Tax Change – Extenders Have Been Extended Again

There were a few tax issues included in the budget act that President Trump signed December 20, 2019.  This includes the items commonly known as “extenders”.

Mary Mellem, EA
Ashwaubenon Tax Professionals

The following “extenders” have been extended retroactive to January 1, 2018 (yes, we said January 1, 2018) and now have an expiration date of December 31, 2020.  We are not providing explanations of these individual items since they have existed for many years and the only change is to make them available for a longer period of time.

- The medical base remains at 7.5% instead of 10% (§213).  (This was already 7.5% for 2018 returns.)

- Deduction for mortgage insurance premiums as qualified residence interest (§163(h)(3)).

- Deduction for tuition and related expenses (§222).

- Nonbusiness Energy Property Credit (i.e., insulation, storm doors/windows, etc.) (§25C).

- Exclusion from income of the debt cancellation that is acquisition indebtedness on the taxpayer’s principal residence of up to $2,000,000 (§108(a)(1)(E)).

- Depreciable life of certain race horses as 3-year property (§168(e)).

- Depreciable life for motorsports entertainment complexes of 7-year property (§168(i)).

- Accelerated Depreciation for business property on Indian Reservations (§168(j)).

- Energy Efficient Homes Credit (aka Builders Credit) (§45L).

- Qualified Fuel Cell Motor Vehicles Credit (§30B).

- Alternative Fuel Refueling Property Credit (§30C).

- 2-Wheeled Plug-in Electric Vehicle Credit (§30D).

- Black Lung Disability Trust Fund Excise Tax (§4121).

- Indian Employment Credit (§45A).

- Railroad Track Maintenance Credit (§45G).

- Mine Rescue Team Training Credit (§45N).

- Expensing under §181(g) for certain productions.

- Various incentives for Empowerment Zone Activities (§1391).

- Economic Development Credit for American Samoa (§119).

- Biodiesel and Renewable Diesel Credit (§40A).

- Second Generation Biofuel Producer Credit (§40).

- Electricity Produced from Certain Renewable Resource Credit (§45).

- Indian Coal Facilities Credit (45(e)).

- Special Allowance for Second Generation Biofuel Plant Property (§168(l)).

- Energy Efficient Commercial Buildings Deduction (§79D).

- Special Rule for Sales or Dispositions to Implement Ferc or State Electric Restructuring Policy for Qualified Electric Utilities.

- Extension and Clarification of Excise Tax Credits relating to alternative fuels (§6426 and §6426).

- Oil Spill Liability Trust Fund Rate (§4611).

The following “extenders” were scheduled to expire at the end of 2019 and have now been extended through 2020.

- New Markets Credit (§45D).

- Employer Credit for Paid Family & Medical Leave (§45S).

- Work Opportunity Credit (§51).

- Certain Provisions Related to Beer, Wine, and Distilled Spirits.

- Look-thru Rule for Related Controlled Foreign Corporations (§954).

- Credit for health insurance costs of Eligible Individuals (§35(b)).

Although some of these extenders may help some taxpayers, we feel Congress acted irresponsible in retroactively extending many of the “extenders”.  The purpose of many of these “extenders” is to give taxpayers a tax incentive to do something.  Reinstating extenders retroactively to January 1, 2018, doesn’t seem like a great way to “incentivize” anyone to do something in 2018 or most of 2019.  It could cause a person to wonder if these “extenders” were passed to reward friends of our elected Congress.

On the government side, IRS is now required to revise all applicable forms and schedules (& programming) to take into account the items that were extended for 2019.  We would not be surprised if IRS delays the ability to file tax returns due to this late action by Congress.  Further, IRS is required to revise forms and schedules (& programming) for 2018 to take these into account.  On the taxpayer side, taxpayers will have to decide if it is worth it to amend their 2018 returns including digging out their documentation for the applicable items.  Most taxpayer use a tax professional to prepare their returns and these tax professionals probably won’t prepare the amended returns for free.

In fairness, these “extenders” now run through December 31, 2020, which means taxpayers will have an incentive to do something during 2020.

This text has been shared by David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.

Happy Holidays from The Massachusetts/Rhode Island Chapter of NATP

Here Are A Few Things to Note For MA & RI State Returns

William Delaney, EA
Westwood, MA

MA – Effective 2020, the individual rate returns to 5%. At the same time, the charitable contribution deduction also returns (remember that one from 2001?). Since the deduction is linked to the federal Schedule A amount, only those who itemize on their federal 1040 will be eligible for this state benefit. The federal health care penalty is now a thing of the past. However, as President Ron Fisher recently reminded your Editor, a penalty still applies on the MA return (it pre-dates the former federal rule). Taxpayer’s beware.

RI – The gremlins are at it once again---a new tax form! This time it is payroll related. All monthly remitters of state withholding tax must now also file an RI-941, effective for the quarter ended 3/31/2020. It’s a quarterly reconciliation of your monthly payments! My guess is that someone at the state DOR was looking for something to do. It’s a
function of Parkinson’s Law---work expands to fill the time available! Will there also be an annual reconciliation of the quarterly reconciliations? “They” aren’t saying as yet!

