Monday, October 14, 2019

PTIN Fees are Legal

The Supreme Court has declined to listen to the PTIN case, therefore the Court of Appeals decision stands.  Here is a brief summary of the case.

A few tax return preparers took IRS to court claiming it did not have the right to charge a fee for issuing PTINs.  On June 1, 2017, the tax preparers won in the District of Columbia District Court.  On July 10, 2017, the District Court ordered IRS to permanently enjoin from charging PTIN fees and provide every class member a full refund of all PTIN fees paid from September 1, 2010, to the present.  The case went to the Court of Appeals.

The Court of Appeals ruled against the tax return preparers denying the arguments presented and vacated the District Court decision.  The case was remanded back to District Court for further proceedings, including an assessment of whether the amount of the PTIN fee was unreasonable and exceeded the costs to IRS to issue and maintain PTINs.

We have not heard if the District Court made a determination of the reasonableness of the fee amount.

Side note – The renewal period for PTINs for the upcoming tax season will open October 16.  This year IRS is not charging a fee for the PTIN renewal.

Montrois, et al. v U.S.

This text has been shared courtesy of:  David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111).

Tuesday, October 8, 2019

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019 - 2 Weeks Away!!

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019





Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 22nd, 2019 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. We have negotiated a room rate of $119 if you would like to stay at the hotel. Please book this by October 11th and mention that you are with NATP. Registration details are below, and is handled online by National. Take a look at the details on our speaker and topics provided in this great Continuing Education  opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities. This seminar is limited to the First 100 Registrants!


  • For online registration with credit card, click here.
  • To register by phone, fax or mail, click for the registration form.
  • After October 21st, please print the form (see link above) and register at the door.

Registration 7:00 am to 7:45 am (Continental Breakfast Included)
Education 7:45 am to 5:00 pm
Annual Meeting Prior to Lunch (Lunch Included)

CE Credits -
8 Federal Tax Law Topics


Speaker - Kathryn Morgan, EA, NTPI Fellow


Topics:

Tax Research Tips

Residential Rentals

Working From Home

Taxes in Divorce


Kathy just completed her 24th year with H&R Block working in the Bossier City Premium office. Her prior careers as a USAF military police officer and as a police communications officer for the Bossier City Police give her a wide variety of experience that translate into tax issues. She proudly holds the titles of Enrolled Agent, Fellow NTPI, Instructor, and Representation Specialist.

She has been published by several tax research companies, including Parker Tax Publishing and TaxConnections.com. She is a accomplished speaker and instructor on a wide variety of tax issues. Through her company, Puzzled By Taxes?, she offers speaking, writing, and instruction.

Kathy lives and practices in the Shreveport Louisiana area and when not "talking tax" she enjoys spending time with her grandchildren and family, writing and reading.

Monday, September 30, 2019

Rhode Island Tax Changes Take Effect Tomorrow, October 1

Feminine hygiene products, urns, specified digital products, and E-911 charges are affected

PROVIDENCE, R.I. – Starting tomorrow, October 1, Rhode Island’s 7% sales and use tax will no longer apply to feminine hygiene products and urns.

Also starting tomorrow, the sales and use tax will be extended to e-books, streaming video, music downloads, and other “specified digital products”.

Furthermore, the monthly E-911 surcharge that applies to residential and business phone lines, as well as to cell phones, will be split into two separate charges – one as the emergency services surcharge, the other as the first response surcharge.

The changes are the result of legislation approved by the Rhode Island General Assembly and signed into law by Rhode Island Governor Gina M. Raimondo on July 5, 2019.1 Following is a summary.

Tampons and other feminine hygiene products

According to the new law, the “feminine hygiene products” category includes tampons, panty
liners, menstrual cups, sanitary napkins, and “other similar products the principal use of which is
feminine hygiene in connection with the menstrual cycle”. They will be exempt from Rhode
Island’s sales and use tax effective October 1, 2019.

Urns

The new law exempts – from Rhode Island’s sales and use tax – the sale, storage, use, or other consumption in Rhode Island of urns that are ordinarily sold by a funeral director as part of the
business of funeral directing. Urns will be exempt beginning October 1, 2019.

Already exempt are coffins and caskets, as well as shrouds and other burial garments that are
ordinarily sold by a funeral director as part of the business of funeral directing.

Digital movies, music, books

“Specified digital products” are subject to Rhode Island sales and use tax effective October 1,
2019. The term “specified digital products” includes digital movies, digital TV shows, digital books,
digital music, and related items that are streamed or downloaded to computers, phones, or other
devices. The term also includes subscriptions to streaming audio and streaming visual products
– such as films, shows, and music that are streamed or downloaded to computers, phones, or
other devices.

Technically, the term “specified digital products” refers to electronically transferred:

  • “Digital audio-visual works” – which means a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any;
  • “Digital audio works” – which means works that result from the fixation of a series of musical, spoken, or other sounds, including ringtones; and
  • “Digital books” – which means works that are generally recognized in the ordinary and usual sense as “books”.

For purposes of the definition of “digital audio works”, “ringtones” means digitized sound files that
are downloaded onto a device and that may be used to alert the customer with respect to a
communication.

The new law makes it clear that specified digital products sold by or through remote sellers,
marketplace facilitators, and referrers are also subject to Rhode Island sales and use tax.
Furthermore, every retailer -- including those with no physical presence in Rhode Island -- that
sells specified digital products for storage, use, or other consumption in Rhode Island must
register with the Rhode Island Division of Taxation. For more details, click here.

E-911 surcharge

The monthly E-911 surcharge on residence and business phone lines will be split into two
separate charges – one as the emergency services surcharge, the other as the first response
surcharge – effective October 1, 2019. The same principle will apply to the E-911 surcharge on
wireless, cellular, and other such devices. For more details about the E-911 surcharge, click here.

For more information

For more information about the tax changes that take effect October 1, 2019, call the Division’s
Excise & Estate Tax unit at (401) 574-8955 (the line is typically staffed from 8:30 a.m. to 3:30 p.m.
Eastern Time business days), or email: Tax.Excise@tax.ri.gov.


Friday, September 20, 2019

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019 - 1 Month Away!!

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019





Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 22nd, 2019 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. We have negotiated a room rate of $119 if you would like to stay at the hotel. Please book this by October 11th and mention that you are with NATP. Registration details are below, and is handled online by National. Take a look at the details on our speaker and topics provided in this great Continuing Education  opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities. This seminar is limited to the First 100 Registrants!


  • For online registration with credit card, click here.
  • To register by phone, fax or mail, click for the registration form.
  • After October 21st, please print the form (see link above) and register at the door.

