Monday, November 30, 2015

New Electronic Filing System—MassTaxConnect—is now live!

Earlier this morning DOR officially launched its newest online portal for filing and paying business taxes in the Commonwealth: MassTaxConnect
. MassTaxConnect has replaced WebFile for Business, offering all the benefits the old system offered, along with a host of new functionalities that will make paying and filing taxes in Massachusetts easier, simpler, and more efficient than ever before.
Users can access MassTaxConnect at the following URL:
Same username and password!
As someone who has filed or paid taxes online with us in the past, you’ll be able to immediately log-in to MassTaxConnect using your WebFile for Business username and password.

Identity verification!
The first time you log on to MassTaxConnect from a new computer, you will be asked for an authentication code as an additional security measure.  Request the code in the pop-up window and enter it on the login page.  Be sure to click “trust this computer,” and you’ll only have to do this once for any given computer.
MassTaxConnect Resources!
To help make the transition to the new system as smooth and seamless as possible, we’veredesigned our MassTaxConnect informational page
 with an arsenal of resources at your disposal. This includes tutorials, FAQs, and DOR contact information if the site does not adequately answer your questions.

Video Tutorials!
Perhaps most importantly, DOR has put together a series of mini-video tutorials that show you step-by-step how to complete the following tasks
 in MassTaxConnect:
  • Log-in as an existing WfB user
  • Log-in as a new user (non-WfB users)
  • Add, access, and manage your accounts
  • File a return
  • Pay a bill
  • View and file and amended return
  • Authorize a 3rd party to manage your account
  • Request 3rd party access to an account
  • Send an e-message, including with an attachment
  • Update my address or my contact information?
  • File a dispute of audit or penalty (abatement request)
  • Access DOR letters and notices
  • Get on a payment plan for money I owe
 Account ID
Once you’re in the system, you’ll notice that you have a new alphanumeric account identification number. This will replace federal employer identification numbers and other personally identifiable information. Doing so will enhance the security of our system and protect your identity from fraudsters. Take note: You’ll also soon be receiving a letter in the mail with your new account ID.

Two Situations Where Spouses Were Not On The Same Wave Length

William Delaney, EA
Westwood, MA
When is a jointly filed income tax return not a jointly filed income tax return?  Answer:  When one signs the return and the other does not.  Sounds simple enough, but the devil is always in the details

Reg. 1.6012-1(a)(5) proscribes the way in which one spouse may sign for both and the requirement for an attachment regarding same to the tax return.  In Bradley C. & Nancy Reifler v. Comm., TC Memo 2015-199 (10/13/2015), the Reiflers had their 2000 income tax return prepared by their accountant.  It was then signed by Mr. Reifler and left somewhere for Mrs. Reifler to sign.  So far, so good.

Now comes Oct. 15th, and Mr. Reifler awakens to the fact that he needs to do something with this paper return (yes, you win a prize---he must mail it to the IRS and today’s the deadline).  So, that’s what he did.  But, what he didn’t do is get it signed by his spouse!  Believe it or not, it gets worse…

The IRS “bounced” the return because of the missing signature.  Mr. Reifler received the original return with some red marks on it and nothing else as to why the return had not been processed.  So, what’s a taxpayer to do?  In Mr. Reifler’s case, he did nothing, as if that were an option.  He just set aside the return (you can’t make up this stuff).

In 2002, the IRS sent the taxpayers a delinquency notice (where is that 2000 tax return which you did not file?), so the taxpayers (this time both of them) signed a second Form 1040 and mailed it in.  However, the IRS knew nothing about a “bounced” return, and the taxpayers did not make mention of it when sending the second return, so the IRS considered the “second” return to be the “original” return filed quite late and imposed the Sec. 6651(a) failure-to file penalty (maximum of 25% of the tax shown on the return).

But, not to worry, the taxpayers have some strong (?) arguments.  First, they argued the substantial compliance doctrine---the original return need not be perfect in order to be valid.  However, the Court held that signing (or not signing) a tax return is a different set of circumstances from substantial completion of a return.  Furthermore, an unsigned return does not start the running of the statute of limitations.