Also, did you know that withholding which is not paid-in electronically (i.e. paper check
payment) “will be subject to an addition to the tax, amounting to 5% of the withheld
tax…or $500, whichever is less.” “Returns not filed electronically will be subject to an
addition to the tax, a sum equal to $50.” RI is catching up to NY and MA.

And Now Some Important News From the MA DOR

Filing season starts soon

DOR will begin accepting electronic returns on January 21. If the IRS moves their opening date for electronic returns, DOR will adopt the new date. As we do every year, we will test a variety of returns during the first week before fully opening up the system. Super early birds might experience a slight delay before receiving a confirmation receipt. Keep an eye on the filing season information page for important updates. The page is currently being updated and we’ll add information as it is available.

Software vendors have started testing

The testing process has already started this year, a little earlier than usual. You can follow the vendor testing process for both electronic filing and 2-D forms (printed from tax preparation software). Track the progress of your vendor on the DOR website.

Important withholding form changes for Mass employers

As you may already know, there are changes to the federal Form W-4 for 2020 that reflect the elimination of the personal exemption and increase in the standard deduction resulting from tax reform enacted in 2018. You can learn more about the form changes at the IRS website. Massachusetts personal exemption amounts do not rely on federal law and the process for calculating the correct Massachusetts withholding amount has not changed.  Here’s what employees and employers need to do.

• New employees as of January 1, 2020 will complete both the Massachusetts Form M-4 and the new IRS Form W-4 to give employers an accurate withholding picture.  The Form W-4 can no longer be used as a substitute for the Form M-4.
• Current employees do not have to do anything unless they want to adjust their withholdings. Employers can rely on the most recently completed form for withholding information if the employee does not want to make adjustments. If an employee does want to revise withholdings, s/he should complete both the new IRS Form W-4 and the Massachusetts Form M-4 to make the changes.

Draft instructions for personal income tax forms posted

Take a look at the instructions for personal income tax forms, and the draft forms themselves if you haven’t already. Be sure to let us know of suggestions or comments for how to make improvements by contacting the Forms Manager at dorforms@dor.state.ma.us.

New stuff!

You can request an income tax return transcript for FY2018 after logging in to MassTaxConnect. Just log in, choose Personal Income Tax, select the return year, and choose Request a return transcript under I Want To. You will be mailed a line item printout of the information on your return, with the exception of any changes made as the result of an audit. If you are requesting a prior year, it will be done manually by DOR and sent to you.

Wait, there’s more. You can now upload a response to a Notice of Change in Tax Return. If you agree with the change, do nothing. If you owe tax, you’ll receive a bill [Notice of Assessment] that you can pay online at MassTaxConnect. If you disagree, respond online through MassTaxConnect. Just go to Quick Links, choose Submit documentation and enter the letter ID number on the notice. You can attach an explanation of why you think it’s incorrect and any supporting documents.

Partnership Capital Account Reporting

Draft versions of the 2019 Schedule K-1 for both Forms 1065 and Form 8865 proposed to require
partner tax basis capital account reporting by all partnerships and prohibit the reporting of partner capital accounts under generally accepted accounting principles (GAAP), or any other method of accounting for 2019.

The IRS has decided to make this reporting requirement effective for partnership tax years that begin on or after January 1, 2020 rather than 2019. Thus, for 2019, partnerships must report partner capital accounts consistent with the reporting requirements in the 2018 forms and instructions, including the requirement to report negative tax basis capital accounts on a partner-by-partner basis.

Notice 2019-66 also clarifies the 2019 requirement for partnerships to report a partner's share of net unrecognized Section 704(c) gain or loss by defining this term for purposes of the reporting requirement.

The notice also exempts publicly traded partnerships from the requirement to report their partners' shares of net unrecognized Section 704(c) gain or loss until further notice.

The notice also provides that the requirement for partnership to report to partners information about separate Section 465 at-risk activities will not be effective until 2020.

Massachusetts Department of Revenue Not Keeping Taxpayer Data Secure, Audit Finds

Shira Schonenberg
The Republican/MassLive.com

An audit of the Department of Revenue released Monday by state auditor Suzanne Bump criticized the department for not keeping taxpayer data secure.

“The Department of Revenue has incredibly sensitive data about every taxpayer and business in the Commonwealth,” Bump said in a statement. “Taxpayers have no choice but to provide this information to DOR, so it has a responsibility to do everything it can to keep it safe.”

In recent years there have been two high profile data breaches involving the agency. In late 2017, a breach inadvertently made private information about 39,000 business taxpayers visible to other companies, the Boston Globe reported. In 2018, the agency accidentally sent notifications about 6,100 people who owed child support to the wrong addresses.

Bump said she hopes the audit will lead to reforms at the agency.

According to the audit, the agency does not have any kind of committee responsible for making decisions about information technology security risks. Its security review board has been inactive since early 2017.

It does not have a policy in place detailing how it will respond to security incidents. It has not assessed risks related to the third-party vendors that have access to Department of Revenue data.

