the instructions PDF, provides a paper option for PTIN applications and renewals. However, the paper form can take four to six weeks to process. Failure to have and use a valid PTIN may result in penalties.

To renew a PTIN online:

  • Follow the prompts to verify information and answer a few questions.

Once completed, users will receive confirmation of their PTIN renewal.

The online system not only allows PTIN renewal, but can also be used by tax preparers to view a summary of the number of filed returns their PTIN has appeared on in the current year, and to receive communications through a secure mailbox from the IRS Return Preparer Office.

First time PTIN applicants can also apply for a PTIN online.

To apply for a PTIN online:

  • Start at IRS.gov/taxpros.
  • Select the "Renew or Register" button and select "Create Account" in the New User box.
  • First time users are issued a temporary password and will be prompted to change their password upon logging in.
  • Select the appropriate "PTIN Sign Up" option once logged in.
  • Follow the prompts to obtain the PTIN online.

Opportunity for non-credentialed tax preparers

The Annual Filing Season Program is a voluntary IRS program intended to encourage non-credentialed tax return preparers to take continuing education courses to increase their knowledge and improve their filing season readiness.

Those who choose to participate must renew their PTIN, complete 18 hours of continuing education from IRS-approved CE providers and consent to adhere to specific obligations in Circular 230 by December 31, 2020. The IRS has a video available on how to sign the Circular 230 consent and print the Record of Completion.

After completing the steps, the return preparer receives an Annual Filing Season Program Record of Completion from the IRS. Program participants are then included in a public directory of return preparers with credentials and select qualifications on the IRS website.

The searchable IRS directory helps taxpayers find preparers in their area who have completed the program or hold professional credentials recognized by the IRS.

Enrolled agent credential

The enrolled agent credential is an elite certification issued by the IRS to tax professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation and representation matters. Enrolled agents have unlimited representation rights, allowing them to represent any client before the IRS on any tax matter.

As non-credentialed return preparers think about next steps in their professional career, the IRS encourages them to consider becoming an enrolled agent.

All enrolled agents, regardless of whether they prepare returns, must renew their PTIN annually in order to maintain their active status.


IR-2020-238, October 20, 2020

Tuesday, October 20, 2020

Paycheck Protection and Other Similar Loan Forgiveness Programs - Mass Tax Implications

William Delaney, EA
Westwood, MA

 What happens if a taxpayer files for “PPP Loan Forgiveness” and is approved.  We know that (as of this moment in time) the forgiven amount is federal taxable income because Congress did not say otherwise (and thereby amend the federal Code). 

We also know that the cash, at the time of receipt, was not considered to be taxable income.  It was a bank loan to be repaid, so there was no need to record income, nor were there any restrictions on deducting expenses paid from that income source (how you go about tracing the activity is a question for another day).

Now comes our friendly SBA Administration and we assume that it approves our form 3508 application and forgives $10,000 of that loan!  We are left with the need to remove $10,000 from the liability account on the balance sheet – Bank Loan Payable.  Perhaps it is the entire amount; perhaps not, but the principle is the same.  Leave it to the IRS to gum up the works when they declared (IRS Notice 2020-32) that they would not allow the expense deductions associated with that money.  How do you trace it so that you don’t deduct it.  Rather than subscribe to the Theatre of the Absurd, I suggest that you make a simple bookkeeping entry (assuming the loan forgiveness is NOT taxable)…

 

Dr.  Bank Loan Payable               $ 10,000

   Cr.  Disallowed Expenses                                $ 10,000

 

Without the need to specifically identify, the bottom line has been adjusted and taxable income is properly calculated.  End of story?  Ah, not so fast…

What happens in MA???  See MA TIR 20-09 (7/13/20).  You guessed it…we have a different rule!  Since MA follows the federal Code as of 1/1/2005, there is no federal CARES Act.  The PPP program doesn’t exist.  As a result, “…any amount forgiven under §1106 of the (CARES) Act is includible in gross income and subject to tax, and there is no disallowance of deductions…” 

Therefore, the MA bookkeeping entry would be…

 

Dr. Bank Loan Payable                $  10,000

  Cr. Debt Forgiveness Income                             $ 10,000

 

Meanwhile, if the Congress does NOT decide to recognize the forgiveness as tax free, your federal bookkeeping entry would be the same as the above MA entry.

So, now we’ve nailed this thing!  Right?  Nope---wrong!  The above rule applies only to personal income tax.  It does not apply to the corporate excise tax, since MA follows the federal Code currently in effect (with exceptions) for purposes of corporate taxation.  The MA rule for forgiveness of corporate debt is…

“…any amount forgiven for a corporate borrower under §1106 of the (CARES) Act would be excluded from Massachusetts gross income, and any deductions disallowed in accordance with IRS Notice 2020-32 would likewise be disallowed for Massachusetts tax purposes.”

Therefore, our corporate bookkeeping entry would be (assuming federal forgiveness)…

 

Dr.  Bank Loan Payable                 $ 10,000

  Cr.  Disallowed Expense                                   $ 10,000   

 

Otherwise, the federal recognition of corporate debt forgiveness income would apply as well to the state corporate return and the bookkeeping entry would be…

 

Dr. Bank Loan Payable                 $ 10,000

  Cr. Debt Forgiveness Income                            $ 10,000

 

Now we have it, at least until/unless they change it.    

Governor Baker Proposes One-Year Delay for 2020 MA Charitable Contribution Deduction

Gov. Charlie Baker, MA

Included in Governor Baker's recently introduced budget proposal for the current fiscal year is a plan to delay the tax year 2020 allowable MA cash charitable contribution deduction until tax year 2021.  This deduction is allowed for all state taxpayers, even if you do not federally itemize or even file a federal return.  Non-cash contributions (clothing, food, vehicle, etc.) are not allowed.  Since the deduction is mandated under a 2002 addition to state law, the proposed delay needs legislative approval.

Your NATP state chapter shall keep you informed.