Again, not to worry.  The taxpayers have another argument.  In the White decision – Daniel Joseph White v. Comm., TC Summary Opinion 2002-101 (8/5/2002), Mr. White signed and submitted a joint income tax return which was not signed by Mrs. White.  The return “bounced” and the White’s resubmitted a signed return within the time period provided by the IRS for correcting the original return (a departure from what Mr. Reifler did not do).  The initial return was deemed to be timely filed and the late filing penalty was not imposed.  But, the Reiflers did not have a valid argument because they chose not to do what the Whites did---fix the problem.  The Reiflers did nothing until contacted by the IRS more than one year later.  There was no evidence that the taxpayers attempted to consult with or inquire of anyone when their tax return “bounced.”

In Mark A. Williams v. Comm., TC Memo 2015-198 (10/17/2015) we have some very clever tax planning.  Let’s suppose that your employer tells you that he will stop writing paychecks and deducting all of those taxes.  Instead, he will write a check for your gross pay and deposit it in a bank account for you each week.  It won’t appear on payroll (i.e. won’t be reported anywhere) and you can take the money each week tax-free and use it as you will.  (Now, why didn’t my accountant tell me about this great deal?).  Anyhow, the employee (Mrs. Williams) discussed it with her husband, and he told her not to do it, and she didn’t for two years (while other people apparently were not so fussy and enjoying their no-tax windfall).  However, the husband eventually gave in and agreed to it when the employer assured him that it was legal (free legal advice is only worth what you pay for it, didn’t he know?).  The paychecks stopped; the tax-free money commenced, and all was happiness until a few years later when the scheme imploded and the taxpayers pleaded guilty to willfully filing false tax returns which omitted Mrs. Williams’ income.

Now comes Mr. Williams asking for relief under the Innocent Spouse provision of the Code, specifically Sec. 6015(f) – Equitable Relief.  There are multiple factors set out in Rev. Proc. 2013-34 for consideration in such circumstances.  For most of them, the analysis was neutral---neither favorable nor unfavorable to Mr. Williams.  What cooked his goose, however, was the “knowledge or reason to know” test.  Why are you not surprised?  He was not an uninvolved and uninformed person.  He checked it out, if you recall.  Not only that, he signed a Form 4549 for each year (that’s the form which sets out the audit adjustments) and agreed that he was liable for a fraud penalty.  He did not dispute that he was aware of the omissions from income at the time that they occurred.

And, finally, it was shown that Mrs. Williams did not sign-up for the tax avoidance scheme until Mr. Williams said that it was OK to do so (remember he initially said no and she remained outside looking in).  So, Mr. Williams was a “contributing cause” of the income omissions on the tax returns.

Friday, November 27, 2015

IRS Increases Safe Harbor Amount for Materials and Supplies

Notice 2015-82 released November 24th increases the $500 safe harbor amount to $2,500. This provision is effective for taxable years beginning on or after January 1, 2016.  However if the taxpayer’s use of this $2,500 safe harbor amount is an issue under consideration in examination, appeals, or before the U.S. Tax Court in a taxable year that begins after December 31, 2011, and ends before January 1, 2016, the issue relates to the qualification under the safe harbor of an amount that does not exceed $2,500 per invoice (or per item), AND the taxpayer otherwise satisfies the requirements of the election, then IRS will not further pursue the issue.  [We find it interesting that fiscal taxable years that begin in 2015 and end after January 1, 2016, aren’t covered under the “won’t pursue” provision.  We’re sure this was just an oversight in the wording.]

Review of the rules as adjusted by this Notice.
** $200 – The definition of “materials and supplies” includes property that has an acquisition or production cost of $200 or less.  This $200 is per item.  If the per item breakout is not available, then the $200 test is applied per invoice.   This is an all or nothing provision.  If the item, including all adjustments such as sales tax, cost $201, then the item does NOT fit this provision.