Registration 7:00 am to 7:45 am (Continental Breakfast Included)
Education 7:45 am to 5:00 pm
Annual Meeting Prior to Lunch (Lunch Included)

CE Credits -
8 Federal Tax Law Topics


Speaker - Kathryn Morgan, EA, NTPI Fellow


Topics:

Tax Research Tips

Residential Rentals

Working From Home

Taxes in Divorce


Kathy just completed her 24th year with H&R Block working in the Bossier City Premium office. Her prior careers as a USAF military police officer and as a police communications officer for the Bossier City Police give her a wide variety of experience that translate into tax issues. She proudly holds the titles of Enrolled Agent, Fellow NTPI, Instructor, and Representation Specialist.

She has been published by several tax research companies, including Parker Tax Publishing and TaxConnections.com. She is a accomplished speaker and instructor on a wide variety of tax issues. Through her company, Puzzled By Taxes?, she offers speaking, writing, and instruction.

Kathy lives and practices in the Shreveport Louisiana area and when not "talking tax" she enjoys spending time with her grandchildren and family, writing and reading.

Wednesday, September 18, 2019

Does Your State Have a Marriage Penalty?

Janelle Cammenga, Policy Analyst
Tax Foundation
Today’s map zeroes in on states that have a “marriage penalty” in their individual income tax brackets.

Under a progressive, graduated-rate income tax system, tax rates increase as a taxpayer’s marginal income increases. A marriage penalty exists when a state’s income brackets for married taxpayers filing jointly are less than double the bracket widths that apply to single filers. In other words, married couples who file jointly under this scenario face a higher effective tax rate than they would if they filed as two single individuals with the same amount of combined income.

This non-neutral tax treatment is particularly harmful to owners of pass-through businesses, who pay taxes on their business income under the individual income tax system. Under a marriage penalty, married business owners are subject to higher effective tax rates on their business income than they would be otherwise.

Fifteen states (displayed in pink on the map below) have a marriage penalty built into their bracket structure. Seven additional states (Arkansas, Delaware, Iowa, Mississippi, Missouri, Montana, and West Virginia), as well as the District of Columbia, offset the marriage penalty in their bracket structure by allowing married taxpayers to file separately on the same return to avoid losing credits and exemptions. Ten states have a graduated-rate income tax but double their brackets to avoid a marriage penalty: Alabama, Arizona, Connecticut, Hawaii, Idaho, Kansas, Louisiana, Maine, Nebraska, and Oregon.

The ability to file separately on the same return is important in states that do not double bracket widths, as is the ability to do so even if the couple files jointly for federal purposes. While married couples have the option of filing separately—though some states only allow this if they do so on their federal forms as well—this normally creates a disadvantage, because it either disallows or reduces the value of deductions and credits available to the family jointly, which is also a form of marriage penalty. Filing separately on the same return eliminates this problem, though at the cost of slightly greater complexity than the obvious, simple solution of doubling tax brackets for joint filers so that there is no penalty for filing jointly.


Thursday, September 5, 2019

Massachusetts Paid Family Medical Leave is Here



Are you PFML ready?

Massachusetts' Paid Family and Medical Leave program is here. And if you employ anyone, you are now required to get your business or non-profit PFML ready.

Withholding starts on October 1st.

Paid Family and Medical Leave

Find out everything you need to know, including contribution rates, important deadlines, who is covered and who is excluded, and how to apply for an exemption.

Visit mass.gov/pfml today.


Thursday, August 22, 2019

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019





Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 22nd, 2019 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. We have negotiated a room rate of $119 if you would like to stay at the hotel. Please book this by October 11th and mention that you are with NATP. Registration details are below, and is handled online by National. Take a look at the details on our speaker and topics provided in this great Continuing Education  opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities. This seminar is limited to the First 100 Registrants!

  • For online registration with credit card, click here.
  • To register by phone, fax or mail, click for the registration form.
  • After October 21st, please print the form (see link above) and register at the door.

Registration 7:00 am to 7:45 am (Continental Breakfast Included)
Education 7:45 am to 5:00 pm
Annual Meeting Prior to Lunch (Lunch Included)

CE Credits -
8 Federal Tax Law Topics


Speaker - Kathryn Morgan, EA, NTPI Fellow


Topics:

Tax Research Tips

Residential Rentals

Working From Home

Taxes in Divorce


Kathy just completed her 24th year with H&R Block working in the Bossier City Premium office. Her prior careers as a USAF military police officer and as a police communications officer for the Bossier City Police give her a wide variety of experience that translate into tax issues. She proudly holds the titles of Enrolled Agent, Fellow NTPI, Instructor, and Representation Specialist.

She has been published by several tax research companies, including Parker Tax Publishing and TaxConnections.com. She is a accomplished speaker and instructor on a wide variety of tax issues. Through her company, Puzzled By Taxes?, she offers speaking, writing, and instruction.

Kathy lives and practices in the Shreveport Louisiana area and when not "talking tax" she enjoys spending time with her grandchildren and family, writing and reading.

Tuesday, August 13, 2019

MA DOR Update: Meals NOT Exempt From Tax For Sales Tax Holiday

As previously reported, recent legislation included meals in a list of items to be exempt from sales tax during the Sales Tax Holiday. That legislation was amended on August 1 to remove meals as an item to be exempt from tax during the Sales Tax Holiday.

If you ordinarily charge sales tax on meals that you sell, nothing will change for you during the Sales Tax Holiday. You will continue to charge sales tax on meals. 

The Sales Tax Holiday for 2019 will take place on August 17 and 18.

You can find more information on the sales tax holiday, including FAQs on what’s included, what’s excluded, and what to do if you accidentally charge sales tax on an excluded item.

Friday, August 9, 2019

MA DOR Announces Relief For Taxpayers Affected By The Cape Cod Tornado.

The Department of Revenue has announced it is taking steps to address the concerns of taxpayers in Barnstable, Brewster, Chatham, Dennis, Harwich, Mashpee, Sandwich, and Yarmouth who have been affected by the recent tornadoes.

The Department recognizes that taxpayers in these areas might be unable to comply with their tax filing or payment due dates occurring on or after the date of the tornadoes and would like to assist those taxpayers as much as possible.

The Department is announcing that it will waive any penalties associated with any late-filed return or payment that was due on or after July 23rd, and before November 15th. The Department will waive penalties for four months, and will later revisit whether any further extensions should be granted.

If any taxpayer in the affected areas receives notice of a penalty for this period they should contact the Department of Revenue at (617) 887-6367.

