Tuesday, August 30, 2016

IRS Launches New Sharing Economy Resource Center on IRS.gov, Provides Tips for Emerging Business Area

WASHINGTON — The Internal Revenue Service recently launched a new web page designed to
help taxpayers involved in the sharing economy quickly locate the resources they need to help them meet their tax obligations.

An emerging area of activity in the past few years, the sharing economy has changed how people commute, travel, rent vacation places and perform many other activities. Also referred to as the on-demand, gig or access economy, sharing economies allow individuals and groups to utilize technology advancements to arrange transactions to generate revenue from assets they possess– such as cars and homes—or services they provide—such as household chores or technology services.

The IRS, working in conjunction with the National Taxpayer Advocate, is taking steps to provide additional information to taxpayers, including the creation of the new Sharing Economy Resource Center on IRS.gov.

“This rapidly evolving area often presents new challenges for people engaged in these economic activities, whether they are renting a room or providing a ride,” said IRS Commissioner John Koskinen. “The IRS is working to help people in this area by providing them the information and resources they need to file accurate tax returns.”

The sharing economy typically describes situations where the Internet is used to connect suppliers willing to provide services or use of assets – apartments for rent, cars for transportation services, etc. – to consumers. These platforms are also used to connect workers and businesses for short-term work.

To help people meet their tax reporting responsibilities, the new Sharing Economy Resource Center offers tips and resources on a variety of topics ranging from filing requirements and making quarterly estimated tax payments to self-employment taxes and special rules for reporting vacation home rentals. In addition, tax-preparation software can be a helpful resource in this area, and a trusted tax professional may assist with many issues.

The sharing economy is a special focal point for tax professionals during this summer's IRS Nationwide Tax Forums. The Forums, which continue at various locations through mid-September, feature sessions with tax experts discussing the implications of the sharing economy for taxpayers.

Here are a few key points people involved in the sharing economy should keep in mind:

  • Taxes. Income received is generally taxable, even if the recipient does not receive a Form 1099, W-2 or some other income statement. This is true if the sharing economy activity is only part-time or a sideline business and even if the recipient is paid in cash. On the other hand, depending upon the circumstances, some or all business expenses may be deductible.
  • Deductions. There are some simplified options available for deducting many business expenses for those who qualify. For example, a person who uses his or her car for business often qualifies to claim the standard mileage rate, currently 54 cents a mile for 2016.
  • Rentals. Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, any expenses need to be divided between personal and business purposes and special deduction limits apply. But if the dwelling unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible.
  • Estimated Payments. The U.S. tax system is pay-as-you-go. This means that people involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligation. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Use Form 1040-ES to figure these payments.
  • Payment Options. The fastest and easiest way to make estimated tax payments is to do so electronically using IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS).
  • Withholding. Alternatively, people involved in the sharing economy who are employees at another job can often avoid needing to make estimated tax payments by having more tax withheld from their paychecks. File Form W-4 with the employer to request additional withholding. The Withholding Calculator on IRS.gov can also be a helpful resource.

IR-2016-110, Aug. 22, 2016

Monday, August 29, 2016

Relief in Independent Contractor Issue

In the Nelly case the homecare companions were treated as independent contractors by the company.

IRS disagreed with the treatment and assessed back withholding and payroll taxes plus interest and penalties.  Nelly took the matter to Court stating it had a “reasonable basis” for making the independent contractor determination, therefore the assessment should be removed. The District Court granted the taxpayer the requested relief but didn’t rule on the workers’ employment v independent contractor status.  Here are some of the details of this case.

Nelly Home Care Inc. and its predecessor Nelly LLC (hereafter jointly called Nelly) provided non-medical homecare services to senior citizens.  Through its history Nelly contracted with up to 70 workers to provide homecare services.  Nelly promoted itself as a matchmaker between elderly customers and workers who provide homecare services.  A prospective customer contacted Nelly, which reviewed the workers in its registry to determine if any were available for the times and tasks requested by the prospective customer.