** $,2500 (formerly $500) – The $200 amount above is increased to $2.500 IF:
1) The taxpayer does not have an “applicable financial statement”,
2)  The taxpayer has at the beginning of the taxable year an accounting procedures treating these items as an expense for non-tax purposes,
3) The taxpayer treats the amount paid for the property as an expense on its books and records in according with these accounting procedures, and
4) The amount paid for the property does not exceed $500 per invoice (or per item as substantiated by the invoice).

** $5,000 – The $2,500 amount is increased to $5,000:
1) The taxpayer has an “applicable financial statement”,
2)  The taxpayer has at the beginning of the taxable year WRITTEN accounting procedures treating these items as an expense for non-tax purposes,
3) The taxpayer treats the amount paid for the property as an expense on its books and records in according with its written accounting procedures, and
4) The amount paid for the property does not exceed $5,000 per invoice (or per item as substantiated by the invoice).

An “applicable financial statement” for this purpose is:
1) A financial statement required to be filed with the Securities and Exchange Commission (SEC) (the 10-K or the Annual Statement to Shareholders),
2) A certified audited financial statement that is accompanied by the report of an independent CPA (or in the case of a foreign entity, by the report of a similarly qualified independent professionals) that is used for:
-- a) Credit purposes;
-- b) Reporting to shareholders, partners, or similar persons; or
-- c) Any other substantial non-tax purpose; or
3) A financial statement (other than a tax return) required to be provided to the federal or a statement government or any federal or state agency (other than the SEC or IRS).

A taxpayer who wants to use the $2,500 or $5,000 safe harbor amounts must attach a statement to a timely filed return (due date plus extensions).  The statement must be titled “Section 1.263(a)-1(f) de minimis safe harbor election” and include the taxpayer's name, address, taxpayer identification number, and a statement that the taxpayer is making the de minimis safe harbor election under §1.263(a)-1(f).

SIDE NOTE – Just because an item falls into the “materials and supplies” expense category does NOT mean it is currently deductible.  It still must meet the incidental v nonincidental tests.  If a cash basis taxpayer pays for an expense that is incidental, such as a book of 20 postage stamps, it is deductible when paid.  If a cash basis taxpayer pays for an expense that is nonincidental, it is deductible when used or consumed in the same manner as Prepaid Supplies.

For example, Taxpayer bought a book of 20 postage stamps in December for $9.80.  Taxpayer used 5 stamps in December and 15 stamps in January.  This is an incidental expense and the entire $9.80 is deductible in December.

An example in the IRS regulations considers toner cartridges to be a nonincidental expense.  In this example a taxpayer purchases a case of 10 toner cartridges for $500 ($50 per cartridge) and installs 8 in printers in the year of purchase and leaves the remaining 2 cartridges on the shelf for the next year’s use.  The example requires the taxpayer to treat the 2 unused cartridges as nonincidental supplies and does not permit a deduction for those until the 2nd year.

Wednesday, November 25, 2015

Medicare B Premiums for 2016

The base Medicare Part B monthly premiums increase to $121.80/per month for 2016.

Approximately 75% of taxpayers on Medicare B will NOT experience this increase.  There is a provision that does not permit a taxpayer’s Social Security check to decrease as a result of an increase in the base Medicare Part B premiums.

Taxpayers who will pay these higher premiums are taxpayers who:
1) First sign up for Medicare in 2016,
2) Are paying Medicare Part B premiums from a method OTHER than directly from their Social Security check, or
3) Have the higher income that requires paying extra to the Medicare fund, and

The higher premiums some taxpayers have to pay vary depending on the taxpayers’ income as shown on their income tax returns and their filing status increased slightly, although the income levels did not change.

This information can be found on Medicare’s web site at

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

Tuesday, November 24, 2015

Out With The Old (MA From CA-6); In With The New Amended Return Concept For MA Business Tax Type Returns

William Delaney, EA
Westwood, MA
The MA Department of Revenue has issued TIR 15-13 (11/17/2015) which outlines (effective 11/30/2015) the new way to amend business tax type returns (income, withholding, sales, etc. on behalf of business taxpayers).  While form CA-6 is still in place for individual tax type returns, it will be discontinued for “business” returns.