Thursday, August 8, 2019

IRS Changing 1040 Forms, Again, For TY 2019

Form 1040 Returns Looks Similar to Previous Versions

The IRS published a re-formatted form 1040 in its website repository. Among the design changes, the form is no longer two half pages, but two 7.25 inch pages.  The 3rd party designee, taxpayer and preparer signature sections have returns to the bottom of page two. Amounts from wages to taxable income moved to the front page  Foreign address information has returned to the address header of page one, so that Schedule 6 is now obsolete.  IRA and pension income amounts are on separate rows; lines 4a & 4b for IRA and lines 4c & 4d for pensions. In 2019, IRA and Pension incomes were combined on lines 4a for the gross and 4b for the taxable amount. Capital Gains are reported on the front page. Payments and refundable credits have moved to page two of the 1040 making Schedule 5 obsolete.

Senior Citizen 1040 Draft Form

The IRS published a draft version of the new 1040-SR on the forms webpage.  The two page 24 line form has the more traditional 1040 layout. It references support items from Schedule A, B, D, 1, 2, and 3 and forms 8814, 4972, 8863, 8812, 8888, 8995 & 8995-A. At the bottom of page one is a traditional standard deduction chart. Form 1040-SR was mandated by Congress a few years ago.

Wednesday, July 31, 2019

Massachusetts & Rhode Island Take Over the NATP National Conference

Greetings from the Windy City!! Just a couple of notes from NATP Annual Conference in Chicago!


We are happy to report that we have 18-Massachusetts Members and 4-Rhode Island members in attendance. All have attended different classes and have been very happy with the courses being offered, the instructors are great.

Some have attended classes taught by Kathy Morgan, who will be presenting at our Annual Meeting on October 22nd. This is definitely an event you should not miss!!

We were honored to have Commissioner Charles Rettig as a speaker yesterday. Overall everyone found him to be very personnel, he comes from a tax background and seems to understand the problems we encounter when dealing with the IRS. Opinions seem to be, let’s give him a chance and hope Congress gives him the tools to make changes. It won’t happen overnight but it feels more positive that things will happen.

Charles Rettig
IRS Commissioner

Last evening was the Charity Auction, there were many baskets donated by various chapters. Here is a picture of our basket which ended with a final bid of $200.

MA/RI Chapter
Charity Basket

Fun was had by all who participated!! They will announce the total raised for CASA Thursday night at the closing ceremony. Stay tuned for the final figure!

This evening we had our Chapter Dinner held at Gino’s East, famous for Chicago Pizza. It was excellent. 15 members were able to join us!




Wednesday, June 26, 2019

Update on the Massachusetts Family & Medical Leave Tax

First, you will be delighted to know that it is unclear as to whether this is a tax (for purposes of claiming a deduction) or if it is something else (what else it may be is also unclear). 

William Delaney, EA
Westwood, MA
Second, you will be delighted to know that it has not been determined if these leave payments are exempt income (such as disability payments) or fully taxable income (such as unemployment compensation).  The MA Dept. of Family and Medical Leave (DFML) is in discussions with the Internal Revenue Service on this issue (why the discussion is not being led by the Mass. Dept. of Revenue is unclear).

Third, but not the least of all, it is still unclear as to whether the employee withholding will be pre-tax or after-tax.  This is also under discussion.  Why it should be pre-tax is anyone’s guess, but you never know.

Every W-2 employee is subject to the “tax” withholding.  Every employer is subject to the withholding requirement (if there is at least one W-2 employee or, in the absence of payroll, if the majority of the “employees” are 1099 contractors).  Certain categories of payroll employees and 1099 contractors are exempt.  The law follows the “shall not include” provisions of MGL Ch. 151A, Sec. 6.

The effective date for withholding is October 1, 2019.  All employers presently in the MATaxConnect system as subject to withholding of income tax will be automatically registered and this “tax” will appear along with any other tax withholding/tax filing requirements on the TaxConnect web site.

There is a “tax” calculation worksheet on the DOR web site.  Here is an example for a small employer who is NOT required to make a contribution…

Total Contribution (using $10,000 of quarterly W-2 income – one employee) –
$10,000 x .0075% = $75.00.

The DFML has allocated this “tax” to the two applicable state programs being funded.  82.5% to Medical Leave; 17.5% to Family Leave.

The employee’s contribution amount is…

Medical Leave – 82.5% x $75.00 = $61.88  Family Leave – 17.5% x $75.00 = $13.12

The employer (under 25 employees) is NOT required to make a contribution.
The employee, on the other hand, IS required to make a contribution (via withholding) equal to…

Medical Leave – 40% of $61.88 = $24.76
Family Leave – 100% of $12.12 = $12.12

Now to how to remit quarterly, using MATaxConnect.  Go to your already established TaxConnect employer account and click on the “needs attention” box associated with this “tax.”  Be sure to click on the various options so that the pop-up boxes will appear.  Use them to enter the total tax (by category) to be remitted.

When you wish to enter employee detail, two options are offered.  One – enter the detail for each employee (and/or contractor, if applicable) in the same manner that you make employee entries into the stste DUA system (this becomes important in a minute or two).  The system will then compute the total contribution due (see $10,000 example – above).  Pay what is owed and it works (for the 25 or more employees employer).  For the employer exempt from making a contribution, the system (we hope) will recognize that the employee withholding will be less than the automatically calculated total contribution (how that will happen is unclear).

Fast forward to the second quarter (Jan-Mar 2020) and start to file a return.  OK, the system already has the data base, so we don’t need to repeat the same employee information again, but wait---that’s a false assumption.  According to the MA DOR and the DFML the employee data base will NOT be retained.  It must be re-entered (because it may change, said they).  If you think that Bill Delaney is on life support and did not hear them correctly---I checked with Jeff Schweitzer, who was also there.  He heard the same thing.  So, warm up those typing fingers guys and gals.  This isn’t going to be easy.

Oh, did I mention that the system does not store accumulated wages and, therefore, it cannot track when the maximum wage base has been reached (it’s the same amount as the social security wage base maximum).  I kid you not---it’s the stone age, guys and gals.

Now for a few chuckles.  If that 1099 payment is made to a single-member LLC which files as a Schedule C (default option), that payment is not considered to part of what the employer (i.e. work provider) counts for purposes of determining if the contribution calculation must include 1099 contractors.  This isn’t a “contractor;” it’s an LLC (don’t you see)!  This MAY change; it is still under discussion.

Finally, for something serious and important.  Suppose (somehow) your taxpayer client either doesn’t file or files each quarter and declares -0- wages?  Let’s suppose one of his (I don’t have any) employees decides to apply for this leave.  DFML will search the MA DOR data base (the one which you [mostly] so dutifully type into each quarter) and discover that it is showing zilch.  However, the employee is entitled to and will receive a benefit.  The employer will be audited by MA DOR and assessed for the “tax,” interest and penalty.  In addition, the employer must also pay the full amount of the employee benefit.

