Thursday, August 31, 2017

New IRS e-Services Platform Launch Next Week

Please don’t confuse this with the routine outage that takes place during the Labor Day holiday. Starting Thursday, September 7, will begin moving e-Services to a new platform that will complete a multi-year upgrade and some products will be unavailable.

  • 6 a.m. Eastern, Thursday, September 7: E-Services registration and the ability to apply for ACA, e-file, TIN Matching and IVES, will be unavailable. A redesigned e-Services landing page will launch. If you go to the old landing page, you will be automatically redirected to the new page.
  • 10 p.m. Eastern Friday, September 8: Transcript Delivery System and TIN Matching will go offline.
  • 6 a.m. Eastern Monday, September 11: Transcript Delivery System and TIN Matching will be back online.
  • 6 a.m. Eastern Tuesday, September 12: Applications for ACA, e-File, TIN Matching and IVES will be available, including ACA Information Return users filing applications for Transmitter Control Codes.

State users only will not be able to submit new or change existing e-File/TDS applications from September 7 through late October.

New e-Services User Agreement

In late October, we will roll out a new user agreement. All registered users must accept its terms to have access to e-Services and its products. Please read and sign it when it comes out.

It also addresses an emerging industry we’re calling Intermediate Service Providers. Intermediate Service Providers are privately owned companies offering software and/or services to e-Services users, including helping users access taxpayer transcripts.

The new user agreement requires tax professionals using Intermediate Services Providers to ensure that the company is not storing their username, password or PIN, and they must notify their clients that they are using an Intermediate Service Provider to access tax information.

Registration tTrough Secure Access

Starting in late October, all e-Services users must register through Secure Access, a rigorous authentication process, to validate their identity and meet a new two-factor authentication requirement.

It is called two-factor authentication because all returning users must first enter their credentials (username and password) and then enter a security code sent to the user. To assist users who either cannot use a cell or lack cell service, the IRS is adding a new feature to its IRS2Go app. This app can be used on many types of mobile devices, including smart phones and tablets.

For existing e-Services users who cannot authenticate through Secure Access, we will have an exception process through our help desk. However, even if you validate your identity through the help desk, you will still need a mobile phone or the IRS2Go app to obtain a security code each time you login to e-Services.

You can read more about these changes at Important Information about Your e-Services Account. Read about the current Secure Access process at This page will update with information about the IRS2Go app when it becomes available.

We also have FAQs about Secure Access and e-Services Users and Tips for Successfully Authenticating Your Identity through Secure Access.

Additionally, we will be scheduling some webinars that will demonstrate the registration process for users and we will have experts on hand to answer technical questions. More to come on the Webinars and information about the IRS2Go app.

We know this is a lot of information but we wanted to give you plenty of time to plan for the changes. We will keep you up-to-date as we move forward.

Mary Hanson
Senior Stakeholder Liaison 
Communications & Liaison

Internal Revenue Service
Andover, Massachusetts

phone 978 783-8459
e-fax 1-877-477-8178

Monday, August 28, 2017

Boston Bruins Get to Deduct 100% of Meal Costs

As we all know business meals are generally deductible at only 50% except those related to the transportation industry.  There are some situations where business meals are deductible at 100%. This is one of those 100% situations.

Through various tax entity conduits Jeremy & Margaret Jacobs own the Boston Bruins, a professional hockey team based in Boston, Massachusetts.  The team plays half of their games in the arena in Boston area and the other half of their games at away arenas throughout the United States.

The team contracts with these away city hotels to provide lodging accommodations and banquet or conference rooms.  The Bruins request the rooms not be disclosed to the public and the contract also restricts access to the rooms to team employees and hotel staff.  The rooms are used for meetings as well as pregame meals and snacks.  The team then makes arrangements (i.e., caters) the pregame meals and snacks which will be available in these rooms.  Each catering company (normally the hotel) prepares meals and snacks for the team based on specific dietary as provided by the team.  The morning meal is mandatory for the players.  If they do not attend the meal or are late, they can be fined by the team and/or scratched from participating in games.  Players will meet during these meals with coaches one-on-one or in small groups to discuss strategy and review game film.

The team’s athletic trainers use hotel space, such as meeting rooms, players’ rooms, fitness center, pool, and hot tubs, for team activities such as medical treatment, massages, strength and conditioning training.