The Department of Revenue, in a written response to the audit, said it will convene a committee to look at strategic risks, it is developing the security response document, and it will create a working group to examine ways of assessing risks from third-party vendors.

The Department of Revenue has been transferring some information technology responsibilities to the state’s Executive Office of Technology Services and Security, a new office established in August 2017 to consolidate the state’s IT functions. But according to the Department of Revenue, it has taken them three years to try to negotiate an agreement, which they still have not completed, laying out the responsibilities at each agency. The Department of Revenue blames organizational and managerial changes at the technology agency.

-From MassLive.com

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 9th 2020

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 9th 2020

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 9th, 2020 for our Annual State Update Seminar. This all day event will be held at the Southbridge Hotel & Conference Center, Southbridge MA. Registration details are below, and are handled online directly by National NATP. 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 is from 7:30am to 8:30am & Education is from 8:30am to 4:30pm.

• Register online with credit card.
• For more information or to register by phone, fax or mail, use this form.
• After January 8th, please register at the door with the form above.

If you are planning to stay at the hotel, we have secured a room rate of $99/night. The reservations can be made here.

Topics:

Massachusetts State Tax Update presented by Massachusetts Department of Revenue.

Rhode Island State Tax Update presented by Rhode Island Division of Taxation.

Connecticut State Tax update presented by Sharon Cummings.

New York State Tax Update presented by Kathryn Keane 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.

Massachusetts DUA EMAC Supplement Hardship Waiver

Important Message From The MA DUA Regarding EMAC

Dear Stakeholder:

We are contacting you to remind you that the Q4 2019 EMAC Supplement Hardship Waiver is now available for organizations that wish to apply. You can learn about the application requirements and your responsibilities as an employer, as well as obtain a copy of the application at:

https://www.mass.gov/info-details/the-emac-supplement-hardship-waiver.

If your organization intends to apply for the EMAC Supplement Hardship Waiver for Q4 2019, the application is due on 1/14/2020 at 5PM.

Please note it is not a requirement that you submit the EMAC Supplement Hardship Waiver. It is at your discretion if you elect to submit an application.

All completed hardship waiver applications and supporting documentation should be sent via email to EMACHardshipWaiver@mass.gov. 

Applications received after the deadline of 1/14/2020 by 5PM, will not be considered.

Any questions, comments or concerns should be directed to our customer service unit.  The unit can be reached via phone at (617) 626-5975 or by email at EMAC.Questions@detma.org.

We also want to remind you that regardless of whether or not your organization elects to apply for the Q4 2019 EMAC Supplement Hardship waiver, Q4 2019 Wages must be filed and payment made in UI Online by 3 p.m. on 1/31/2020.

Thank you,

The Massachusetts Department of Unemployment Assistance

Happy Thanksgiving from the Massachusetts/Rhode Island NATP Chapter

Medicare B Premiums for 2020

The base Medicare Part B monthly premium for 2020 increases to $144.60/month (from $135.50/month for 2019).

The higher premiums some taxpayers have to pay for 2020 vary depending on the taxpayers’ modified AGI (MAGI) as shown on their 2018 income tax returns.  The various MAGI levels increased a small amount with the exception of the maximum MAGI levels.  The exact costs and modified AGI levels can be found at www.medicare.gov by clicking on the “Your Medicare Costs” tab and then on “Part B Costs”.

The highest Medicare Part B premium for 2020 is $491.60/month and applies to:

• Individuals with modified AGI of $500,000 or more
• Married Filing Jointly taxpayers with modified AGI of $750,000 or more
• Married Filing Separately taxpayers with modified AGI of $413,000 or more

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

©2019 Ashwaubenon Tax Professionals.  No reproduction of this article is permitted without the express consent of Ashwaubenon Tax Professionals, 2140 Holmgren Way, Suite 1040, Green Bay, WI 54304.

This Return Filing Includes a Schedule K-1; I Don't Have It, My Client Can Not Obtain It, What Should I Do?

William Delaney, EA
Westwood, MA

A paid preparer signs a jurat (that little statement opposite Sign Here) along with the taxpayer(s) which says (in part) “Declaration of the preparer…is based on all information of which the preparer has any knowledge.”  Some of us think that this is the only part which holds us to a standard.   But, we sign the entire jurat which also says…”true, correct, and complete.”  We are only off the hook if we don’t know about it, but we do know that the K-1 is missing and we are faced with that extended due date filing deadline, the Dr. Silber defense (see below) notwithstanding.

You can file a return with incomplete information, so long as you disclose this to the IRS.  No, I don’t want to file an 8275-R – Regulation Disclosure Statement!   They will audit my client!  And, your Editor is in agreement---you don’t want to attach that form; it is only used for disclosing a position which is inconsistent with treasury regulations.  What to do…

Use form 8275 (without the R).  Explain what you are doing (Part II) and reference the pass-through entity (Part III).  Then, let the IRS chase the entity for you!

What is the Dr. Silber defense?  If you are old enough, you will remember the 1990 MA state election for governor.  William Weld (Republican) v. John R. Silber (Democrat).  During the campaign, Dr. Silber (then President of Boston University) was asked when he planned to make public his income tax return.  To which he replied, it’s on extension (i.e. incomplete).  After October 15th, the press asked again, and Dr. Silber replied that his accountant had obtained another extension because he was missing a K-1.