Monday, May 20, 2019

IRS Can Charge Fees for PTINs

The latest in this saga is the decision by the Court of Appeals for DC Circuit which states, in part, IRS can charge a fee for its granting of PTINs.

As you have all heard, a few tax return preparers took IRS to court claiming it did not have the right to charge a fee for issuing PTINs.  On June 1, 2017, the tax preparers won in the District of Columbia district court.  On July 10, 2017, the District Court ordered IRS to permanently enjoin from charging PTIN fees and was to provide every class member a full refund of all PTIN fees paid from September 1, 2010, to the present.  The case went to appeals.

Several arguments were submitted to the Court of Appeals.  The Court ruled against the tax return preparers denying the arguments presented and vacated the District Court decision.  The case was remanded back to District Court for further proceedings, including an assessment of whether the amount of the PTIN fee unreasonable exceeded the costs to IRS to issue and maintain PTINs.

Just in case you forgot, anyone who has obtained and paid a user fee for a PTIN is affected by this case as one large class.

Montrols, et al. v U.S., Court of Appeals for the District of Columbia.


This text has been shared with you courtesy of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.

Thursday, May 16, 2019

IRS Webinar - Qualified Business Income Deduction (199A)

Qualified Business Income Deduction (199A)

Thursday, May 30, 20192 pm Eastern; 1 pm Central; 12 pm Mountain; 11 am Arizona;  11 am Pacific; 10 am Alaska; 8 am Hawaii

This webinar highlights the basics of the qualified business income deduction, updated to incorporate guidance issued in January 2019.

This free 100-minute webinar for Tax Professionals & Industry will cover:

  • Definition of terms
  • Calculating the deduction
  • Application of limitations
  • Discussion of the rental real estate safe harbor
  • Walk through examples to bring it all together
  • Plus a live Q & A

Click here to Register for the Webinar 

Tax Professionals – Earn 2 CE Credit – Category: Federal Tax

Closed captioning is offered for this webinar.

Closed captioning displays the words that describe the audio portion of the program for viewers who are deaf or hard of hearing. Captions are available in English.

Stay in the know on the go! View IRS webinars the day they air on smartphones and tablets.

Find previous archived on www.irsvideos.gov.

Questions? Email IRS at: cl.sl.web.conference.team@irs.gov

This is an IRS Webinar, this is not a Webinar hosted by NATP or the MA/RI Chapter of NATP.

Tuesday, February 19, 2019

Mass Tax Connect Option For Energy Exemption

Third parties may now register for client’s energy exemption.


A third party, with access rights to a client’s MassTaxConnect account for at least one tax type, can now register for the small business energy exemption on behalf of the client. The certificate will be mailed to the client. Only the client will be able to obtain a copy of the exemption certificate or view the certificate through MassTaxConnect. Learn more about the small business energy exemption.

Monday, January 28, 2019

Form 8965 Health Coverage Exemption Changes

The Shared Responsibility Penalty is alive and well in 2018.  The penalty will be the greater of the flat dollar penalty of $695 per person with a maximum $2085 or 2.5% of household income in excess of the filing requirement.

What is new for this year is the expansion of the exemptions available on the tax return.  The 2018 instructions for Form 8965, Health Coverage Exemptions, contain a new option entitled General Hardship, Code G, which can be selected without provided any additional proof of the hardship.  The hardship options available through the tax return contain the same 14 hardships that were available through healthcare.gov by special application last year.

In addition to those, a 15th hardship option has been added.  It is:  You lived in a country where there is no qualified health plan offered, there is only one issuer offering coverage, or all affordable plans provide abortion coverage contrary to your beliefs.

You are still able to apply for the hardship exemption through healthcare.gov and provide the required proof.  The application will be reviewed and if granted, an exemption certificate number will be sent to the taxpayer.  The only reason that this method may be preferred is to avoid a later IRS challenge of the hardship through audit.

Beginning in 2019, the Shared Responsibility Penalty is reduced to $0.  However, TCJA did not affect the Premium Assistance Credit.


This text has been shared with you courtesy of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.

Friday, January 25, 2019

How High Are State and Local Tax Collections in Your State?

Katherine Loughead, Analyst
TaxFoundation.com
Today’s state tax map shows state and local tax collections per capita in each of the 50 states and the District of Columbia. D.C.’s tax collections per capita ($10,841) are higher than in any state. The five states with the highest tax collections per capita are New York ($8,957), Connecticut ($7,220), New Jersey ($6,709), North Dakota ($6,630), and Massachusetts ($6,469). The five states with the lowest tax collections per capita are Alabama ($3,206), Tennessee ($3,322), South Carolina ($3,435), Oklahoma ($3,458), and Florida ($3,478).

While some of these results speak for themselves, others are less intuitive. For example, as a resource-rich state, North Dakota generates a substantial share of its tax revenue from severance taxes on oil and natural gas, the burden of which is borne mainly by consumers outside North Dakota. As a result, in terms of tax collections per capita, North Dakota joins the ranks of the high-tax states in the Northeast even though North Dakota’s tax burden is comparatively low.



It is also important to note that severance taxes are far from the only example of “tax exporting” states engage in. Travel taxes—such as hotel, car rental, and meal taxes—also disproportionately impact nonvoting nonresidents who have few means of redress. As a result, states that generate substantial amounts of tax revenue from tourism may also show tax collections per capita that are significantly higher than the actual tax burden that falls on the in-state population. It is important to keep both legal incidence and economic incidence in mind when evaluating the true costs of any tax.

Thursday, January 24, 2019

Final Regs on QBI Have Changes

On Friday, January 18, 2019, IRS released final regulations on the Qualified Business Income (QBI) deduction, Section 199A.  These regs (247 pages) contain changes from the proposed regs (184 pages) issued last August.  The preamble to the final regs cover almost 150 pages, leaving the remaining 90+ pages for the actual regs.  The preamble is the portion of the package where IRS discusses some of the over 300 comments it received, its thinking, and its decision.

It is extremely likely that any seminar you attended or article you read dealing with QBI prior to last Friday has information that was correct at the time, but is now different.  Here are some of the changes that affect most taxpayers.

LOSS BUSINESS – the final regs state a loss from a business must be allocated prorate to offset the profits from other businesses.  For example, Business A has a loss of 10, Business B has a profit of 60, and Business C has a profit of 40.  The total of the profits is 100.  Business B’s portion of this profit is 60% and Business C’s portion is 40%.  Business B is allocated 6 (60% x 10) of the loss, reducing Business B’s profit down to 54 for QBI calculation purposes.  Business C is allocated 4 (40% of 10) of the loss, reducing Business C’s profit down to 36 for QBI calculation purposes.