What brings this about is MassTaxConnect, which will be introduced by the DOR as of the end of November.  According to the TIR, “the amended return process will be automated, and in most cases will be separated from the abatement application process.”  How will it work?

Filing an amended return will now mean referring to the original return, making any necessary changes or corrections, and filing it as an “amended” return.  This would also include a no-change situation, for example a correction to a capital loss carryover.  You would do it by “log on to MassTaxConnect, adjust the amounts shown on the taxpayer’s prior return, and submit the amended return by following the instructions provided…”
“Any taxpayer amending a return using a paper form will manually complete the same tax form as used for the original or prior amended return and check the box indicating that the return is an amended return.”

What is left unsaid in the TIR is how do you actually access the tax return which you wish to amend.  My “guess” is that you must be established as the Professional Tax Preparer identified with the taxpayer; otherwise, how could you access a taxpayer’s records?  So, if you are not the PTP for the business type, you will first need to go through that process before MassTaxConnect will allow you to do anything.

The Department of Revenue has also published a “Hey Business Taxpayers!” one page colored brochure and mailed it to business taxpayers.  According to the brochure, amendments are just three easy steps---log in; select an existing return; submit!  RESULT:  New process and internal streamlining means faster processing and response time.  It’s so easy---why should a client expect us to send them a bill for a simple three-step process?  

For those of you who may have doubts (or fear the unknown), the brochure explains that:  “You will be able to continue to file amendments to corporate excise returns through third party tax preparation software, the same way you file original returns (i.e. “Corp. eFile”).”  The TIR also explains that:  “Taxpayers using a third party software provider will adjust the information using the amended return process specific to the software they are using.”  Apparently there will be a check the box option to indicate that you are filing an amended return.

Monday, November 23, 2015

WebFile for Business Limits Services While MassTaxConnect Switchover in Progress

What happens between November 21st and November 30th?

WebFile for Business will shut down to transfer account information to MassTaxConnect for the November 30th start date for business taxpayers. If you anticipate having transactions during that time, please review what you can do.

If you have a new hire between November 21st and November 30th

Please report the new hire information on MassTaxConnect beginning November 30. Please keep in mind that you have a grace period to report a new hire that will allow you to be in good standing provided it is completed promptly.

If you have a depository payment for your business or for a client

If you are able to schedule the payment before November 21 using WebFile for Business or Telefile, please make the settlement date the due date. The payment will be considered timely regardless of when we receive the money. Otherwise, DOR will allow an automatic grace period to extend the due date of the depository payments until December 4, 2015.

If you need to register a new business

WebFile for Business will shut down to transfer account information to MassTaxConnect for the November 30th start date for business taxpayers.  Please access the new website as soon as possible after that date to register your business in order to perform functions that will become necessary to pay your tax obligations.

If you need to update registration information

WebFile for Business will shut down to transfer account information to MassTaxConnect for the November 30th start date for business taxpayers.  Please access the new website as soon as possible after that date to update any registration information in order to perform functions that will become necessary to pay your tax obligations.

If you require a cigarette retailer license 

WebFile for Business will shut down to transfer account information to MassTaxConnect for the November 30th start date for business taxpayers.  Please access the new website as soon as possible after that date to request a Cigarette Retailer License.

If you require a Certificate of Good Standing 

If you require a certificate of good standing before December 1st, fax a paper request pdf format of certgoodstanding.pdf  to 617-660-3611.  Attach a statement regarding any deadlines or special reasons for your request.

If you have a question about MassTaxConnect

Please call the DOR Contact Center at (617) 887-6367 or toll-free in Massachusetts at (877) 671-6367 for any DOR related assistance. Business hours are 9:00 a.m. to 5:00 p.m., Monday - Friday.