The pesky press were not satisfied, so they interviewed a spokesperson for the IRS Boston office who explained that no extension is possible after October 15th except for someone who is still out of the country.  Dr. Silber was insistent---he had an extension. Of course, since he lost the election to his opponent, we never did see his tax return.

Rhode Island's Health Coverage Mandate

All Rhode Islanders must have qualifying health coverage beginning January 1, 2020. Failure to have such coverage in 2020 may result in a Rhode Island personal income tax penalty in 2021. So now's the time to plan ahead.

Rhode Island residents can enroll in new health insurance or renew their coverage for 2020 with Rhode Island's health insurance exchange -- HealthSource RI. For more information, including details about the current open enrollment period and about how eligible Rhode Islanders can receive financial assistance to lower the cost of health insurance, see https://healthsourceri.com/.

Open enrollment began November 1 and ends December 31. But you must pick your plan and pay for it by December 23 in order to get coverage starting January 1, 2020.

IRA Beneficiary Waits 2 1/2 Years For Her Money - Obtains Consumer Protection Relief Under MA Ch 93A

William Delaney, EA
Westwood MA

Taxpayer Patrick Kenney opened three IRA accounts with UBS Financial Services, Inc. in 2008.  The UBS financial advisor was taxpayer’s one-time sister-in-law.  At the time,  Kenney was smitten by but not legally married to Donna M. Aliberti (the defendant).  Therefore, it is not surprising that Kenney named Aliberti as the sole beneficiary of each IRA.

Five years later (Nov. 2013) Kenney decided to change the beneficiary on two of the three IRAs and completed an UBS update form for each, “writing in the names of four individuals with the notation ‘25%’ next to each…Kenney completed each of the forms improperly…” and they were rejected by UBS.

The financial advisor thereupon arranged for new beneficiary forms to be sent to Kenney, who apparently did not complete and resubmit them prior to his unexpected death on Dec. 2, 2013.

“Approximately two weeks following Patrick Kenney’s death, Aliberti contacted Margaret Kenney (financial advisor/former sister-in-law) about the three IRAs.”  The two which were in flux at death contained relatively small amounts.  The third, which had been left intact as to beneficiary, was valued at approx. $276,000.

Margaret (former sister-in-law) Kenney’s initial reaction was to send a series of trash talk e-mails to Aliberti; finally she did send a message which stated “Documents mailed to you today please sign and return ASAP for distribution.”

Now, to an event which threw a monkey wrench into the distribution process.  One of the four who were named as updated beneficiaries on the forms which UBS had rejected, Craig Gillespie (a friend of the late Patrick Kenney), contacted UBS in writing (attorney letter) asserting that Kenney had changed the beneficiaries on the two small IRAs and was in the process of changing the beneficiary on the large IRA at the time of his death.  “The letter also stated that Gillespie intended ‘to have a court of law resolve the issue of whether or not he is a named beneficiary of the third IRA account’ and asked UBS not to make any distributions therefrom.”  Apparently, Gillespie thought that his 25% beneficial interest in the smaller IRAs could not be disputed.  UBS put a hold on the large IRA.

Aliberti contacted UBS in Jan. 2014 and filed a verbal claim to all three accounts.  UBS acknowledged the claim by sending an unsigned letter received on Feb. 4, 2014.  On Feb. 19, 2014, Aliberti “sent completed beneficiary processing forms for all three IRAs, a copy of Patrick Kenney’s death certificate, and a copy of her driver’s license to UBS.”

PTIN Fees are Legal

The Supreme Court has declined to listen to the PTIN case, therefore the Court of Appeals decision stands.  Here is a brief summary of the case.

A few tax return preparers took IRS to court claiming it did not have the right to charge a fee for issuing PTINs.  On June 1, 2017, the tax preparers won in the District of Columbia District Court.  On July 10, 2017, the District Court ordered IRS to permanently enjoin from charging PTIN fees and provide every class member a full refund of all PTIN fees paid from September 1, 2010, to the present.  The case went to the Court of Appeals.

The Court of Appeals ruled against the tax return preparers denying the arguments presented and vacated the District Court decision.  The case was remanded back to District Court for further proceedings, including an assessment of whether the amount of the PTIN fee was unreasonable and exceeded the costs to IRS to issue and maintain PTINs.

We have not heard if the District Court made a determination of the reasonableness of the fee amount.

Side note – The renewal period for PTINs for the upcoming tax season will open October 16.  This year IRS is not charging a fee for the PTIN renewal.

Montrois, et al. v U.S.

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

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019 - 2 Weeks Away!!

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019

Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 22nd, 2019 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. We have negotiated a room rate of $119 if you would like to stay at the hotel. Please book this by October 11th and mention that you are with NATP. 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 Continuing Education  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 21st, please print the form (see link above) and register at the door.