Section 530 of the Revenue Act of 1978 provides safe harbor relief for taxpayer who can show they meet any one of the following:

  1. Judicial precedent, published rulings, technical advice with respect to the taxpayer, or a letter ruling to the taxpayer;
  2. A past IRS audit of the taxpayer in which there was no assessment attributable to the treatment (for employment tax purposes (of the individuals holdings positions substantially similar to the position held by this individual); or
  3. Long-standing recognized practice of a significant segment of the industry in which such individual was engaged.

Nelly cited prior audits (#2 above) as a reason relief should be given.  The Court denied this reason since none of the prior IRS audits involved the employee v independent contractor status issue.

Friday, August 26, 2016

Wellness Programs Bite the Dust...Not An Excludable Fringe Benefit Under Certain Circumstances

William Delaney, EA
Westwood, MA
May an employer exclude from an employee’s income under IRC Sections 105 or 106 cash rewards paid to an employee for participating in a wellness program?

May an employer exclude from an employee’s income under IRC Sections 105 or 106 reimbursements of premiums for participating in a wellness program, if premiums for the program were paid by salary reduction through a Section 125 cafeteria plan?

Those commonly offered options to employees were addressed by the IRS Office of Chief Counsel in Chief Council Advice 201622031 (4/14/16).

The CCA noted that “Under Section 106(a), an employee may exclude from income premiums for accident or health insurance coverage that are paid by an employer.  Also, under Section 105(b), an employee may exclude amounts received through employer-provided accident or health insurance if those amounts are paid to reimburse expenses incurred by the employee for medical care…”

“Coverage by an employer-provided wellness program that provides medical care as defined under Section 213(d) is generally excluded from an employee’s gross income…”  “However, any reward, incentive or other benefit provided by the medical program that is not medical care as defined under Section 213(d) is included in an employee’s income, unless excludible as an employee fringe benefit under Section 132.”

Thursday, August 25, 2016

A Message From Our Chapter President...

During the week of August 8 – 12, fifteen of our Chapter members joined me in attending the National conference in Indianapolis.  This was my seventh year attending the annual conference and I must say it was one of the better ones I have attended.  The education content and selection of instructors was superb. In addition to the education, the Chapter Showcase competition raised $ 23,931, of which $745 was contributed thru the efforts of our Chapter. The recipient organization who received this year’s charity award was Flight 1, an organization within the Indianapolis area which builds confidence in children who face health challenges or who have lost an immediate family member to illness.  A special thank you to Chris Miarecki and her crew for assisting with our Chapter’s contributing efforts for this special event.  Each year our Chapter hosts an evening social get together and eats for attending members from our local Chapter.  This year was no exception, as we enjoyed a pleasant evening at the Loughmiller’s Pub and Eatery.  For anyone who may be thinking of attending next year’s conference, it will be held in Washington, D.C. August 7 thru the 10.

As many of us may still be struggling with the overflow of extensions from last tax season, one should not overlook their education requirements.   Now is no better time to register for our Chapter’s Fall Seminar and Annual meeting scheduled for October 25 at the Holiday Inn, Mansfield, Mass.  A copy of the day’s agenda can be found on our Chapter Blog at www.massrinatp.org  along with a registration link.  Education chair, Tracey Bell, has coordinated a very complete program which includes our own member and National speaker Cheryl A. Morse, EA who will be the education presenter.  At the annual meeting portion of the day’s events we will be electing one board member seat, whose term expires, from each of the following regions:

Region 1 (Berkshire, Franklin, Hampshire, and Hampden counties)
Region 2 (Worcester and Middlesex counties)
Region 3 (Essex, Suffolk, and Norfolk counties)
Region 4 (Bristol, Plymouth, Barnstable, Dukes, and Nantucket counties)

I encourage anyone who may have a desire to represent their region to contact our nominating chair, June Massee, no later than September 23, with their intent to be considered for nomination or pose any questions one may have concerning the election.  June can be reached at jmassee0185@aol.com

Just a reminder, our state tax update is scheduled for Thursday, January 5, 2017 at the Sturbridge Host Hotel Conference Center in Sturbridge, Mass. By registering for this event at our Fall seminar on   October 25, 2016 and making payment by November 8, 2016 you will benefit from a 50 % discount.