Friday, November 20, 2015

Rhode Island Annual E-file Production Shutdown and Switchover is November 21

That is when Rhode Island will stop accepting e-filed personal, business returns for tax year 2014

PROVIDENCE, R.I. – The Rhode Island Division of Taxation is scheduling its annual electronic filing shutdown and switchover for November 21, 2015.

“Each year, we temporarily close our system to e-filing in order to prepare the system for the upcoming filing season, just as the Internal Revenue Service and many other jurisdictions do at
this time of year,” said Rhode Island Tax Administrator David M. Sullivan. This year, the shutdown will occur on Saturday, November 21, 2015, he said.

“To ensure that all e-filed Rhode Island returns for tax year 2014 on Form RI-1040, Form RI-1120C, Form RI-1120S, and Form RI-1065 are processed in a timely manner, transmitters must abide by the schedule,” Sullivan said. “All e-filed returns for tax year 2014 will have a transmission deadline of 10:00 a.m. Eastern Time on November 21, 2015. To avoid any lastminute logjams, preparers and taxpayers should get their electronic submissions to their transmitters well in advance of the deadlines,” he said.

For e-file purposes, Rhode Island accepts only current-year returns. Thus, November 21, 2015, is
the deadline for e-filing Rhode Island personal and business tax returns for the 2014 tax year.
When the switchover is complete and the Division of Taxation reopens to e-filing in January
2016, it will be only for returns for the 2015 tax year, Sullivan noted.

Fiscal year filers

The Tax Division’s current-year e-filing rule means that some fiscal-year filers can e-file, but
only if they are willing to e-file early.

For example, a taxpayer with a fiscal year ended September 30, 2015, waiting to the original due
date in December 2015 to file will have to file a paper return – but that taxpayer can e-file
instead if willing to file early (by the November 21, 2015, shutdown and switchover date).

Tuesday, November 17, 2015

Nonresident Alien Interest Earned Shared With Other Countries by IRS

IRS now automatically exchanges tax information with many countries.  Under this exchange, IRS shares information on the amount of deposit interest paid to nonresident aliens.  The list of countries has now reached 34.  This type of interest earned by nonresident aliens is not taxable to the United States, but it may be taxable to the alien’s home country.  US banks have sued IRS to overturn the reporting requirements, but have been unsuccessful so far.

The countries IRS automatically shares this information with are:  Australia, Brazil, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Slovenia, South Africa, Spain, Sweden, and United Kingdom.

Other countries with which IRS has tax information sharing include:  Antigua & Barbuda, Aruba, Austria, Azerbaijan, Bangladesh, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, China, Columbia, Costa Rica, Croatia, Curacao, Cyprus, Dominica, Dominican Republic, Egypt, Greece, Grenada, Guyana, Honduras, Hong Kong, Indonesia, Israel, Jamaica, Japan, Kazakhstan, Marshall Islands, Monaco, Morocco, Netherlands island territories: Bonaire, Saba, and St. Eustatius, Pakistan, Panama, Peru, Philippines, Portugal, Romania, Russian Federation, Slovak Republic, South Korea, Sri Lanka, St. Maarten (Dutch part), Switzerland, Thailand, Trinidad & Tobago, Tunisia, Turkey, Ukraine, and Venezuela.

As part of this exchange program IRS receives information regarding interest income earned by US taxpayers.  Naturally this information could be used by IRS to match with foreign bank account reporting (FBAR).

Wednesday, November 11, 2015

Rhode Island Division of Taxation Self Audit

The Rhode Island Division of Taxation last week began mailing letters to 9,600 businesses and individuals to let them know about Rhode Island's new self-audit program.

The Division also let practitioners know about the mailing in case they receive any calls or emails from clients who have questions. The self-audit program is voluntary; the letter is intended simply to get the word out and get the ball moving. 

Rhode Island Tax Administrator David M. Sullivan says that the self-audit program is a great opportunity for taxpayers, especially businesses, to clear their books of a use tax liability and get a significant break in the form of a penalty waiver and interest forgiveness.

The first batch of 3,300 letters went out November 4; additional mailings are planned. But the program is not limited to those who receive letters. Practitioners may have other clients who would benefit, and the Division invites practitioners to encourage them to apply.