The deduction for meals is typically limited to 50%.  One of the exceptions from the 50% reduction, permitting a 100% deductibility, is for meals that fall into de minimis under Section 132 which states, in part, 1) the eating facility is owned or leased by the employer, 2) the facility is operated by the employer, 3) the facility is located on or near the employer’s business premises, 4) the meals are furnished by the employer during, or immediately before or after, the employee’s workday, and 5) the annual revenue from the facility normally equals or exceeds the direct operating costs of the facility.

IRS argued the meal costs did not meet the de minimis provision since the meals were not furnished near the Bruins’ home facility.  IRS adjusted the meal expense by reducing it by the 50% normal reduction.

Tax Court ruled in favor of the Bruins.  The Court stated the Code does not define a “lease” and the arrangement the Bruins had with the various hotels was in essence leasing a room for a short period of time.  Further the Bruins separately arranged for the meals, normally using the hotel catering. Therefore the meals were provided on the employer’s premises and provide by the employer.

Jeremy M.  & Margaret J Jacobs, 148 TC No. 24.  This case can be found by going to, clicking on Opinion Search and entering Jacobs in the Case Name box.

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

Wednesday, August 9, 2017

In Nearby Connecticut, Governor Signs New Law For Tax Preparers

On July 7th, CT Governor Dan Malloy signed into law, Public Act 17-147, which sets tax preparation requirements and regulations in Connecticut. Included in the legislation are tax preparer error penalties and disciplinary authorization. Effective January 1, 2019, registration is mandated every two years for preparers who are not attorneys, enrolled agents, CPAs or TCE/VITA volunteers. CT registered tax preparers must demonstrate the experience, training, and education in tax. Such evidence includes after January 1st, 2020, a certificate of completion of the IRS annual filing season program.

The new law also

  • Restricts RAL fees that can be assessed by tax preparers. 
  • Prohibits unnecessary delaying actions of tax preparers in providing and returning taxpayer records.
  • Sets an initial $100 registration fee and every two years after a $50 renewal fee
  • Establishes effective October 1, 2018 a "prior to providing tax preparation services" written disclosure requirement that includes tax preparer name, address, phone number, an estimate of the tax preparation fee and a warranty that tax preparer will safeguard the taxpayer's personal and tax information.

Tuesday, August 8, 2017

Rhode Island Approves Tax Amnesty

Rhode Island will offer a state tax amnesty. The amnesty will be open to all taxpayers who are
delinquent on any Rhode Island state taxes – including, but not limited to, personal income tax, sales tax, use tax, corporate income tax, and unemployment insurance tax.

The amnesty is for 75 days, ending on February 15, 2018.

Thus, the amnesty will begin in December 2017. (The Division of Taxation plans to begin accepting applications on December 1, 2017.)

The amnesty applies to any taxable period ending on or before December 31, 2016. For taxpayers whose amnesty applications are accepted, the Tax Administrator generally will not seek civil or criminal prosecution of the taxpayer, will waive penalties, and will reduce the applicable interest
rate by 25 percent.

Thus, for example, the interest rate of 18 percent in effect for calendar year 2016 would be reduced
by 4.5 percentage points, to 13.5 percent.

The amnesty will be open to any taxpayer who pays the tax and interest due upon filing the
amnesty tax return, or who enters into a bona fide installment payment agreement for reasons
of financial hardship (provided that the installment payment agreement is for a short term). The
Division of Taxation will develop and post the form to be used by amnesty applicants.
The Tax Administrator must provide a written analysis of the amnesty program by April 30,
2018, to the chairs of the House and Senate Finance Committees, with copies to the members
of the Revenue Estimating Conference.

Effective: 75-day amnesty ending February 15, 2018
Citation: Rhode Island General Laws (RIGL) Chapter 44-6.5

Monday, August 7, 2017

Lawsuit Proceeds Were Taxable

Theresa Devine worked as a National Guard civilian aircraft technician at Andrews Air Force Base from 2008-2010.  Beginning in 2008 she became the target of sexual harassment and gender discrimination by senior noncommissioned officers (NCOs).  This continued until she resigned in February 2010 at which time she continued to serve in a military position with her unit.

In late 2008 she informed her supervisors she was pregnant.  In alleged contravention to the National Guard rules, she was ordered to continue working in an area where she would be exposed to toxic chemicals.  When she developed a rash she was ordered to stock parts on shelves.  Several months later she consulted informally with a National Guard human resources officer.  She reported she had experienced several incidents of sexual harassment, inappropriate behavior, and retaliatory action by senior NCOs in her unit.

