IRS to Begin Accepting Business Tax Returns on Jan. 13

The Internal Revenue Service plans to begin accepting business tax returns on January 13, more than two weeks ahead of the start date for accepting individual tax returns.

The IRS announced last Wednesday that it would begin accepting individual 1040 tax returns on January 31, blaming the 16-day federal government shutdown in October for delaying its annual programming, updating and testing its tax-processing systems. However, the IRS posted on its Web site last Thursday that it will also begin accepting 2013 business tax returns on Monday, Jan. 13, 2014. This start date applies to both electronically filed and paper-filed returns.

The business tax returns include any return that posts on the IRS’s Business Master File system. BMF tax returns include a variety of income tax and information returns such as Form 1120 filed by corporations, Form 1120-S filed by S corporations, Form 1065 filed by partnerships and Form 1041, the return filed by estates and trusts. It also includes various excise and payroll tax returns, such as Form 720, Form 940, Form 941 and Form 2290. The IRS expects to be able to begin processing any of these business returns on January 13.

The IRS noted that the January 13 start date does not apply to unincorporated small businesses that report their income on Form 1040. The start date for all 1040 filers is Jan. 31, 2014. While the IRS is encouraging these small businesses to begin preparing their returns now, it will not be able to accept these or any other individual returns or begin processing them until January 31. This includes sole proprietors who file a Schedule C, landlords who file a Schedule E and farmers who file a Schedule F.

Further details are available on IRS.gov.

REMINDER - Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 9th 2014

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 9th, 2014 for our Annual State Update Seminar. This all day event will be held at the Sturbridge Host in Sturbridge MA. Registration details are below, and will be handled online by National this year. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours.

REGISTRATION INFO HERE

Happy Holidays from the MA / RI Chapter of NATP

Cost of Copies of Tax Returns Reduced

IRS has released the September 2013 Form 4506, Request for Copy of Tax Return.  The cost for a copy of a Federal tax return including all attachments as originally submitted to the IRS is now $50 (down from the previous $57).  IRS instructions to the Form 4506 states it may take up to 75 calendar days for IRS to process the request for copies.

Alternatively, at no charge, Form 4506-T, Request for Transcript of Tax Return, can be used to request tax return transcripts, tax account information, W-2 information, 1099 information, verification of non-filing, and records of account.  These transcripts can also be ordered on line at www.irs.gov or by calling 1-800-908-9946.

MA DOR Offers Taxpayers a Faster Way to Settle Tax Disputes

Successful pilot program becomes permanent option for more taxpayers

(Boston, MA)-The Massachusetts Department of Revenue (DOR) is giving taxpayers a new option for settling tax disputes quicker than traditional appeal methods or litigation following the success of a year-long early mediation pilot program.

Three of four corporate taxpayers that participated in the pilot settled their $1 million dollar or more tax assessments during the very first mediation session. These cases, with tax assessments ranging from $2.6 to $9.7 million, closed in four months on average compared with the year or more it would have taken through the department’s regular appeals process.

“This is a win-win for both taxpayers who are disputing large tax assessments and DOR,” said Commissioner Pitter. “Long, drawn out appeals cost us both time and money, but if we can mutually settle a number of audit cases through early mediation in under half the time it normally takes, our entire appeals process becomes more efficient.”

Commissioner Pitter noted that one reason the program works so well is because hearing officers who act as neutral facilitators are trained in mediation techniques while auditors and attorneys representing the department are educated about conflict resolution.

“We know from experience that if both sides can come to mediation early in the appeals process after the issues and facts have been developed, but before their positions harden and become polarized, then there’s a greater chance for settlement,” said Commissioner Pitter.

The success of the pilot encouraged DOR to make early mediation an integral part of the department’s resolution process and lower the eligibility requirement so more taxpayers can choose the option. The tax assessment threshold is now $250,000 instead of the $1 million dollar base for the pilot program. Other eligibility requirements for early mediation include:

• Taxpayers must state their case and facts in writing,
• The issues of the case must be fully developed,
• Both the taxpayer and DOR must come to mediation willing to settle,
• Decision makers for both the taxpayer and DOR must participate in the mediation sessions.

 Since the pilot ended, four additional corporate taxpayers with more than $22 million in tax assessments have signed up for the early mediation program and at least two cases settled during the first mediation session.

For details on the Early Mediation Program, please visit Early Mediation Administrative Procedures on the DOR website.

MA DOR Issues New Withholding Tables for Tax Year 2014

Beginning January 1, 2014, the 5.25 percent tax rate on most classes of taxable income will drop to 5.20 percent.     The Department of Revenue has certified that baseline revenues this year met growth thresholds set by statute which automatically triggered the .05 percent decrease.  DOR will continue to certify any revenue growth every year until the income tax rate reaches 5 percent.  You can find the revised withholding tables for the new income tax rate by clicking here.