The regs also state the allocation to a Specified Service Trade or Business (SSTB) is calculated AFTER any reduction in the SSTB’s income that is required if the taxpayer’s taxable income exceeds the threshold.

QUALIFIED BUSINESS INCOME – Normally for a sole proprietorship, this would be the net income from the bottom of Schedule C.  The final regs address the following in connection with QBI:
1) The deduction of a portion of the self-employment tax reduces QBI.

2) The deduction for self-employed health insurance reduces QBI.

3) The deduction for contributions to qualified retirement plans (we believe this includes SEPs and SIMPLEs but not traditional IRAs but our opinion can change).

4) The deduction for unreimbursed partnership expenses, the interest expense to acquire an ownership in a partnership or S corporation, and state and local taxes are items the preamble states will specifically NOT be addressed currently.  (We feel the unreimbursed partnership expenses should reduce QBI, but at this time we are not expressing an opinion on the other items.)

5) Form 4797 income/losses that are carried to Schedule D are NOT QBI, while any Form 4797 income/losses that are treated as ordinary income bypassing the Schedule D are QBI.

6) Rentals – The preamble to the final regs state that meeting the real estate professional provisions of Section 469(c)(7) does NOT make a rental activity a business.  It is still based on whether the rental activity rises to the level of a business.  Notice 2019-07 covers QBI & rental activities by providing a safe harbor.  (We addressed this Notice in an email we sent out January 18, 2019.)

7) Suspended losses – QBI related to losses suspended under the passive, at-risk, or basis rules is not QBI until the suspended losses are included in the taxpayer’s taxable income.  If only part of the suspended losses is included in taxable income in a year, that prorata portion of the suspended QBI is taken into account. For example, for 2018 a taxpayer receives a Schedule K-1 showing a 12 loss and -10 of QBI.  The entire loss is suspended under the passive loss rules for 2018.  The Schedule K-1 for 2019 shows a profit of 4, which releases 4 of the 2018 loss.  Since this 4 represents 33% of the 2018 suspended loss, 33% of the -10 QBI is taken into account in 2019.  The suspended losses are based on FIFO – the first suspended losses are the first ones to be used.  The released suspended QBI is considered a separate activity and is NOT linked to the activity that created it.

8) Employee status – Basically the regs say “once an employee, always an employee.”  Briefly an employee who terminates the employee status and becomes an independent contractor doing the same work for the same company will be treated by IRS as an employee and ineligible for the QBI deduction.  This can be rebutted by the taxpayer and will be judged on the facts and circumstances.  The regs include the example of an employee who worked for the firm long enough to become a partner.  Since a partner of a partnership cannot be an employee, this is sufficient to rebut the IRS position.  This rule appears to discourage a taxpayer from recharacterizing his/her employee status to that of an independent contractor.

MULTIPLE TRADES OR BUSINESSES – The preamble states the Treasury Department and IRS feels multiple trades or businesses will generally not exist within one entity (individual, partnership, etc.) UNLESS a different method accounting could be used for each business.  Regulation §1.466-a(d) explains that no trade or business is considered separate and distinct unless a complete and separable set of books and records is kept for the business.

UNADJUSTED BASIS IMMEDIATELY UPON ACQUISITION (UBIA) –
1) Like kind exchanges and involuntary conversions – the regs now state the “placed in service” date for the old property is the same date that would have been used if the old property still existed (in most cases this will be the purchase date of the old property).  The boot continues to use the date the new property was acquired.

The regs also state the UBIA of the old property carries over.  The UBIA of the boot will normally be the amount of boot paid.  However sometimes the UBIA of the boot will actually be lower, such as when the old property decreased in value.  If you have an exchange, we suggest you read the examples in the regs for the calculations.

2) Property contributed to a partnership under Section 721 or into a corporation under Section 351 – The regs continue to say the “placed in service” date is the date the partner or shareholder originally placed the property in service.  But the regs now say the UBIA for the partnership and S corporation is the UBIA the partner or shareholder would have used if they kept the asset.  In most cases this will be the cost of the asset to the partner or shareholder.  (The proposed regs required the UBIA for the partnership and S corporation to be the adjusted basis of the property in the hands of the partner and shareholder as of the date it was contributed to the entity.)

3) Section 754 election in place - A partnership which has made a Section 754 election has triggered §§734(b) & 743(b).  The increase or decrease in basis in assets under §743(b) will result in changes to the UBIA for the partner(s) affected by the 754 election.  Again, the regs have examples going through the calculations required for this.

4) Disposition of a relevant passthrough entity (RPE) ownership during the year.  The UBIA is allocated to the owners of the RPE based on their ownership on the last date of the year.  Therefore, any taxpayer who disposed of the ownership during the year will have an allocation of QBI and wages, but no allocation of UBIA.

SPECIFIED SERVICE TRADE OR BUSINESS (SSTB) –
1) In response to comments received, the regs provide more examples of various SSTB categories, especially in the field of health.

2) The final regs state a business that has ANY SSTB is considered to be an SSTB except if it meets the di minimis provision.  The di minimis provision did not change from the proposed regs and states the entity is not an SSTB if its average annual gross receipts is not over $25,000,000, and less than 10% of its gross receipts is from an SSTB.  This percentage is lowered to “less than 5% for those businesses that have average annual gross receipts of over $25,000,000.

3) A business that provides part of its property, products, or services to a commonly controlled SSTB (at least 50% common ownership) operated by an individual or RPE has to treat that portion of its business as an SSTB.  The remainder of the business is an eligible QBI if it meets the normal provisions of QBI.  In a way this contradicts the statement above that says “ANY” SSTB, but this is the way we read the regs.

RELEVANT PASSTHROUGH ENTITIES (RPEs)
1) Each RPE must passthrough to its owners the proper allocated QBI, wages, and UBIA.  These items need to be reported for each business the RPE has AND be further identified as an SSTB if applicable.  These items are noted in the OTHER box of the Schedule K-1.  The amounts shown in boxes 1 & 2 of the Schedule K-1 may not be the same amount as the QBI.

2) The recipient of the Schedule K-1 does have to use common sense and may need to contact the RPE if information appears to be missing.

3) The regs say:
- Failure to passthrough wages means the activity does not have wages.
- Failure to passthrough UBIA means the activity does not have UBIA.
- Failure to passthrough POSITIVE QBI means the activity does not have positive QBI.  This implies the taxpayer cannot ignore a Schedule K-1 that appears to have a negative QIB.

4) The RPE can amend the Schedule K-1 to report this information up through the RPE’s normal 3-year statute of limitations.