The program has its own webpage, which includes the program application, FAQs, and other information.

Information about the self-audit program is also available by calling the Division of Taxation’s Field Audit section at (401) 574-8962 from 8:30 a.m. to 3:30 p.m. business days.

Happy Veterans Day from the MA/RI NATP Chapter

Friday, November 6, 2015

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 7th 2016 - TWO MONTHS AWAY!

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 7th 2016

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 7th, 2016 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.

  • Register online with credit card.
  • For more information or to register by phone, fax or mail, use this form.
  • After January 6, please register at the door with the form above.


Connecticut State Tax Update presented by Danielle Toce of Connecticut Department of Revenue Services.

Massachusetts State Tax Update presented by Brian Lynch & Dana Ackerman of Massachusetts Department of Revenue.

Rhode Island State Tax Update presented by Matthew Lawlor & Kenneth Drezek of Rhode Island Division of Taxation.

New York State Tax Update presented by Kathryn Keane, VP of New York NATP Chapter.

Federal Tax Update presented by Kathryn Keane of New York NATP Chapter. (2 Hours of CE Credits)

Featured Speaker - Kathryn M. Keane, EA.

Kathryn is a principal of Macanta, a small tax and related services practice located in Brooklyn, NY, serving over 850 individual clients and 50 businesses. In December 2006, Kathryn completed two three-year terms on the National Board of Directors of NATP and was twice awarded Chapter Person of the Year for 2002 and 2008 for her volunteer service to the community at large as well as to NATP. In addition to serving as an Education Committee member for NY NATP, she currently serves as Chair of the IRS Tri-Boro Practitioner Liaison Committee. Kathryn is a frequent speaker for NATP Chapters. She has also presented for VASEA, NCCPAC (Nassau-Suffolk County Chapter) and local chapters of NYSSCPA. Kathryn has a B.S. degree from Brooklyn College.

Wednesday, November 4, 2015

Rhode Island Division of Taxation Computer System Changeover Successfully Completed

David M. Sullivan
Rhode Island Tax Administrator
A new operating system for personal income tax, replacing old mainframe; final phase next year

PROVIDENCE, R.I. – Rhode Island Tax Administrator David M. Sullivan announced today that the Division of Taxation has successfully implemented the second phase of its changeover to a new agencywide computer system.

“Phase Two was a success,” Sullivan said. “I appreciate the patience of taxpayers, tax practitioners, and our many other stakeholders during the past six business days as this latest annual phase of our project was implemented. My thanks, as well, to all Division of Taxation employees for their team work on this important project. I also appreciate the work performed by Revenue Solutions Inc. (RSI), our technology partner in this venture,” he said.

“We are moving to a new system that will eventually save everyone time and give taxpayers and practitioners more tools and improved online access,” Sullivan said. “To get to that point, we must change over the old system to the new system. But to keep disruption to a minimum, we are doing the changeover gradually, in stages over time,” he said.

Project in three main phases

  1. Phase One Migrated bank excise tax, other levies Summer 2014 Completed
  2. Phase Two Migrated personal income tax, other levies Fall 2015 Completed
  3. Phase Three Migrate corporate income tax, sales tax; launch taxpayer portal Fall 2016

The first phase of the changeover was completed in July 2014. The second phase took place on six
consecutive business days: from October 26, 2015, through November 2, 2015. During that time, the Tax Division office at One Capitol Hill in Providence remained open during normal business hours and continued to offer most services, but certain services were limited. “We are now back to full service,” Sullivan said. “All services have now resumed full operation.”

What’s ahead

“We are excited to move into the last phase of our system implementation, which has already begun,”
Sullivan said. The third and final phase of the project, scheduled to be completed in the fall of 2016, will include a new Division of Taxation website and taxpayer portal that will allow taxpayers to log in and manage their account, grant online access to tax practitioners, make payments, and check balances, he said. Until the third and final phase is completed, the corporate income tax, sales tax, and some other levies will remain on the mainframe computer – but they will all be migrated to the new system in the fall of 2016, Sullivan said.