WELCOME Tracey Bell & Sharon Cummings to the MA/RI NATP Chapter Board of Directors

The Massachusetts / Rhode Island Chapter of NATP welcome two new members to the Board of Directors. 

Tracey Bell

Tracey Bell

Tracey Bell received a Bachelor of Science Degree in Marine Biology at the University of Massachusetts Dartmouth.  After being employed in the water and materials testing industry as a chemist and quality control manager for over 20 years and wanting a change, she decided to pursue a career in income tax preparation.  In 2012, Tracey earned the Registered Tax Return Preparer designation.  She has worked for a small accounting and tax firm in Holden, Massachusetts and been a member of NATP for 4 years. Tracey resides in Rutland, Massachusetts.

Sharon Cummings

Sharon Cummings

Sharon Cummings is Vice President of Horan Associates Inc., located in South Easton, Massachusetts. Sharon graduated from Bridgewater State University in 2011 with a Bachelor of Science in Accounting and Bachelor of Science in Economics. From a very young age, she always knew that she wanted to work with numbers. Obtaining her CPA was her goal in college, and it wasn’t until she met her current business partner, John Horan, that she realized her calling is in tax preparation. As Sharon is still new to the game, she hopes to continue to grow and learn with this ever changing field.

REMINDER - Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 9th 2014

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 9th, 2014 for our Annual State Update Seminar. This all day event will be held at the Sturbridge Host in Sturbridge MA. Registration details are below, and will be handled online by National this year. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours.

REGISTRATION INFO HERE

Rhode Island Tax News - Latest Advisory Posted

The Rhode Island Division of Taxation's latest Advisory includes information about the start of filing season, tax form revisions, the annual sales tax reconciliation, new documents for historic tax credits, and more.

To view it, please click here for the advisory alert.

Also, here is a new RI Administrative Decision showing how someone faced tax and penalties from the sale of a car - click here.

WELCOME to the New Massachusetts / Rhode Island NATP Chapter President Walter Matiseski, CPA

Walter J. Matisewski, CPA
MA/RI NATP Chapter President

Walter has owned his own accounting firm in Lincoln, Rhode Island since 1985.  His firm offers full accounting and tax preparation services to over 500 clients.  He graduated from Bryant College with a BS in accounting.  Walter also is a registered representative with Sage Point Financial offering financial services to many of his individual and business clients. Walter takes over for Christine Miarecki our outgoing Chapter President.

December 31st Filing Deadline for Computer Services Tax Abatements

The clock is ticking on filing a claim for sales or use taxes that you may have submitted to the MA Department of Revenue for computer and software services that was recently repealed.

When the tax was repealed in late September the law included language that changed the normal abatement deadlines giving taxpayers until December 31, 2013 to file an abatement electronically. DOR set up a special process to expedite these applications and refund the taxes to vendors as quickly as possible.  In turn, vendors must make every reasonable effort to refund the abatement to the customers from whom they collected the tax.

If you or your client filed and paid a use tax on services purchased that were subject to this repealed tax you must also follow the procedure below by December 31, 2013.

Of the 252 taxpayers who filed a return and submitted computer services taxes, 195 still have not filed an application or did not follow the instructions for expediting their claim. But there is still time and here’s how to do it:

1. Login to the vendor's WebFile for Business user account
2. Select "File, Pay or Amend Returns"
3. Select "Amend a Return"
4. Click "Amend" for the period 8/31/13
5. Complete and submit the amended return
6. Print the confirmation page that results and fax it to 617-660-7247 for expedited processing

Vendors may need to provide supporting documentation if requested by the Department and no actual refund will be made until the vendor establishes that the tax has been repaid or credited to the retail customer.   Taxpayers who reported a tax on computer and software services but did not remit payment of that tax to DOR should also file an amended return through expedited processing in order to avoid billing.

DOR is committed to processing your abatement application as quickly as possible. Should you have any questions, please call customer service at 617-887-6367.

If you have filed an electronic application for abatement, but did not follow the steps for expedited processing, you may fax your confirmation page to the number listed above and receive expedited processing. (If you do not have your confirmation page, just fax a brief statement with the date you filed the electronic application.)

For more information see TIR 13-17: Repeal of the Computer Software and Services Tax

RI Withholding Tables Now Posted

The Rhode Island Division of Taxation has now posted on its website the booklet of withholding tables for tax year 2014.

Employers use the tables to figure out how much to withhold from an employee’s pay for Rhode Island personal income tax.

The booklet can be viewed on the RI Division of Taxation website here.

2014 Standard Mileage Rates for Business, Medical and Moving Announced by IRS

WASHINGTON — The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56 cents per mile for business miles driven
• 23.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2013-80 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Is There A Deductible Long Term Capital Loss on the Sale of an Inherited Personal Residence?