AGGREGATION
1) An election to aggregate multiple businesses can be disregarded by IRS if the election is not attached to the return.  Once IRS disaggregates the businesses, the taxpayer cannot re-aggregated those same businesses for the following three tax years.

2) An aggregation elected by an RPE cannot be ignored by the recipient of the Schedule K-1, although the recipient can elect to add to the aggregation for any OTHER businesses the recipient has that qualify.

3) The aggregation election cannot be made on an amended return with the exception of the 2018 return.  IRS feels making the exception for 2018 is reasonable since this is new.

4) An aggregation election does NOT have to be made in the first year.  It can be made in any year and is binding for all future years after made.

FINAL TEST CALCULATION – The final test calculation takes taxable income and reduces it by the net capital gains.  The proposed regs said this was the net long-term capital gains from Schedule D less any net short-term capital losses.  The final regs keep this same definition BUT qualified dividends are also considered “net capital gains” for this purpose.


Why did these changes happen?  Partly because comments were sent to IRS with concerns, suggestions, and clarification requests.  Your voice can be heard if you want it heard.  The preamble contains information on submitting comments to IRS.

News Release 2019-04 contains links to the final regs discussed above as well as links to the official Revenue Procedure 2019-11 which defines “wages” for purposes of QBI, Notice 2019-07 containing a proposed Revenue Procedure dealing with QBI & rental activities, and proposed regs dealing with suspended losses as well as RICs.

You can find this News Release by going to irs.gov and entering “IR-2019-04” in the SEARCH box and then clicking on the link in the news release.

If you have questions about a certain area of QBI, you should check the examples in the regs because they may illustrate your issue.

THE END (for now).


This text has been shared courtesy of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.

Wednesday, January 23, 2019

Rhode Island Division of Taxation Lists Software Cleared For E-File

The Rhode Island Division of Taxation has cleared for use a number of tax-preparation software programs for electronic filing for tax year 2018. These programs have completed and passed acceptance testing for tax year 2018 for e-filing purposes. The list, which is now on the Division’s website, will be updated as needed.


(Note: Although the Rhode Island filing season officially begins January 28, some software providers may allow e-filing in advance of that date and hold the completed returns until the season officially starts.)

The Rhode Island Division of Taxation this filing season will accept the following returns under its electronic filing program:


  • Form RI-1040
  • Form RI-1040NR
  • Form RI-1120C
  • Form RI-1120S
  • Form RI-1065

Monday, January 21, 2019

IRS Addresses QBI and Rental Properties

On Friday, January 18, 2019, IRS released Notice 2019-07 with a title of “Section 199A Trade or Business Safe Harbor:  Rental Real Estate.”  Finally, we receive better guidance from IRS on QBI & rentals other than “read case law”, especially since case law is not consistent.  We really like the part of this Notice where it says “The Treasury Department and the IRS are aware that whether a rental real estate enterprise is a trade or business is the subject of uncertainty for some taxpayers.”  Yes, we thought you would enjoy a little humor before reading the details of the Notice.  Inside the Notice is a 7-page proposed revenue procedure containing the requirements.  Here is a summary of the safe harbor rules for rental real estate enterprises (rentals) and QBI.  Read the Notice for all of the details.

1) The rental must be held directly or through a disregarded entity.

2) The taxpayer must EITHER:
- a) Treat each rental as a separate activity, or
- b) Treat all similar (commercial and residential are NOT similar) rentals as a single activity.

In other words a taxpayer wanting to treat multiple rentals as a single activity would have TWO activities – one commercial rental and one residential rental.  Once this treatment is made, it must continue unless there has been a significant change in facts and circumstances.  This is a “one or all” option.  For example a taxpayer with three residential rentals can’t choose to combine two out of the three, it’s either keep each one separate or combine all three.

3) Separate books and records are kept for each rental.

4) “250 hours test.”  For years beginning prior to January 1, 2023, the taxpayer must perform 250 or more hours of “rental services” during the year with respect to the rental.  (Editor note:  This provision may require some taxpayers to make the “treat as one” election in order to qualify.)  For taxable years beginning after December 31, 2022, this “250 or more” test must be met in any three of the five consecutive years including the current year.  If the rental has been held less than five years, the “five” is replaced with the number of years the rental has been held.  These hours can be performed by the taxpayer or employees, agents, and/or independent contractors of the taxpayer.

4)  The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following:
-- Hours of all services performed,
-- Description of all services performed,
-- Dates on which such services were performed, and
-- Who performed the services.

“Rental services” for this purposes include:
i) Advertising to rent the property,
ii) Negotiating and executing leases,
iii) Verifying information contained in prospective tenant applications,
iv) Collection of rent,
v) Daily operation, maintenance, and repair of the property,
vi) Management of the real estate,
vii) Purchases of materials, and
viii) Supervision of employees and independent contractors.

“Rental services” for this purpose does NOT include financial or investment management activities, such as:
i) Arranging financing,
ii) Procuring property,
iii) Studying and reviewing financial statements or reports on operations,
iv) Planning, managing, or constructing long-term capital improvements, or
v) Traveling to and from the real estate.

Rentals that do NOT qualify for this safe harbor treatment include:
a) Real estate used by the taxpayer or an owner of a passthrough as a residence for ANY part of the year under the vacation home rules of Section 280A, or
b) Rentals under a triple net lease.

STATEMENT REQUIRED - To use this safe harbor provision the taxpayer must attach a statement to the tax return that the requirements of Section 3.03 of Revenue Procedure ____(currently unnumbered)___ have been met.  The statement must be signed by the taxpayer or the passthrough entity’s authorized representative.  The statement must also include:  “Under penalties of perjury, I (we) declare that I (we) have examined the statement, and, to the best of my (our) knowledge and belief, the statement contains all the relevant facts relating to the revenue procedure, and such facts are true, correct, and complete.”  The signer must have personal knowledge of the facts and circumstances related to the statement.

Although this safe harbor is proposed to apply to taxable years ending after December 31, 2017, it is not effective until it is published in final form, BUT taxpayers can apply it immediately.

This applies to all taxpayers, including passthrough entities such as partnerships.

Remember that this is a safe harbor provision.  This means a taxpayer who meets these rules can treat the rental property as QBI.  If the taxpayer doesn’t meet the safe harbor rules, the rental property may still qualify as QBI if it meets the definition of a trade or business.  (In other words, you can still argue about the issue.)

This News Release 2019-07 also contains links to the finalized regulations and the official Revenue Procedure 2019-11 which defines “wages” for purposes of QBI.  These two items are very similar to the proposed regulations and revenue procedure IRS issued back in early August.

IRS also released additional proposed regulations on QBI which we are currently reading.

You can find this QBI package by going to irs.gov and entering “IR-2019-04” in the SEARCH box and then clicking on the link in the news release.


