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.