Looking forward to seeing you on October 25 in Mansfield.

David L. Johnson, EA, ATA

IRS Seeks Additional Applications for the Electronic Tax Administration Advisory Committee

WASHINGTON — The Internal Revenue Service is seeking applications from consumer advocates
and others for consideration to join as members of the Electronic Tax Administration Advisory Committee (ETAAC).

In addition to applications from people representing consumers and taxpayers, the IRS is seeking individuals with experience in cybersecurity and information security, tax software development, tax preparation, payroll and tax financial product processing, systems management and improvement, implementation of customer service initiatives and public administration.

This is the second solicitation for ETAAC nominations as the IRS seeks to ensure the committee’s membership reflects a range of interests and viewpoints as required by the Federal Advisory Committee Act (FACA). The IRS expects to announce the initial selections to ETAAC in a few weeks. Applications from this second solicitation will be announced later in the year.

The ETAAC provides an organized public forum for discussion of electronic tax administration issues such as prevention of identity theft and refund fraud in support of the overriding goal that paperless filing should be the preferred and most convenient method of filing tax and information returns. ETAAC members will work closely with the Security Summit, a joint effort of the IRS, state tax administrators and tax software industry to fight electronic fraud.

The IRS is looking for qualified individuals who will serve a one, two or three-year term. Applications will be accepted through Sept. 19, 2016.

Nominations of qualified individuals may be made by letter and received from organizations or the individuals themselves. Applicants should complete the ETAAC application and include a short statement of interest along with a resume. Applicants should describe and document their qualifications, past and current affiliations, and dealings with cybersecurity and electronic tax administration. More information is available on Apply for Membership on IRS.gov.

ETAAC members are drawn from substantially diverse backgrounds. ETAAC is a Federal Advisory Committee established by the Internal Revenue Service Restructuring and Reform Act of 1998. Questions about the ETAAC and the application process can be e-mailed to publicliaison@irs.gov.

Wednesday, August 24, 2016

RI Tax Administrator Warns Tax Professionals Targeted in New Phishing Scam

Rhode Island Acting Tax Administrator Neena S. Savage is providing the following announcement from the Internal Revenue Service to inform Rhode Island tax professionals about a new phishing email scam – and about ways to safeguard data.

WASHINGTON — The Internal Revenue Service today alerted tax professionals to an emerging
phishing email scam that pretends to be from tax software providers and tries to trick recipients
into clicking on a bogus link.

The email scheme is the latest in a series of attempts by fraudsters to use the IRS or other tax
issues as a cover to trick people into giving up sensitive information such as passwords, Social
Security numbers or credit card numbers or to make unnecessary payments.

In the new scheme identified as part of the IRS Security Summit process, tax professionals are
receiving emails pretending to be from tax software companies. The email scheme requests the
recipient to download and install an important software update via a link included in the e-mail.

Once recipients click on the embedded link, they are directed to a website prompting them to
download a file appearing to be an update of their software package. The file has a naming
convention that uses the actual name of their software followed by an “.exe extension.”

Upon completion, tax professionals believe they have downloaded a software update when in
fact they have loaded a program designed to track the tax professional’s key strokes, which is a
common tactic used by cyber thieves to steal login information, passwords and other sensitive

Tuesday, August 23, 2016

Massachusetts July Revenue Collections Total $1.707 Billion

Revenue collections are $7 million above the monthly benchmark

(Boston, MA) – Massachusetts Department of Revenue Commissioner Michael J. Heffernan announced that preliminary revenue collections for July totaled $1.707 billion, which is $36 million or 2.1% more than July 2015.

  • July 2016 revenues were $36 million more than July 2015
  • July 2016 revenues were $7 million above monthly benchmark
  • Income tax collections were $20 million above monthly benchmark
  • Withholding collections were $2 million below monthly benchmark
  • Corporate and business taxes were $4 million above monthly benchmark
  • Sales and use tax collections were $18 million below monthly benchmark
  • All other collections were $1 million above monthly benchmark

“We are close to benchmark for the first month of Fiscal Year 2017," said Commissioner Heffernan. “July saw modest growth in income tax revenues and lower than expected growth in overall sales tax revenues. We will watch revenues closely to identify potential trends in our collections.”