Registration 7:00 am to 7:45 am (Continental Breakfast Included)
Education 7:45 am to 5:00 pm
Annual Meeting Prior to Lunch (Lunch Included)

CE Credits -
8 Federal Tax Law Topics


Speaker - Kathryn Morgan, EA, NTPI Fellow

Topics:

Tax Research Tips

Residential Rentals

Working From Home

Taxes in Divorce

Kathy just completed her 24th year with H&R Block working in the Bossier City Premium office. Her prior careers as a USAF military police officer and as a police communications officer for the Bossier City Police give her a wide variety of experience that translate into tax issues. She proudly holds the titles of Enrolled Agent, Fellow NTPI, Instructor, and Representation Specialist.

She has been published by several tax research companies, including Parker Tax Publishing and TaxConnections.com. She is a accomplished speaker and instructor on a wide variety of tax issues. Through her company, Puzzled By Taxes?, she offers speaking, writing, and instruction.

Kathy lives and practices in the Shreveport Louisiana area and when not "talking tax" she enjoys spending time with her grandchildren and family, writing and reading.

Rhode Island Tax Changes Take Effect Tomorrow, October 1

Feminine hygiene products, urns, specified digital products, and E-911 charges are affected

PROVIDENCE, R.I. – Starting tomorrow, October 1, Rhode Island’s 7% sales and use tax will no longer apply to feminine hygiene products and urns.

Also starting tomorrow, the sales and use tax will be extended to e-books, streaming video, music downloads, and other “specified digital products”.

Furthermore, the monthly E-911 surcharge that applies to residential and business phone lines, as well as to cell phones, will be split into two separate charges – one as the emergency services surcharge, the other as the first response surcharge.

The changes are the result of legislation approved by the Rhode Island General Assembly and signed into law by Rhode Island Governor Gina M. Raimondo on July 5, 2019.1 Following is a summary.

Tampons and other feminine hygiene products

According to the new law, the “feminine hygiene products” category includes tampons, panty
liners, menstrual cups, sanitary napkins, and “other similar products the principal use of which is
feminine hygiene in connection with the menstrual cycle”. They will be exempt from Rhode
Island’s sales and use tax effective October 1, 2019.

Urns

The new law exempts – from Rhode Island’s sales and use tax – the sale, storage, use, or other consumption in Rhode Island of urns that are ordinarily sold by a funeral director as part of the
business of funeral directing. Urns will be exempt beginning October 1, 2019.

Already exempt are coffins and caskets, as well as shrouds and other burial garments that are
ordinarily sold by a funeral director as part of the business of funeral directing.

Digital movies, music, books

“Specified digital products” are subject to Rhode Island sales and use tax effective October 1,
2019. The term “specified digital products” includes digital movies, digital TV shows, digital books,
digital music, and related items that are streamed or downloaded to computers, phones, or other
devices. The term also includes subscriptions to streaming audio and streaming visual products
– such as films, shows, and music that are streamed or downloaded to computers, phones, or
other devices.

Technically, the term “specified digital products” refers to electronically transferred:

• “Digital audio-visual works” – which means a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any;
• “Digital audio works” – which means works that result from the fixation of a series of musical, spoken, or other sounds, including ringtones; and
• “Digital books” – which means works that are generally recognized in the ordinary and usual sense as “books”.

For purposes of the definition of “digital audio works”, “ringtones” means digitized sound files that
are downloaded onto a device and that may be used to alert the customer with respect to a
communication.

The new law makes it clear that specified digital products sold by or through remote sellers,
marketplace facilitators, and referrers are also subject to Rhode Island sales and use tax.
Furthermore, every retailer -- including those with no physical presence in Rhode Island -- that
sells specified digital products for storage, use, or other consumption in Rhode Island must
register with the Rhode Island Division of Taxation. For more details, click here.

E-911 surcharge

The monthly E-911 surcharge on residence and business phone lines will be split into two
separate charges – one as the emergency services surcharge, the other as the first response
surcharge – effective October 1, 2019. The same principle will apply to the E-911 surcharge on
wireless, cellular, and other such devices. For more details about the E-911 surcharge, click here.

For more information

For more information about the tax changes that take effect October 1, 2019, call the Division’s
Excise & Estate Tax unit at (401) 574-8955 (the line is typically staffed from 8:30 a.m. to 3:30 p.m.
Eastern Time business days), or email: Tax.Excise@tax.ri.gov.

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019 - 1 Month Away!!

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019

Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 22nd, 2019 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. We have negotiated a room rate of $119 if you would like to stay at the hotel. Please book this by October 11th and mention that you are with NATP. 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 Continuing Education  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 21st, please print the form (see link above) and register at the door.

Registration 7:00 am to 7:45 am (Continental Breakfast Included)
Education 7:45 am to 5:00 pm
Annual Meeting Prior to Lunch (Lunch Included)

CE Credits -
8 Federal Tax Law Topics


Speaker - Kathryn Morgan, EA, NTPI Fellow

Topics:

Tax Research Tips

Residential Rentals

Working From Home

Taxes in Divorce

Kathy just completed her 24th year with H&R Block working in the Bossier City Premium office. Her prior careers as a USAF military police officer and as a police communications officer for the Bossier City Police give her a wide variety of experience that translate into tax issues. She proudly holds the titles of Enrolled Agent, Fellow NTPI, Instructor, and Representation Specialist.