Project Background

The project involves the modernization of the Tax Division’s tax and revenue accounting system. The first stage of the project, which occurred in summer 2014, mainly involved migrating account records and other information regarding bank, insurance, and certain other tax types and fees from the old system to the new system. It was the first time that the new system was used to process tax returns and other forms on a real-time basis.

In this, the second phase, the personal income tax, estate and trust income tax, composite income tax, and passthrough withholding were migrated onto the new system.

In the third phase, in late 2016, the Tax Division will launch a new website and taxpayer portal, and a number of other taxes and fees will be migrated over, including the corporate income tax and the sales and use tax. “By the time the third phase is completed, all of the system’s benefits will be available – and a number of them will be visible to taxpayers and tax practitioners,” Sullivan said. For example:

  • A high-speed scanning and imaging system will ensure that returns -- and refunds -- are processed more quickly. The faster processing of returns -- and of payments – means that taxpayer accounts will be updated more quickly.
  • Eventually, all information about a taxpayer will be contained in one place. So if a taxpayer or preparer calls, the Tax Division employee can easily and quickly pull up the taxpayer’s account to view all of the account activity on one system – such as payments, notices, letters, and other items.
  • There will be consistent business rules across all tax types -- for the application of interest and penalties, and for filing requirements, for example.
  • The single location for taxpayer information should eventually result in faster processing of requests for letters of good standing. (To fulfill such requests, the Tax Division must check its records to determine if the taxpayer is current on taxes. But under the current system, that process can take time; a taxpayer’s sales tax account, withholding account, and corporate account are all in different locations.)
  • Faster processing of returns will also result in more timely review of those returns and their related accounts, which should reduce the turnaround time for billing. More timely review and faster and more accurate billing can improve collection on delinquent accounts – which helps all taxpayers.

The new computer system, known in the industry as an integrated tax system, is the result of legislation approved by the Rhode Island General Assembly in 2012, which appropriated $25 million for the project, to be paid out over a number of years to the vendor. RSI, of Pembroke, Mass., was the successful bidder. The Tax Division is using RSI’s Revenue Premier system. The system is known within the Tax Division as the State Tax Administration and Revenue System (STAARS).

Monday, November 2, 2015

IRS Annual Filing Season Program (AFSP) Challenged by the AICPA

William Delaney, EA
Westwood MA
The American Institute of Certified Public Accountants (AICPA) filed a lawsuit with the District of Columbia District Court – AICPA v. IRS (Oct. 2014) to challenge the authority of the Internal Revenue Service’s Annual Filing Season Program along with the credential type recognition and federal directory listing which comes with participation in the program.  The legal action was dismissed by the district court on the grounds that the AICPA lacked standing.  The AICPA appealed.

On appeal, the U.S. Court of Appeals for the District of Columbia Circuit reversed the lower court and ruled that the AICPA legal action could go forward.  The decision was announced on October 30, 2015.

Some interesting aspects of the once again pending litigation…

The AICPA claims (and the court “must accept as true for purposes of assessing its standing”) that this program “will dilute the value of a CPA’s credential in the market for tax return preparer services.”  According to the court, “…the link between government-backed credentials offered to unenrolled preparers and the reputational benefit they will enjoy is hardly speculative.  Indeed, the reputational benefit is the very point of the IRS program.”

“Because increased competition almost surely injures a seller (i.e. the AICPA) in one form or another, he need not wait until allegedly illegal transactions hurt him competitively before challenging the…governmental decision that increases competition.”  (Court’s Opinion, page 9)

“As the Institute helpfully sums up, ‘because the Rule distorts the competitive marketplace and dilutes [Institute] members’ credentials by introducing a government-backed credential and a government-sponsored public listing, it harms those members regardless of whether it also confuses consumers.’”  (Court’s Opinion, page 11)

Although it is far too soon to know, your editor’s opinion is that this is a win for the AICPA waiting to happen.  Has the IRS once again overstepped its authority?