Issue:   The personal residence of a decedent is now part of an estate and will eventually be placed for sale, either by the fiduciary or by the beneficiaries of the estate.  If the sale results in a capital loss (all sales of inherited property are long-term for tax purposes), is the loss allowed as a deduction?
See IRS Chief Counsel Memo SCA 198-012 (5/12/98) for, perhaps, the answer.  The Memo refers to IRC Sec. 641(b) and Sec. 165(c).  These sections deal with the taxation of individuals and limitations on deduction of personal losses, and the Memo points out that “…an estate generally may not deduct a loss incurred on the sale of the decedent’s personal residence unless it has been converted to an income-producing purpose.”

However, the Memo goes on to say that IRC Sec. 165(c)(2) would allow an estate to “…deduct a loss incurred in any transaction entered into for profit, though not connected with a trade or business.”  “This provision may apply when the estate establishes that it converted the decedent’s personal residence to an income-producing purpose.”

Then, a certain level of ambiguity is introduced when the Memo states “We believe that the conversion of the decedent’s personal residence is not necessarily unusual, especially if the administration of the estate is prolonged.”  One would presume that it would be unnecessary to define a situation where the residence is rented for fair value as a conversion to an income-producing purpose.  That would be self-evident and further supported by the use of Schedule E.

MA Interest Rate On Overpayments And Underpayments

The Massachusetts Department of Revenue is issuing this Technical Information Release (TIR) to announce the quarterly interest rate on overpayments and underpayments determined by the Department of Revenue pursuant to G.L. c. 62C, §§ 32 and 40, as amended.  The interest rate on overpayments and underpayments was the same for periods prior to July 1, 2003.  An amendment to G.L. c. 62C, § 40, contained in the FY ’04 Budget, St. 2003, c. 26, § 196, reduces the interest rate paid by the Department on overpayments.  Effective July 1, 2003, the interest rate on overpayments is the Federal short-term rate determined under § 6621(b) of the Internal Revenue Code, as amended and in effect for the taxable year (“Federal short-term rate”) plus two percentage points, simple interest.  The rate for underpayments pursuant to G.L. c. 62C, § 32, remains at the Federal short-term rate plus four percentage points, compounded daily. G.L. c. 62C, § 32(f) may reduce the rate of interest accruing on a deficiency assessment where the audit resulting in the deficiency assessment was commenced after July 1, 2011.  See Technical Information Release 11-6, Tax Changes Contained in the Fiscal Year 2012 Budget.

2014    First quarter Overpayments 2% Underpayments 4%
2013 (entire year) Overpayments 2% Underpayments 4%
2012 (entire year) Overpayments 2% Underpayments 4%
2011 First quarter Overpayments 2% Underpayments 4%
2011 Second quarter Overpayments 3% Underpayments 5%
2011 Third quarter Overpayments 3% Underpayments 5%
2012 Fourth quarter Overpayments 2% Underpayments 4%
2010 (entire year) Overpayments 3% Underpayments 5%

The above rates may change quarterly.  See TIR 92-6 for an explanation of statutory changes in interest and penalties effective January 1, 1993 and 830 CMR 62C.33.1:  Interest, Penalties, and Application of Payments.

Fed Interest Rates Remain the Same for the First Quarter of 2014

WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2014.  The rates will be:

• three (3) percent for overpayments [two (2) percent in the case of a corporation];
• three (3) percent for underpayments;
• five (5) percent for large corporate underpayments; and
• one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2013 to take effect Nov. 1, 2013, based on daily compounding.

Revenue Ruling 2013-25 announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2013-52, dated Dec. 23, 2013.

IRS ACA Virtual Town Hall Presentation on Small Business Health Care Tax Credit

The IRS is offering FREE online presentations on the Small Business Health Care Tax Credit

To register for one of these events, use one of the following registration links:
(Note:  All sessions will cover the same materials; you only need to register for one event.)

December 16, 2013 (Monday) Time: 3:00 PM – 4:00 PM (Eastern Time)
Registration Link: https://events.na.collabserv.com/register.php?id=8a9908f59c&l=en-US

December 18, 2013 (Wednesday) Time: 3:30 PM – 4:30 PM (Eastern Time)
Registration Link: https://events.na.collabserv.com/register.php?id=4a0ae67512&l=en-US

Update on Allowable MA Medical Expense Deduction

Under the theory that there is a carryover deduction on the MA personal income tax return for the allowable federal itemized deduction, does the increase in the federal floor (for under age 65) from 7.5% to 10% apply to MA, or will MA continue to apply the lower 7.5% floor because MA has adopted, and generally follows, the federal code as of December 31, 2005.

Answer – No to the 10% question and also no to the 7.5% question.

Well, Mr. Editor, you had better explain yourself!  Here’s the real answer, according to the MA DOR speakers at the recent U Mass seminar.  MA considers this carryover amount to be an exemption and not a deduction.  It’s found on line 2 of MA Form 1 as one of the allowable exemptions.  So, it matters not how it is calculated on the federal return.  MA allows the carryover as an exemption and if the floor is changed, this does not create a federal/state difference as it would if the carryover amount were considered to be a MA deduction.