This text has been shared courtesy of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.

Friday, January 18, 2019

New for Massachusetts - Paid Family Medical Leave Law

William Delaney, EA
Westwood, MA
RI already mandates paid family leave.  Now comes MA with House Bill 4640.  Effective 7/1/2019, a notice describing this benefit must be posted in each workplace.  Also, within 30 days of hiring, employees must receive written information (either prepared by or approved by MA) explaining the benefits, etc.

All employers are covered.  There is NO minimum number of employees---one is sufficient.  A covered individual is your current employee (regardless of length of service), or a former employee (within 26 weeks of separation).  Also, if they so elect, self-employed may be covered.

Benefits will be paid from the Family and Employment Security Trust Fund.  The money will actually come from a payroll tax on employers – initial contribution rate of 0.63% of all wages paid.  ($40,000 x .0063 = $252)

Employers with 25 or more employees:

Up to 40% of the medical leave contribution may be deducted from the employee’s wages.  The employer is responsible for remitting 100% of the tax.

Up to 100% of the family leave contribution may be deducted from the employee’s wages.  The employer is responsible for remitting 100% of the tax.

Employers with fewer than 25 employees in Massachusetts:

The employer is not required to pay the employer portion of the tax.  The employee is still subject to payroll deduction (see above for 25 or more employees) for his/her share of the tax.

A “covered business entity” (a business which contracts with self-employed individuals and is required to issue federal form 1099-Misc) is subject to the same requirements as to deductions and remittances as outlined above.

Regulations to follow on or before July 1, 2019.  Your Editor assumes that the tax and withholding obligations will be effective July 1, 2019.  The statute does not specify a start date.  Paid leave will not be available until 2021 – effective date not clear; the language in the statute is inconsistent and needs clarification.


Thursday, January 17, 2019

Basis Computation Required

Did you happen to look at the 2018 Schedule E, page 2?

Part II of the Schedule E is the place you report the income from partnerships and S corporations.  You’re familiar with entering the name, EIN, a box to check if the at-risk limits apply, etc.  This year we have a new box (e) which says “Check if basis computation is required”.  The directions above line 27 says “Income or Loss From Partnership and S Corporations - Note:  If you report a loss, receive a distribution, dispose of stock, or receive a loan repayment from an S corporation, you must check the box in column (e) on line 28 and attach the required basis computation.”  The word “must” in this sentence is bolded on the IRS form.

This appears pretty strongly to mean we MUST attach a basis worksheet if any of these items apply.  Pages E-8 and E-9 of the directions for Schedule E discuss limiting losses by applying the basis rules.  These directions specifically mention basis must be computed before claiming losses and refers you to worksheets found in the Schedule K1 instructions.  The directions do not mention attaching basis to the return for partnership limited losses but do specifically state basis computation must be attached in connection with S corporation items mentioned above.


This text has been shared with you courtesy of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.

Thursday, January 10, 2019

IRS Offers Tips to Tax Professionals to Reduce CAF Number Errors, Better Protect Data From Cyberthieves

The Internal Revenue Service has outlined common errors that may delay processing of Centralized Authorization File (CAF) numbers. Reducing errors in CAF applications is one way to speed the approval process for tax  professionals.

The IRS also reminded tax practitioners that CAF numbers are valuable cybercriminal targets and outlined steps tax professionals should take annually to help protect their CAF number from misuse.

The IRS annually processes 3.5 million paper Forms 2848, Power of Attorney and Declaration of Representative, and Forms 8821, Tax Information Authorization. The Form 2848 grants eligible practitioners the authorization to represent a client before the IRS. The Form 8821 grants individuals or organizations the authorization to inspect a client’s tax records.

When practitioners submit Forms 2848 or 8821 for the first time, they are issued a nine-digit CAF number that they use as an identifier on all their future third-party authorization requests. During fiscal year 2018, the IRS rejected 384,081 authorization requests.

Issues that cause an IRS CAF assistor to reject the Forms 2848 or 8821 are as follows:

  • Lack of an original pen and ink signature (i.e. use of a digital signature, no signature or use of a signature stamp) by the Taxpayer.
  • The Representative Designation is not complete on page 2 of Form 2848.
  • Level H designation on Form 2848 requires the signor to have prepared the tax return.  If the signor did not prepare the return, as verified by the CAF assistor, then this is a basis for rejection.
  • The Representative information requested is incomplete or missing on Form 2848. This includes the Designation; Licensing Jurisdiction or Authority; Bar, License, Certification, Registration or Enrollment Number or representative signature and/or date.
  • Check of the box 6 to add a new designee but retain the former designee.  A copy of the old Form 2848 is required to retain the prior authorization; however, the copy is not attached.
  • The Forms 2848 or 8821 are missing the required Taxpayer and/or Representative identification information.
  • The Tax Matter identification is not specific.  The completion of “all years” or “all future periods” is not acceptable.  This needs to be specific tax modules.
  • The title of the Officer of the Business and/or Company (if applicable) is blank.
  • The date of the Taxpayer signature is blank.

The average processing time for a third-party authorization request is less than 5 days. Because this is a manual process, it is important that tax practitioners also submit accurate forms to avoid delays.

The IRS urges tax practitioners to protect the CAF numbers just as they would their Electronic Filing Identification Numbers (EFINs) and Preparer Tax Identification Numbers (PTINs).

However, as cybercriminals target tax practitioners for data thefts, more CAF numbers are falling into crooks’ hands. Today’s identity thief is just as knowledgeable about tax practices as technology. The IRS has noticed an increase in criminal’s efforts to pose as a tax practitioner using a stolen CAF number or to fax one of the third-party authorization forms using a stolen CAF number.

Here are a few steps tax professionals can take to protect their CAF numbers:

  • Make a data security plan and take sound security steps to protect all taxpayer data as outlined in Publication 4557, Safeguarding Taxpayer Data.
  • Make an annual review of the firm’s third-party authorizations. Prior to filing season is a good time to review the list of clients represented.
  • If the list includes clients who are no longer represented, fax a copy of the authorization form to the IRS CAF unit with the word “Withdraw” written at the top. Review Publication 947 for details.
  • Be aware of data theft signs, which include the receipt of tax transcripts for clients that you either did not request or taxpayers you do not represent.
  • Contact the Practitioner Priority Service telephone line if the CAF number has been stolen, if there is suspicion it’s being misused or if transcripts are being received that were not requested.

Tuesday, January 8, 2019

Tax Refunds Will Be Paid During Shutdown, White House Says

Mike Pence, Vice President
United State of America

New policy meant to ‘mitigate the impact’ of shutdown, Vice President Mike Pence says

The IRS will pay tax refunds even though the agency is subject to the federal government shutdown, after the Trump administration reversed a longstanding policy.