She has been published by several tax research companies, including Parker Tax Publishing and TaxConnections.com. She is a accomplished speaker and instructor on a wide variety of tax issues. Through her company, Puzzled By Taxes?, she offers speaking, writing, and instruction.

Kathy lives and practices in the Shreveport Louisiana area and when not "talking tax" she enjoys spending time with her grandchildren and family, writing and reading.

Does Your State Have a Marriage Penalty?

Janelle Cammenga, Policy Analyst
Tax Foundation

Today’s map zeroes in on states that have a “marriage penalty” in their individual income tax brackets.

Under a progressive, graduated-rate income tax system, tax rates increase as a taxpayer’s marginal income increases. A marriage penalty exists when a state’s income brackets for married taxpayers filing jointly are less than double the bracket widths that apply to single filers. In other words, married couples who file jointly under this scenario face a higher effective tax rate than they would if they filed as two single individuals with the same amount of combined income.

This non-neutral tax treatment is particularly harmful to owners of pass-through businesses, who pay taxes on their business income under the individual income tax system. Under a marriage penalty, married business owners are subject to higher effective tax rates on their business income than they would be otherwise.

Fifteen states (displayed in pink on the map below) have a marriage penalty built into their bracket structure. Seven additional states (Arkansas, Delaware, Iowa, Mississippi, Missouri, Montana, and West Virginia), as well as the District of Columbia, offset the marriage penalty in their bracket structure by allowing married taxpayers to file separately on the same return to avoid losing credits and exemptions. Ten states have a graduated-rate income tax but double their brackets to avoid a marriage penalty: Alabama, Arizona, Connecticut, Hawaii, Idaho, Kansas, Louisiana, Maine, Nebraska, and Oregon.

The ability to file separately on the same return is important in states that do not double bracket widths, as is the ability to do so even if the couple files jointly for federal purposes. While married couples have the option of filing separately—though some states only allow this if they do so on their federal forms as well—this normally creates a disadvantage, because it either disallows or reduces the value of deductions and credits available to the family jointly, which is also a form of marriage penalty. Filing separately on the same return eliminates this problem, though at the cost of slightly greater complexity than the obvious, simple solution of doubling tax brackets for joint filers so that there is no penalty for filing jointly.

Massachusetts Paid Family Medical Leave is Here

Are you PFML ready?

Massachusetts' Paid Family and Medical Leave program is here. And if you employ anyone, you are now required to get your business or non-profit PFML ready.

Withholding starts on October 1st.

Paid Family and Medical Leave

Find out everything you need to know, including contribution rates, important deadlines, who is covered and who is excluded, and how to apply for an exemption.

Visit mass.gov/pfml today.

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019

Massachusetts / Rhode Island NATP Chapter Annual Meeting & Educational Seminar October 22nd 2019

Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 22nd, 2019 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. We have negotiated a room rate of $119 if you would like to stay at the hotel. Please book this by October 11th and mention that you are with NATP. 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 Continuing Education  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 21st, please print the form (see link above) and register at the door.

Registration 7:00 am to 7:45 am (Continental Breakfast Included)
Education 7:45 am to 5:00 pm
Annual Meeting Prior to Lunch (Lunch Included)

CE Credits -
8 Federal Tax Law Topics


Speaker - Kathryn Morgan, EA, NTPI Fellow

Topics:

Tax Research Tips

Residential Rentals

Working From Home

Taxes in Divorce

Kathy just completed her 24th year with H&R Block working in the Bossier City Premium office. Her prior careers as a USAF military police officer and as a police communications officer for the Bossier City Police give her a wide variety of experience that translate into tax issues. She proudly holds the titles of Enrolled Agent, Fellow NTPI, Instructor, and Representation Specialist.

She has been published by several tax research companies, including Parker Tax Publishing and TaxConnections.com. She is a accomplished speaker and instructor on a wide variety of tax issues. Through her company, Puzzled By Taxes?, she offers speaking, writing, and instruction.

Kathy lives and practices in the Shreveport Louisiana area and when not "talking tax" she enjoys spending time with her grandchildren and family, writing and reading.

MA DOR Update: Meals NOT Exempt From Tax For Sales Tax Holiday

As previously reported, recent legislation included meals in a list of items to be exempt from sales tax during the Sales Tax Holiday. That legislation was amended on August 1 to remove meals as an item to be exempt from tax during the Sales Tax Holiday.

If you ordinarily charge sales tax on meals that you sell, nothing will change for you during the Sales Tax Holiday. You will continue to charge sales tax on meals. 

The Sales Tax Holiday for 2019 will take place on August 17 and 18.

You can find more information on the sales tax holiday, including FAQs on what’s included, what’s excluded, and what to do if you accidentally charge sales tax on an excluded item.

MA DOR Announces Relief For Taxpayers Affected By The Cape Cod Tornado.

The Department of Revenue has announced it is taking steps to address the concerns of taxpayers in Barnstable, Brewster, Chatham, Dennis, Harwich, Mashpee, Sandwich, and Yarmouth who have been affected by the recent tornadoes.