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 9th 2014

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 9th, 2014 for our Annual State Update Seminar. This all day event will be held at the Sturbridge Host in Sturbridge MA. Registration details are below, and will be handled online by National this year. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours.

REGISTRATION INFO HERE

Rhode Island Sales Tax Changes

Two key tax changes took effect this past Sunday,  December 1st 2013.

• If you buy wine and spirits from a liquor store in Rhode Island, you will not have to pay Rhode Island’s 7 percent sales tax.
• If you buy original works of art or limited edition works of art anywhere in Rhode Island, you will not have to pay Rhode Island’s 7 percent sales tax.

The Division of Taxation has posted an Advisory with details about the changes.

Happy Thanksgiving

Happy Thanksgiving From Where It All Started

UPDATE: The Affordable Care Act and Your Company

Join the Small Business Association (SBA) in person or via webinar to learn the basics of the Affordable Care Act and what it means for your business and employees in Massachusetts.

Presented by:  David Kerrigan, Director of Business Development & Audrey Morse Gasteier, Deputy Director of Policy and Research and Director of Employer Policy at the Massachusetts Health Connector.

Program Objective: Effective January 1, 2014, the Affordable Care Act (ACA) will usher in new changes and opportunities for small businesses. This program will provide an overview of some of the key changes and discuss how national health reform and Massachusetts’ health reform policies are being reconciled for employers.

Date and time:  Monday, December 2, 2013, from 10:00 a.m. – 11:00 a.m.

Where:  10 Causeway St., Room 265, Tip O’Neill Federal Building, Boston, MA 02222

                                                                   OR

Call in:  1-888-858-2144 - Access Code: 3308406#

Link: http://www.connectmeeting.att.com

To register or for questions, please contact:        

          Malise Sundstrom, Phone: 617-565-8417, E-mail: malise.sundstrom@sba.gov

IRS Payment Alternatives Webinar - Dec 11th

Owe federal taxes?   Pay now?   Pay later?   Problems paying?

Find out what options are available during this FREE one-hour webinar…

Topic: Payment Alternatives When You Owe the IRS

Date:  Wednesday, December 11, 2013

Time:  11:00 a.m. (Pacific); Noon (Mountain); 1:00 p.m. (Central); 2:00 p.m. (Eastern)

What's Covered:

• Installment Payment Agreements
• Types of agreements
• Who qualifies
• How to apply
• Offer in Compromise
• What to do before you apply
• Who qualifies
• How to apply

CPE:  Earn one CE Credit – Category: Federal Tax

Information & Registration:

Click on the following link to register:
http://www.visualwebcaster.com/event.asp?id=96566

IRS Webinar Support Team
Small Business/Self-Employed

RI Renewal for Historic Tax Credit Regulation

The Rhode Island Division of Taxation yesterday renewed for 90 days its emergency regulation involving historic tax credits.

The agency originally filed the emergency regulation this summer so that it would take effect August 1, 2013, and remain in force for 120 days, until November 29, 2013. The Division of Taxation today took action to renew it, with no changes, so that it will remain in effect from November 29, 2013, through February 27, 2014.

This will give the agency ample time to develop a formal (non-emergency) regulation on the subject. The agency tentatively plans to propose such a regulation sometime in December 2013, and schedule a public hearing on it sometime in January 2014; dates and other details will be announced. The goal is to make the regulation final by the end of February.

Legislation approved by the General Assembly and signed into law by Governor Lincoln D. Chafee in July 2013 essentially reopened the state’s historic tax credit program, with certain limits, to encourage redevelopment and reuse of historic buildings. The Division of Taxation’s emergency regulation is intended to provide guidance to developers and other stakeholders about the credit program.

Rhode Island Division of Taxation -- inflation adjustments for 2014

The RI Division of Taxation has issued inflation-adjusted standard deduction, personal exemption, and other amounts for tax year 2014.

Please use the following link to view details:

http://go.usa.gov/W9KH

Weigh in on DOR's Guidance by Taking the Survey

The MA DOR has heard from many of you, but if you have not responded, please do.

DOR TAX GUIDANCE SURVEY

Commissioner Pitter launched DOR 360, her signature initiative to open communication lines between DOR and its stakeholders, almost one year ago and a key component of the initiative is monitoring the quality of DOR’s customer service.   The Commissioner wants to know how well the department is serving the DOR community.  To answer that question, DOR launched a series of surveys this year.  The results are being carefully reviewed and changes are being made.

Guidance is an essential resource for taxpayers and practitioners and it is important for us to hear how you utilize DOR’s guidance.  Accordingly, we are requesting that you complete this DOR Tax Guidance Survey. We would very much appreciate your input.

Tell us about your experience with DOR’s guidance

By taking this survey, you will provide DOR with important feedback on what you believe works, what needs improvement, and perhaps what should be eliminated.

How to take the survey

Survey Link: https://www.research.net/s/DORGuidance

Or, scan the QR code and use your smartphone

Time

The survey will take approximately three minutes to complete.