  • July is one of the smaller tax collection months with no quarterly estimated payments due for most individuals and businesses
  • Income tax collections for July were $949 million, $34 million or 3.7 % more than a year ago and $20 million above the monthly benchmark.
  • Withholding collections for July totaled $895 million, up $12 million or 1.4% from last July and $2 million below the monthly benchmark. 
  • Income tax payments with returns or tax bills for July totaled $40 million, $8 million or 22.8% more than last July and $8 million above the monthly benchmark. 
  • Income tax estimated payments totaled $33 million for July, $5 million or 17.7% more than a year ago and $5 million above the monthly benchmark. 
  • Income cash refunds in July totaled $21 million in outflows, which is a favorable $8 million or 27.6% less in outflows than a year ago, and $8 million below the monthly benchmark. 
  • Corporate and business tax collections for the month totaled $52 million, up $4 million or 9.3% from last July and $4 million above the monthly benchmark. 
  • Sales and use tax collections for July totaled $544 million, down $5 million or 0.8% from last July and $18 million below the monthly benchmark, mainly due to a substantial decrease in motor vehicle sales, although still a short-term trend in a notably volatile category. 
  • Other tax collections, totaled $162 million in July, $2 million or 1.2% more than last July and $1 million above the monthly benchmark.

Monday, August 22, 2016

Listed Property Limits for 2016

IRC §280F (listed property) provides ceilings on the amount of depreciation and §179 that can be claimed on passenger automobiles, light duty trucks and vans.  This email gives you these limits for vehicles placed in service beginning in 2015.

These limits are multiplied by the taxpayer’s business use percentage of the vehicle.

** Limits for passenger automobiles
The §280F limits for passenger automobiles first placed in service during the calendar year 2016 that are neither trucks nor vans:
-Year 1 - 3,160 (plus extra $8,000 if bonus depreciation is used)
-Year 2 - 5,100
-Year 3 - 3,050
-Year 4 & after - 1,875

** Limits for trucks and vans
The §280F limits for trucks and vans first placed in service during the calendar year 2016 are:
-Year 1 - 3,560 (plus extra $8,000 if bonus depreciation is used)
-Year 2 – 5,700
-Year 3 – 3,350
-Year 4 & after - 2,075

The lease inclusion for 2016 applies to a passenger automobile when the FMV of the vehicle exceeds $19,000 and apply to a light duty truck and van when the FMV of the vehicle exceeds $19,500.

CHANGE TO LEASE INCLUSION TABLE FOR 2015 – The first three lines of the table for automobiles and the first two lines of the table for trucks & vans are removed.  Therefore the lease inclusion for 2015 applies to a passenger automobile when the FMV of the vehicle exceeds $19,000 and apply to a light duty truck and van when the FMV of the vehicle exceeds $19,500 (same as 2016).  (We suspect most taxpayers will not want their 2015 return amended for such a minor change.)

This information including the lease tables for 2016 can be found in Revenue Procedure 2016-23 which can be found at www.irs.gov/pub/ by clicking on irs-drop and then on rp-16-23.

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

Friday, August 19, 2016

A Good Illustration of a System Which Does Not Work, AKA, How Not To Get Rid Of A Disreputable Income Tax Preparer

William Delaney, EA
Westwood, MA
I was recently reminded of how difficult it is to put an unlicensed and disreputable tax preparer out of business when reviewing an April 4, 2016 District Court decision.  The pattern of behavior is as bad as (actually worse than) anything I’ve ever encountered.

Tax Factory Enterprise, Inc. (Tax Factory) is a Nevada corporation which operates in Tenn.  Stephanie Edmund and her husband Kevin Williams are the corporate officers.
Based on a complaint filed in 2013, the defendants were enjoined (permanent injunction) from operating a tax preparation business as of April 17, 2015 unless certain conditions were met.  The injunction prohibited the defendants from “…preparing false returns, claiming improper deductions or credits, or otherwise engaging in conduct that could result in tax penalties.”  They were also required to hire a monitor who would review at least 3% of returns subsequently prepared.  So, although they had sinned, they were told to go and sin no more, but we shall keep an eye on what you do going forward.