The decision, announced Monday by the White House Office of Management and Budget, would remove one of the biggest potential pains for Americans from the shutdown and allow hundreds of billions of dollars to flow once tax filing opens later this month in the event that the shutdown lasts that long.

The administration is trying to make the shutdown as “painless as possible consistent with the law,” Russell Vought, the acting OMB director, told reporters.

“We’re going to continue to take steps like that to mitigate the impact,” Vice President Mike Pence said of the tax refunds.

Until Monday, the Trump administration and its predecessors had said refunds couldn’t be paid while the IRS was shut because that wasn’t necessary to protect life or government property.

IRS Confirms Tax Filing Season to Begin January 28

WASHINGTON ― Despite the government shutdown, the Internal Revenue Service today confirmed that it will process tax returns beginning January 28, 2019 and provide refunds to taxpayers as scheduled.

“We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period,” said IRS Commissioner Chuck Rettig.

Congress directed the payment of all tax refunds through a permanent, indefinite appropriation (31 U.S.C. 1324), and the IRS has consistently been of the view that it has authority to pay refunds despite a lapse in annual appropriations. Although in 2011 the Office of Management and Budget (OMB) directed the IRS not to pay refunds during a lapse, OMB has reviewed the relevant law at Treasury’s request and concluded that IRS may pay tax refunds during a lapse.
The IRS will be recalling a significant portion of its workforce, currently furloughed as part of the government shutdown, to work. Additional details for the IRS filing season will be included in an updated FY2019 Lapsed Appropriations Contingency Plan to be released publicly in the coming days.

“IRS employees have been hard at work over the past year to implement the biggest tax law changes the nation has seen in more than 30 years,” said Rettig.

As in past years, the IRS will begin accepting and processing individual tax returns once the filing season begins. For taxpayers who usually file early in the year and have all of the needed documentation, there is no need to wait to file. They should file when they are ready to submit a complete and accurate tax return.

The filing deadline to submit 2018 tax returns is Monday, April 15, 2019 for most taxpayers.  Because of the Patriots’ Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17, 2019 to file their returns.

Software companies and tax professionals will be accepting and preparing tax returns before Jan. 28 and then will submit the returns when the IRS systems open later this month. The IRS strongly encourages people to file their tax returns electronically to minimize errors and for faster refunds.

Friday, January 4, 2019

Massachusetts Differences for 2018 - Did You Know?

Alimony – MA did NOT adopt the recent federal changes to alimony (for agreements on or after 12/31/18). It is income to the recipient and a deduction for the payer even if NOT reportable on the federal tax return. Not likely to be an issue until tax year 2019.

Like-kind-exchange - For federal purposes, like-kind exchanges now apply only to real property. For MA purposes, the prior law is still in place. Example: a trade-in of a business vehicle is a like-kind exchange. Gain/loss is computed and rolled into the cost of the replacement vehicle (MA tax treatment). However, the gain is now currently recognized for federal tax purposes.

Sec. 199A Qualified Business Income Deduction - Not a deduction on the MA return.

Sec. 217 Moving Expense Deduction – Not allowed for federal purposes; still ALLOWED for MA purposes. MA has designed a worksheet (found in the instructions for form MA-1) which will calculate the allowable deduction.

Form 2106 Expense Deductions – Gone for BOTH federal and MA purposes.

Your Editor’s take from attending a recent MA update by Mass. Taxpayer Advocate
Dana Ackerman.

Tuesday, January 1, 2019

Chapter President's Message

Ronald Fisher, President
Massachusetts/Rhode Island Chapter

I consider it a great honor and privilege to begin my term of President of the Massachusetts/Rhode Island NATP Chapter.  Especially in this unique time in history where tax changes are rocking our profession.  Luckily for me, I will be leading an extraordinary Board of Directors (including many past presidents) who all have an enormous amount of energy and passion.  I could not have hoped for a more dedicated team of colleagues to share this experience and rely on their wise counsel.

I hope everyone is prepared for the 2019 tax filing season where we will all be dealing with some of the biggest changes in tax law in a very long time. I don’t know about anybody else, but this could very well be one of craziest seasons in my 38 years preparing tax returns.  All of the changes that took place in 2018 will be a hindrance to us and our clients. These changes are going to both help and hurt the way we can take care of our client’s needs.

This is YOUR Chapter and the Board is here for you.    I would like to ask something of each of you reading this:  take a moment and write down ways this Chapter can add value to your business.  Seriously, what can we do to help you?  Not what National NATP can do, but focus solely on this Chapter.  After you figure out what you need from us, e-mail me at:  rfishertax@aol.com.  This will be a feedback mechanism to allow you to come up with ideas that I can share/discuss with the board.

There are many things that are ever changing in the tax world, and these require us to keep on our toes.  These changes require us to have more education and knowledge to help our clients.  Your Chapter provides support, education and local networking opportunities for its members including:

  • Regularly updated Chapter Website with news and information on not only IRS issues but issues local to Massachusetts & Rhode Island, also contact info for any of our Board of Directors – http://www.massrinatp.com.
  • Hosting meetings where members can exchange ideas, solve problems, and discuss issues with other tax professionals in their area.
  • Volunteering to provide individual support and expertise about state and local tax issues to members through website, newsletters, meetings, and e-mail communications.
  • Offering live local education seminars on Federal, state and local tax topics.
  • Interfacing with the NATP National Office to make current information available on the Chapter website, enabling members to get updates on issues in other states.
Your Chapter has the following upcoming events in 2019 that you will not want to miss:
  • January 3rd 2019 – Annual State & Mini Federal Update Seminar – the only seminar around where you can get 2 hours of Federal Tax Update CE hours plus presentations from 4 Different states (MA, RI, CT, NY) ALL IN ONE DAY!!  Held at the Southbridge Hotel & Conference Center. Check the chapter website for registration details.
  • In June, we usually have a half day educational seminar with current hot topics and it is held at a central location in the Worcester/Marlboro area.  (2019 Date TBA)
  • October 22nd 2019 – Annual Federal Seminar & Chapter Annual Meeting 7-8 Hours of Federal Tax Update CE Hours plus nominations, elections, state of our chapter – this is open to ALL members and ALL are encouraged to get involved. Held at the Mansfield Holiday Inn.

I encourage all of you to register and participate in these Chapter events.  It is the best way for you to meet, connect and build solid professional relationships with other local tax preparers who share similar experiences.  All in a relaxed setting and at a reasonable cost. 

I wish you all a healthy and prosperous new year and I also hope to see all of you at one (or all) of our 2019 seminars.