Anonymous

This survey is completely anonymous, unless you choose to provide us with contact information for follow up – and that contact information will be shared with no one outside DOR.  We ask for contact information because we learn so much from the survey responses and sometimes that generates new questions we had not considered.  It is helpful to have the opportunity for more discussion on a particular issue.

Results will be published

The overall results of the survey will be published on the DOR website.
Thank you for your participation.  We look forward to hearing from you, and all of our stakeholders, and to improving our guidance for the benefit of all.

To contact the DOR: dor360@dor.state.ma.us

Repair v Capitalization Regulations Safe Harbor Options Released

The Repair v Capitalization regulations released back in 2011 have been revised and re-released.  The re-
released regulations make up 111 pages as a pdf file.  They discuss many different areas.  This email text discusses the portion of these regulations that provide a safe harbor dollar amount for deducting purchases of equipment.

Previous to these regulations there was a $500 safe harbor per item amount that could be deducted for purchases of “smallwares” by restaurants, but there was not a safe harbor amount for any other business.  We know many tax professionals used $500 or another amount when preparing financial statements or income tax returns.  The 2011 regulations proposed a $100 amount.  These new September 2013 regulations increase this amount and give us additional options if certain conditions are met.

Here are the safe harbor amounts available and their respective conditions:

** $200 – The definition of “materials and supplies” includes property that has an acquisition or production cost of $200 or less (increased from $100 or less in the 2011 regulations).  This $200 is per item or invoice.

Example 6.  Unit of property that costs $200 or less.  F operates a business that rents out a variety of small individual items to customers (rental items).  F maintains a supply of rental items on hand.  In Year 1, F purchases a large quantity of rental items to use in its rental business.  Assume that each rental item is a unit of property under §1.263(a)-3(e) and costs $200 or less.  In Year 2, F begins using all the rental items purchased in Year 1 by providing them to customers of its rental business.  F does not sell or exchange these items on established retail markets at any time after the items are used in the rental business.  The amounts that F paid for the rental items in Year 1 are deductible in Year 2, the taxable year in which the rental items are first used in F's business.

PTIN Revoked Under Circular 230; CPA Hung Out To Dry

David O. Christensen, a CPA licensed in Oregon and Washington, sued a trust being administered by his
brother, on behalf of his minor daughter for whom he was guardian ad litem (guardian of his daughter’s property).  The daughter was a beneficiary of the trust and Christensen believed (correctly as it turned out) that the trust assets were being improperly administered.  He obtained a $90,000 settlement on behalf of his daughter.

The funds (less a charge by him of $15,000 for reimbursement of the costs associated with obtaining the settlement) were deposited into Christensen’s personal investment account (as opposed to an account for the benefit of his minor daughter) and he proceeded to both lose money in trading activity and disburse money to pay other people to perform accounting and recordkeeping (note that he was a CPA).

Within eighteen months, less than $24,000 of the original $90,000 was still in the account.  Christensen was sued and eventually accepted a guilty plea to one count of first degree theft.  Christensen’s CPA licenses were subsequently revoked in both states as a result of the conviction.

Now comes the IRS.  The return preparer office of the IRS revoked Christensen’s PTIN for disreputable conduct by claiming that all PTIN holders are subject to Circular 230 in its entirety. Christensen appeared before an Administrative Law Judge and argued that his theft conviction was a family related matter having nothing to do with his income tax preparation, and that he should be allowed to retain his PTIN.  The judge, however, ruled that he displayed a lack of integrity and found for the IRS.  Christensen was prohibited from any practice before the IRS for a period of five years.

It would appear to your Editor that the IRS has a very potent weapon in pulling someone’s PTIN – you are out of the income tax preparation business.  It isn’t even necessary to suspend or revoke your right to practice (i.e. as a result of state action against one’s CPA license).  Losing your PTIN will accomplish the same thing.

Upcoming IRS e-File Maintenance Period

In the new era of modernized e-file, IRS will accept most electronic returns for 2 years after the initial filing season for that tax year.  So, a 2012 return can be filed electronically in 2013, 2014, and 2015.

However, IRS does have a down time for maintenance.

For individual returns, that down time begins 11/23/2013 at 10:00 am ET and ends when the IRS opens up for business in late January or early February of 2014.  So, NO individual returns can be electronically filed between 11/23/2013 at 10:00 and opening day in filing year 2014.

For business returns, that down time begins 12/26/2013 at 11:59 am ET (subject to change) and ends when the IRS opens up for business in early January of 2014.  So, NO business returns can be electronically filed between 12/26/2013 at 11:59 and opening day in filing year 2014.

During the IRS maintenance period, your software company may or may NOT accept returns until they open up our transmissions sometime in January.  After that time, you will be able to transmit 2011, 2012, and 2013 returns.  But, remember none of those can be forwarded to IRS until the official IRS start date, which has yet to be determined.