The Department recognizes that taxpayers in these areas might be unable to comply with their tax filing or payment due dates occurring on or after the date of the tornadoes and would like to assist those taxpayers as much as possible.

The Department is announcing that it will waive any penalties associated with any late-filed return or payment that was due on or after July 23rd, and before November 15th. The Department will waive penalties for four months, and will later revisit whether any further extensions should be granted.

If any taxpayer in the affected areas receives notice of a penalty for this period they should contact the Department of Revenue at (617) 887-6367.

IRS Changing 1040 Forms, Again, For TY 2019

Form 1040 Returns Looks Similar to Previous Versions

The IRS published a re-formatted form 1040 in its website repository. Among the design changes, the form is no longer two half pages, but two 7.25 inch pages.  The 3rd party designee, taxpayer and preparer signature sections have returns to the bottom of page two. Amounts from wages to taxable income moved to the front page  Foreign address information has returned to the address header of page one, so that Schedule 6 is now obsolete.  IRA and pension income amounts are on separate rows; lines 4a & 4b for IRA and lines 4c & 4d for pensions. In 2019, IRA and Pension incomes were combined on lines 4a for the gross and 4b for the taxable amount. Capital Gains are reported on the front page. Payments and refundable credits have moved to page two of the 1040 making Schedule 5 obsolete.

Senior Citizen 1040 Draft Form

The IRS published a draft version of the new 1040-SR on the forms webpage.  The two page 24 line form has the more traditional 1040 layout. It references support items from Schedule A, B, D, 1, 2, and 3 and forms 8814, 4972, 8863, 8812, 8888, 8995 & 8995-A. At the bottom of page one is a traditional standard deduction chart. Form 1040-SR was mandated by Congress a few years ago.

Massachusetts & Rhode Island Take Over the NATP National Conference

Greetings from the Windy City!! Just a couple of notes from NATP Annual Conference in Chicago!

We are happy to report that we have 18-Massachusetts Members and 4-Rhode Island members in attendance. All have attended different classes and have been very happy with the courses being offered, the instructors are great.

Some have attended classes taught by Kathy Morgan, who will be presenting at our Annual Meeting on October 22nd. This is definitely an event you should not miss!!

We were honored to have Commissioner Charles Rettig as a speaker yesterday. Overall everyone found him to be very personnel, he comes from a tax background and seems to understand the problems we encounter when dealing with the IRS. Opinions seem to be, let’s give him a chance and hope Congress gives him the tools to make changes. It won’t happen overnight but it feels more positive that things will happen.

Charles Rettig
IRS Commissioner

Last evening was the Charity Auction, there were many baskets donated by various chapters. Here is a picture of our basket which ended with a final bid of $200.

MA/RI Chapter
Charity Basket

Fun was had by all who participated!! They will announce the total raised for CASA Thursday night at the closing ceremony. Stay tuned for the final figure!

This evening we had our Chapter Dinner held at Gino’s East, famous for Chicago Pizza. It was excellent. 15 members were able to join us!

Update on the Massachusetts Family & Medical Leave Tax

First, you will be delighted to know that it is unclear as to whether this is a tax (for purposes of claiming a deduction) or if it is something else (what else it may be is also unclear). 

William Delaney, EA
Westwood, MA

Second, you will be delighted to know that it has not been determined if these leave payments are exempt income (such as disability payments) or fully taxable income (such as unemployment compensation).  The MA Dept. of Family and Medical Leave (DFML) is in discussions with the Internal Revenue Service on this issue (why the discussion is not being led by the Mass. Dept. of Revenue is unclear).

Third, but not the least of all, it is still unclear as to whether the employee withholding will be pre-tax or after-tax.  This is also under discussion.  Why it should be pre-tax is anyone’s guess, but you never know.

Every W-2 employee is subject to the “tax” withholding.  Every employer is subject to the withholding requirement (if there is at least one W-2 employee or, in the absence of payroll, if the majority of the “employees” are 1099 contractors).  Certain categories of payroll employees and 1099 contractors are exempt.  The law follows the “shall not include” provisions of MGL Ch. 151A, Sec. 6.

The effective date for withholding is October 1, 2019.  All employers presently in the MATaxConnect system as subject to withholding of income tax will be automatically registered and this “tax” will appear along with any other tax withholding/tax filing requirements on the TaxConnect web site.

There is a “tax” calculation worksheet on the DOR web site.  Here is an example for a small employer who is NOT required to make a contribution…

Total Contribution (using $10,000 of quarterly W-2 income – one employee) –
$10,000 x .0075% = $75.00.

The DFML has allocated this “tax” to the two applicable state programs being funded.  82.5% to Medical Leave; 17.5% to Family Leave.