When her supervisors learned what she had done, they chastised her for “breaking the chain of command and going outside to report the incident.”  During a meeting in April 2010 she described the misconduct she had experienced.  She informed the equal employment opportunity (EEO) officers that the bases for her complaint were sexual harassment and gender discrimination.  She did not allege that she suffered physical injury for which the National Guard might be liable.

On a National Guard complaint form she said a ranking NCO (NCO-1) denied her a promotion because she was pregnant, made romantic advances to her even though he knew she was married, and informed other unit members that he desired to have sexual relations with her.  Mrs. Devine did not allege that she suffered any physical injury.

Her second complaint form claimed a second NCO (NCO-2) had stated he did not want women working in his unit, referred to her in a derogatory fashion as a “good little mechanic”, and insisted she could not receive a promotion because she was pregnant.  Again Mrs. Devine did not allege that she suffered any physical injury.

The National Guard agreed with her complaints and reprimanded the NCOs, ordered her unit supervisors to receive EEO training, and directed that Mrs. Devine be considered for a promotion in the normal course.

A few months later Mrs. Devine filed an EEO complaint against the National Guard.  This complaint state she was still suffering ongoing reprisals and sexual harassment.  Again she did not mention she suffered from any physical injury.  In April 2011 she amended her complaint form alleging another NCO (NCO-3) “came up behind me and violently threw himself into me giving me a hug ***.  It was forceful enough that it actually hurt.  We currently do not have a friendly relationship and I find this behavior to be inappropriate and disturbing.”  Again she did not allege this caused her physical harm, it was an example of unwanted touching and indicative of the hostile environment in which she worked.

In June 2012 a settlement was reached and Mrs. Devine received $220,252.  Nothing in the settlement agreement mentioned any physical injury.  When questioned about not reporting this income, Mr. & Mrs. Devine argued that the settlement was related to physical injury because touching was physical and therefore the settlement should be nontaxable under IRC Section 104.  IRC Section 104 states lawsuit settlements are nontaxable if they are for physical injury or physical illness.  The law specifically says “emotional distress” is not a physical injury or physical illness for this purpose.

Tax Court agreed with the IRS position that this settlement was not received in connection with a physical illness or injury.  Nothing was mentioned about either of these during any of the complaints or discussions, therefore the entire settlement was taxable.  The settlement agreement stated the settlement proceeds would be subject to Federal and State income taxes.  A Form 1099-MISC was also issued.  Tax Court also upheld the accuracy related penalty.

Although the main issue in this case is the lawsuit settlement, it is notable that Mr. & Mrs. Devine also failed to report taxable interest income of $14, wages of $207, a state tax refund of $207, and a retirement plan distribution of $5,192.  These amounts are minor in comparison to the big issue, but their inclusion shows nothing is too small for IRS to know about.

Michael L. Devine, Jr, & Theresa M. Devine, TC Memo 2017-111.  This case can be found by going to, clicking on Opinion Search, and entering DEVINE in the “Case Name Keyword” box.

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

Saturday, August 5, 2017

Lincoln Imposes First Federal Income Tax

On this day in 1861, Lincoln imposes the first federal income tax by signing the Revenue Act. Strapped for cash with which to pursue the Civil War, Lincoln and Congress agreed to impose a 3 percent tax on annual incomes over $800.

As early as March 1861, Lincoln had begun to take stock of the federal government’s ability to wage war against the South. He sent letters to cabinet members Edward Bates, Gideon Welles and Salmon Chase requesting their opinions as to whether or not the president had the constitutional authority to “collect [such] duties.” According to documents housed and interpreted by the Library of Congress, Lincoln was particularly concerned about maintaining federal authority over collecting revenue from ports along the southeastern seaboard, which he worried, might fall under the control of the Confederacy.

The Revenue Act’s language was broadly written to define income as gain “derived from any kind of property, or from any professional trade, employment, or vocation carried on in the United States or elsewhere or from any source whatever.” According to the U.S. Treasury Department, the comparable minimum taxable income in 2003, after adjustments for inflation, would have been approximately $16,000.

Congress repealed Lincoln’s tax law in 1871, but in 1909 passed the 16th Amendment, which set in place the federal income-tax system used today. Congress ratified the 16th Amendment in 1913.