Annual State Update Seminar - Save the Date

Massachusetts / Rhode Island NATP Annual State Update & Educational Seminar January 9th, 2014 @ Sturbridge Host in Sturbridge MA

Speakers will include:

Connecticut Department of Revenue
Massachusetts Department of Revenue
Rhode Island Division of Taxation
New York State Tax Update
Mini Federal Update

Stay tuned for more details and complete registration details!

2014 PTIN Renewal Period Underway for Tax Professionals

WASHINGTON — The Internal Revenue Service today reminded the nation’s almost 690,000 federal tax return preparers that they must renew their Preparer Tax Identification Numbers (PTINs) for 2014. All current PTINs will expire on Dec. 31, 2013.

Anyone who, for compensation, prepares or helps prepare any federal return or claim for refund must have a valid PTIN from the IRS. The PTIN must be used as the identifying number on returns prepared.

“We ask that you renew your PTIN as soon as possible to avoid a last-minute rush. It’s easy to let this slip as the holiday season approaches,” said Carol A. Campbell, Director, IRS Return Preparer Office.

The PTIN system is ready to accept applications for 2014.

For those who already have a 2013 PTIN, the renewal process can be completed online and only takes a few moments. The renewal fee is $63. If you can’t remember your user ID and password, there are online tools to assist you. Preparers can get started at www.irs.gov/ptin.

If you are registering for the first time, the PTIN application fee is $64.25 and the process may also be completed online.

Form W-12, IRS Paid Preparer Tax Identification Number Application and Renewal, is available for paper applications and renewals, but takes four to six weeks to process. Failure to have and use a valid PTIN may result in penalties. All enrolled agents, regardless of whether they prepare returns, must have a PTIN in order to maintain their status.

There have been a number of enhancements to the online PTIN system since last year. They include:

• The fully functional "Manage My Account" tool allowing preparers to self-correct almost any field at any time (including professional credentials). Previously, most changes had to be made during renewal. A phone call was required for users to make changes during the rest of the year. However, for security reasons, name changes still require written documentation.
• Preparers can now view completed continuing education programs reported by IRS-approved providers beginning with 2013 courses. Providers report completed CE programs to the IRS based on your PTIN number. Enrolled agents must have a minimum of 16 CE hours annually and a total of 72 hours every  three years. Others can also view voluntary programs completed. If something is missing, contact your provider directly as we only display what providers send to us.
• Planning to take a year off for any reason? A new function allows certain preparers to inactivate their PTINs voluntarily and then reactivate the same number when they return to work. This is only for those preparers who plan to take a full year off. If you are paid to prepare tax returns during any part of a year, you must have a valid PTIN. Note: Enrolled agents must maintain a valid PTIN each year in order to maintain their EA credential and therefore are not eligible to inactivate their PTIN.

For more information about requirements for federal tax professionals and access to the online PTIN system, go to www.irs.gov/for-Tax-Pros.

Happy Veterans Day

Rhode Island Estate Tax Threshold Set for 2014

The Rhode Island Division of Taxation today posted an Advisory about the estate tax threshold for 2014. The Rhode Island estate tax threshold will be $921,655 for decedents dying on or after January 1, 2014, compared with $910,725 for decedents dying in 2013, an increase of 1.2 percent

For additional details, please use the following link from the RI DOT - http://go.usa.gov/WbbJ

2014 Pension Plan Limitations Announced

The 2014 pension plan limitations have been announced.  Below are some of the more common amounts.

The defined benefit plan limitation increases to $210,000 (up from $205,000 for 2013).  The defined contribution plan maximum increases to $52,000 (up from $51,000 for 2013).

The annual compensation limit for most employer contributions increases to $260,000 (up from $255,000 for 2013).

A year of service for SEP coverage remains at $550.

The maximum elective deferral for §401(k), §403(b), §457, and SARSEPs remains the same at $17,500 with the catch-up amount staying at $5,500.

The maximum elective deferral to SIMPLE plans remains at $12,000 with a catch-up of $2,500.

The IRS Notice also has the other pension related indexed amounts such as key employee, top heavy, and “control employee” limits.

A copy of this Notice can be found at www.irs.gov/pub/ by clicking on irs-news and then clicking on IR-13-85

Rhode Island Division of Taxation Seminar For Tax Preparers

There's only one day left to register for the Division of Taxation's seminar for tax preparers.

At the seminar, the Division of Taxation will offer an update for filing season. There will also be a personal income tax "boot camp," which will focus on the basics of some items that are of particular interest to preparers, such as the Form RI-1040H (property tax relief).