The employee’s contribution amount is…

Medical Leave – 82.5% x $75.00 = $61.88  Family Leave – 17.5% x $75.00 = $13.12

The employer (under 25 employees) is NOT required to make a contribution.
The employee, on the other hand, IS required to make a contribution (via withholding) equal to…

Medical Leave – 40% of $61.88 = $24.76
Family Leave – 100% of $12.12 = $12.12

Now to how to remit quarterly, using MATaxConnect.  Go to your already established TaxConnect employer account and click on the “needs attention” box associated with this “tax.”  Be sure to click on the various options so that the pop-up boxes will appear.  Use them to enter the total tax (by category) to be remitted.

When you wish to enter employee detail, two options are offered.  One – enter the detail for each employee (and/or contractor, if applicable) in the same manner that you make employee entries into the stste DUA system (this becomes important in a minute or two).  The system will then compute the total contribution due (see $10,000 example – above).  Pay what is owed and it works (for the 25 or more employees employer).  For the employer exempt from making a contribution, the system (we hope) will recognize that the employee withholding will be less than the automatically calculated total contribution (how that will happen is unclear).

Fast forward to the second quarter (Jan-Mar 2020) and start to file a return.  OK, the system already has the data base, so we don’t need to repeat the same employee information again, but wait---that’s a false assumption.  According to the MA DOR and the DFML the employee data base will NOT be retained.  It must be re-entered (because it may change, said they).  If you think that Bill Delaney is on life support and did not hear them correctly---I checked with Jeff Schweitzer, who was also there.  He heard the same thing.  So, warm up those typing fingers guys and gals.  This isn’t going to be easy.

Oh, did I mention that the system does not store accumulated wages and, therefore, it cannot track when the maximum wage base has been reached (it’s the same amount as the social security wage base maximum).  I kid you not---it’s the stone age, guys and gals.

Now for a few chuckles.  If that 1099 payment is made to a single-member LLC which files as a Schedule C (default option), that payment is not considered to part of what the employer (i.e. work provider) counts for purposes of determining if the contribution calculation must include 1099 contractors.  This isn’t a “contractor;” it’s an LLC (don’t you see)!  This MAY change; it is still under discussion.

Finally, for something serious and important.  Suppose (somehow) your taxpayer client either doesn’t file or files each quarter and declares -0- wages?  Let’s suppose one of his (I don’t have any) employees decides to apply for this leave.  DFML will search the MA DOR data base (the one which you [mostly] so dutifully type into each quarter) and discover that it is showing zilch.  However, the employee is entitled to and will receive a benefit.  The employer will be audited by MA DOR and assessed for the “tax,” interest and penalty.  In addition, the employer must also pay the full amount of the employee benefit.

IRS Can Charge Fees for PTINs

The latest in this saga is the decision by the Court of Appeals for DC Circuit which states, in part, IRS can charge a fee for its granting of PTINs.

As you have all heard, a few tax return preparers took IRS to court claiming it did not have the right to charge a fee for issuing PTINs.  On June 1, 2017, the tax preparers won in the District of Columbia district court.  On July 10, 2017, the District Court ordered IRS to permanently enjoin from charging PTIN fees and was to provide every class member a full refund of all PTIN fees paid from September 1, 2010, to the present.  The case went to appeals.

Several arguments were submitted to the Court of Appeals.  The Court ruled against the tax return preparers denying the arguments presented and vacated the District Court decision.  The case was remanded back to District Court for further proceedings, including an assessment of whether the amount of the PTIN fee unreasonable exceeded the costs to IRS to issue and maintain PTINs.

Just in case you forgot, anyone who has obtained and paid a user fee for a PTIN is affected by this case as one large class.

Montrols, et al. v U.S., Court of Appeals for the District of Columbia.


This text has been shared with you courtesy of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.

IRS Webinar - Qualified Business Income Deduction (199A)

Qualified Business Income Deduction (199A)

Thursday, May 30, 2019 - 2 pm Eastern; 1 pm Central; 12 pm Mountain; 11 am Arizona;  11 am Pacific; 10 am Alaska; 8 am Hawaii

This webinar highlights the basics of the qualified business income deduction, updated to incorporate guidance issued in January 2019.

This free 100-minute webinar for Tax Professionals & Industry will cover:

• Definition of terms
• Calculating the deduction
• Application of limitations
• Discussion of the rental real estate safe harbor
• Walk through examples to bring it all together
• Plus a live Q & A

Click here to Register for the Webinar 

Tax Professionals – Earn 2 CE Credit – Category: Federal Tax

Closed captioning is offered for this webinar.

Closed captioning displays the words that describe the audio portion of the program for viewers who are deaf or hard of hearing. Captions are available in English.

Stay in the know on the go! View IRS webinars the day they air on smartphones and tablets.

Find previous archived on www.irsvideos.gov.

Questions? Email IRS at: cl.sl.web.conference.team@irs.gov

This is an IRS Webinar, this is not a Webinar hosted by NATP or the MA/RI Chapter of NATP.

Mass Tax Connect Option For Energy Exemption

Third parties may now register for client’s energy exemption.

A third party, with access rights to a client’s MassTaxConnect account for at least one tax type, can now register for the small business energy exemption on behalf of the client. The certificate will be mailed to the client. Only the client will be able to obtain a copy of the exemption certificate or view the certificate through MassTaxConnect. Learn more about the small business energy exemption.