Thursday, December 26, 2019

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.

Monday, December 23, 2019

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.

Friday, December 20, 2019

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

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.

Wednesday, December 18, 2019

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.

Tuesday, December 17, 2019

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

Shira Schonenberg
The Republican/
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.


Thursday, December 12, 2019

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.


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.

Tuesday, December 10, 2019

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:

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

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

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