The free seminar will be held at the Community College of Rhode Island in Newport from 9 a.m. to 11:30 a.m. on November 14, 2013, but pre-registration is required -- and the deadline to register is 4 p.m. on Friday, November 8, 2013. (A second session, at CCRI in Warwick on December 4, is already sold out.) For more information, please use the following link:

http://www.tax.ri.gov/Tax%20Website/TAX/onlineservices/Seminar%20flier%20revised%2010-15-13%20at%204pm.pdf

AFRs and 7520 Rates for November 2013

AFRs - - When a taxpayer makes a loan or sells something on installment, a minimum interest rate normally has to be charged.  The minimum rate depends on the month of the loan or sale.  The IRS releases the Applicable Federal Rates (AFRs) each month.  They are broken down into short-term (3 years or less), mid-term (more than 3 years, but not more than 9 years), and long-term (more than 9 years).  They are further broken down into Annual, Semi-Annual, Quarterly, or Monthly compounding periods.

The November 2013 applicable federal rates (AFRs) are (annual, semi-annual, quarterly, monthly):
Short-term---0.27---0.27---0.27---0.27
Mid-term---1.73---1.72---1.72—1.71
Long-term---3.37---3.34---3.33---3.32

IRC 7520 Rates – These rates are normally used when determining life estate & remainder interests when property has been gifted with the giver retaining a life estate.  The rate for November is 2.0%.

Revenue Ruling 2013-22

MASS DOR TAX GUIDANCE SURVEY

Commissioner Pitter launched DOR 360, her signature initiative to open communication lines between DOR and its stakeholders, almost one year ago and a key component of the initiative is monitoring the quality of DOR's customer service.   The Commissioner wants to know how well the department is serving the DOR community.  To answer that question, DOR launched a series of surveys this year.  The results are being carefully reviewed and changes are being made.

Guidance is an essential resource for taxpayers and practitioners and it is important for us to hear how you utilize DOR?s guidance.  Accordingly, we are requesting that you complete this DOR Tax Guidance Survey. We would very much appreciate your input.

Please tell us about your experience with DOR's guidance

By taking this survey, you will provide DOR with important feedback on what you believe works, what needs improvement, and perhaps what should be eliminated.

Time

The survey will take approximately three minutes to complete.

Anonymous

This survey is completely anonymous, unless you choose to provide us with contact information for follow up and that contact information will be shared with no one outside DOR.  We ask for contact information because we learn so much from the survey responses and sometimes that generates new questions we had not considered.  It is helpful to have the opportunity for more discussion on a particular issue.

Results will be published

The overall results of the survey will be published on the DOR website.

Survey Link: https://www.research.net/s/DORGuidance

2014 Income Tax Rates and Miscellaneous Rates/Phaseouts

Most of the inflation adjusted amounts are indexed based on inflation factors as of August 31st each year.  Various tax reference sources, such as CCH and RIA, make projections based on these factors.  We have chosen to wait until the official numbers have been released.  Here are the official 2014 amounts.

Revenue Procedure 2013-35 contains most of these inflation adjusted amounts for 2014.  A copy of the Rev. Proc. can be found at www.irs.gov/pub/ by clicking on irs drop down menu and clicking on rp-13-35.  The IRA limits are found in IR-2013-86.

- Tax Rates - Ceilings
Single
10% bracket tops at $9,075
15% tops at $36,900
25% tops at $89,350
28% tops at $186,350
33% tops at $405,100
35% tops at $406,750
39.6% applies to anything over $406,750

MFJ
10% bracket tops at $18,150
15% tops at $73,800
25% tops at $148,850
28% tops at $226,850
33% tops at $405,100
35% tops at $457,600
39.6% applies to anything over $457,600

Head of Household
10% bracket tops at $12,950
15% tops at $49,400
25% tops at $127,550
28% tops at $206,600
33% tops at $405,100
35% tops at $432,200
39.6% applies to anything over $432,200

MFS
10% bracket tops at $9,075
15% tops at $36,900
25% tops at $74,425
28% tops at $113,425
33% tops at $202,550
35% tops at $228,800
39.6% applies to anything over $228,800

Estates & Trusts
15% bracket tops at $2,500
25% tops at $5,800
28% at $8,900
33% at $12,150
39.6% applies to anything over $12,150

- Exemption amount is $3,950.

- Standard deduction amounts are:  MFJ-$12,400, Single & MFS-$6,200, HH-$9,100, Additional amounts for aged/blind-$1,200 for unmarried and $1,550 for married status.

- Exemption and itemized deduction phase outs begin for MFJ at $305,050, HH at $279,650, S/HH at $254,200, and MFS at $152,525.

- Kiddie Tax
Standard Deduction is $1,000, the next $1,000 is taxed at child’s rate, and the excess is taxed at parent’s rate.  AMT Exemption amount is the child’s earned income plus $7,250.

- AMT – The exemption amounts are:
MFJ/QW = $82,100
S/HH = $52,800
MFS = $41,050
Estates/trusts = $23,500

The excess taxable income level (where the 28% AMT rate applies) is:
MFJ/QW/S/HH = $182,500
MFS = $91,250

- Adoption Credit - $13,190 is the maximum for the credit or assistance amounts.  The phase out starts at $197,880 and is completely phased out at $237,880.