Robert Vance, CPA was selected as their monitor in July.  Vance required that the defendants provide sufficient financial information (cash receipts journal, bank statements, etc.) so that he could determine how much business they were doing and how many tax returns he would need to review.

Cooperation on the part of the Tax Factory was less than enthusiastic.  Between July and the end of November, Vance was provided with only two returns.  During that time period, no financial information was provided.  Vance did not become alarmed about this until December 1st, when he sent them a letter regarding their failure to comply.  One might wonder why they should comply if it takes five months of non-compliance before the monitor stirs himself to act.

Tax Factory ignored a respond by deadline of Dec. 11, 2015; they never replied.  They never provided any financial information.  Finally, they stiffed Vance by not paying some of his bills!  Normally, three strikes and you are out, but not these guys.  They are something else---read on…

Thursday, August 18, 2016

MA/RI NATP 2016 Annual Meeting & Educational Seminar

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 25th 2016

Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 25th, 2016 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. Registration details are below, and is handled online by National. Take a look at the details on our speaker and topics provided in this great 8 CE Hour opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities. This seminar is limited to the First 100 Registrants!

  • For online registration with credit card, click here.
  • To register by phone, fax or mail, click for the registration form.
  • After October 24th, please print the form (see link above) and register at the door.

Speaker - Cheryl A. Morse, EA

Cheryl Morse has been a tax practitioner since 1982 and an enrolled agent since 1996. She is a manager for Emerging Business Partners, Inc., which prepares over 1500 tax returns in three offices. Cheryl graduated Magna Cum Laude with a B.S. degree in accounting from Bentley College in Waltham, MA.  In addition to speaking for NATP, she works on taxpayer education through various community outreach speaking engagements. She currently represents the Northeast Region as Area 1 Chair of the Taxpayer Advocacy Panel, is a contributor to the development of the IRS EA Examination, and a contributing writer to Forbes.

Education Savings, Deductions, Credits and Tax Issues:

Education and Taxes; it is not as easy as 1-2-3.  This course clarifies who can or should claim the many education benefits, and how to make the most of all the available deductions, credits and savings plans.  Do you know why the "optimize" button on your software does not really work?  We review the education savings plans and point out some pitfalls regarding withdrawals.  We finish up with taxable education benefits and discuss when that might be a good thing. IRS #JSAQG-T-00021-16-I

Elder Issues, SS, IRA, Medical Expenses, Long Term Care, Life Insurance:  

We are all aging, preparer and our clients alike.  It is more important than ever that we understand the issues that affect the "age advantaged" population.     This session is packed with information regarding the various Social Security options including the new changes to "file and suspend", planning for retirement distributions and strategies for handling finances upon retirement.  We review the inevitable cost of medical expenses, including long term care contracts, and finish up with the tax implications of long term care and life insurance payments.  This session is intended as a resource in helping your clients plan for retirement or other life events. IRS #JSAQG-T-00022-16-I

Helping a Delinquent Taxpayer, POA, Notices, Audits, Collections, Penalty/Interest Relief:

As long as there is "death and taxes" there will be delinquent taxpayers.  The requirements of our profession have changed.  In this climate of identity theft helping our clients can be more difficult.  In this session, we discuss the best way to help a client, and how best to protect ourselves when dealing with someone who may be non-compliant in more than one area of his life.  We look at some of the more common notices, such as this year's 1095A Letter and how to get relief for our client. IRS #JSAQG-T-00023-16-I

IRS Notices, Responses, Avoidance:

Is there anything preparers can do to stop the flurry of notices some clients receive?  This part of our day continues with more looks into notices, what prompts them to be issued, and way to best avoid notices in the first place.  IRS #JSAQG-T-00024-16-I

Special Offer for the January 5, 2017 State Update Seminar
Sign up on October 25, 2016 and pay by November 8, 2016 for ½ Price