- Child Tax Credit – refundable portion uses an income base of $3,000.

- Education Credits.  The phaseout for the American Opportunity Credit starts at $80,000 ($160,000 for MFJ).  The phaseout for the Lifetime Learning Credit $54,000 ($108,000 for MFJ)

- EIC maximum AGI/earned income for MFJ is $43,941 for one child, $49,186 for two children, $52,427 for three or more children, and $20,020 for no children.  The EIC maximum AGI/earned income for other taxpayers is $38,511 for one child, $43,756 for two children, $46,997 for three or more children, and $14,590 for no children.  Excessive investment income level for EIC is $3,350.

- Transportation Fringe maximum exclusion for monthly parking is $250/month and for commuter highway vehicle and transit passes is $130.

- Savings Bonds for Education phase out level starts at $113,950 for MFJ and $76,000 for other filing statuses.  This is completely phased out at $143,950 for MFJ and $91,000 for other filing statuses.

- §179 election changes to $25,000.

- Foreign Earned Income exclusion is $99,200.

- Long-term care premiums are limited to:
Age
40 or less-------$370
>40, but not >50------$700
>50, but not >60------$1,400
>60, but not >70------$3,720
>70------$4,660

- Long-term care contract benefit amount is $330 per day.

- IRA Contribution Limits – The maximum contribution to an IRA is $5,500, plus the $1,000 catchup.

- IRA Phase out ranges – MFJ phase out for IRA contributions starts at $96,000.  MFJ phase out for spouse contributions when spouse is not covered starts at $181,000.  Single and Head of Household = $60,000.  MFS starts at $0.

- Roth IRA AGI phase out limits increase to beginning levels of $181,000 for MFJ, $0 for MFS, and $114,000 for other taxpayers.

- Retirement Savers Credit – The indexed ceilings are:  MFJ - $60,000, HH - $45,000, Others - $30,000.

- Student loan interest maximum is $2,500, with a phase out starting at $65,000 ($130,000 for MFJ).  This is completely phased out at $80,000 ($160,000 for MFJ)

- Annual gift tax exclusion is $14,000, while the limit on gifts to noncitizen spouses is at $145,000.

- Attorney Fee Awards are limited to $190 per hour.

- MSA
Self-only coverage annual deductible is not less than $2,200 nor more than $3,250, with out-of-pocket limits not in excess of $4,350.

Family coverage annual deductible is not less than $4,350 nor more than $6,550, with out-of-pocket limits not in excess of $8,000.

- Cafeteria Plan – The dollar limitation for §125 health FSAs remains at $2,500.

- Nanny Tax – The wage threshold for the Nanny tax for 2014 is $1,900.

- Small Business Health Insurance Credit – The dollar amount for purposes of limiting this credit is $25,400.

- Exclusion amount for Estate/Gift tax is $5,340,000.

Annual Meeting 2013 Recap

Our Annual Meeting & Seminar in Mansfield last week was a great success!!

Kathryn Keane held everyone's attention through all four sessions. She offered much information on FBAR, ACA, AMT and last, but certainly not least, Ethics in the Real World. The meeting was a wonderful opportunity to meet and converse with other members, ask those questions that we sometimes wonder such as, "Does this only happen in my office?" It is so very nice to discover that we all have the same issues. 

If you did not have the opportunity to attend this year you missed a great educational session and we hope you will make an effort to attend the next offering. All attendees this year received a Staples Gift Card from the Chapter as a thank you for participating in our seminar.

I am  happy to welcome two new members to the Board of Directors, Sharon Cummings and Tracey Bell. I look forward to working with them in the coming year. I personally want to thank Steve Garvey and Nina Marcinowski for their time on the Board. They will be missed but I know they will remain active members of the Chapter.


I welcome your new President, Walter Matisewski and new Vice-President, June Massee.


Also I am happy to announce that Bill Delaney will remain as Treasurer and Jeff Schweitzer will continue as Secretary.


Please watch the Chapter Weekly and our very own Blog for information on the next seminar in Sturbridge this coming January.


I would like to thank all the Board Members for making my time as President very enjoyable. I look forward to working with the new officers and the new board members to continue the growth and success of our Chapter.


To all members thank you for your participation in our seminars "You are the Chapter " and your involvement is what will make our chapter successful. Please feel free to contact myself or any board member with any ideas, questions or issues you want to discuss about the Chapter.


Wishing everyone a Happy Holiday Season, relax and rest, for we all know what is around that corner!

-Christine Miarecki, Immediate Past President

Message from our President:

Hi Members,

Please check out the MA/RI Chapter Section on the NATP site under chapters. This along with our blog will be a great resource for information about the Chapter. 

Please check out the Community Section under Member Center on NATP site, this is an area for questions and discussions, new to the site.

Reminder, Annual Meeting next Tuesday in Mansfield, elections will take place. We have a great speaker, Kathryn Keane, hope to see you there.

Chris Miarecki, EA
President, MA/RI Chapter NATP