WASHINGTON — Acting National Taxpayer Advocate Bridget Roberts today released her 2019 Annual Report to Congress. Key challenges highlighted in the report include implementation of the Taxpayer First Act, inadequate taxpayer service and limited funding of the agency.

Roberts also released the third edition of the National Taxpayer Advocate’s “Purple Book,” which presents 58 legislative recommendations designed to strengthen taxpayer rights and improve tax administration.

The report highlights that the Taxpayer First Act, enacted into law on July 1, 2019, has made the most comprehensive revisions to IRS procedures since the IRS Restructuring and Reform Act of 1998, including some 23 provisions previously recommended by the National Taxpayer Advocate. The Taxpayer First Act also requires the IRS to develop four strategic plans: (i) a comprehensive taxpayer service strategy (due to Congress by July 1, 2020); (ii) a comprehensive plan to redesign the IRS’s organizational structure (due to Congress by Sept. 30, 2020); (iii) a comprehensive employee training strategy that includes taxpayer rights training (due to Congress by July 1, 2020); and (iv) a multi-year plan to meet IRS information technology (IT) needs.

“By passing the Taxpayer First Act, Congress has sent the IRS a clear message that it needs to rethink the way it operates – the services it provides, its organizational structure, the way it trains employees, and the technology it uses,” Roberts wrote in the preface to the report.

Roberts also noted that long-time National Taxpayer Advocate Nina E. Olson retired five months ago, and a permanent replacement has not yet been appointed. “While I am honored to serve as the Acting National Taxpayer Advocate,” Roberts wrote, “the Office of the Taxpayer Advocate – and taxpayers – deserve a permanent appointee. . . . Given the current crossroads at which the IRS finds itself, it is critical that a permanent National Taxpayer Advocate be appointed as quickly as possible to help ensure the IRS protects taxpayer rights and meets its obligations to taxpayers.”

Highlights of the report are summarized below.

The IRS Is Struggling to Accomplish Its Mission 

According to its mission statement, the IRS aims to “[p]rovide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all." The report says the IRS is struggling to meet both of those goals.

The IRS has been found to be among the lowest performing federal agencies in providing a positive customer experience. The President’s Management Agenda emphasizes the importance of high-quality customer service and cites the American Customer Satisfaction Index (ACSI) and the Forrester U.S. Federal CX Index™ as key benchmarks. The ACSI report for 2018 ranked the Treasury Department tied for 10th out of 12 federal departments and says that “most [IRS] programs score . . . well below both the economy-wide national ACSI average and the federal government average.” The 2019 Forrester report ranked the IRS as 13th out of 15 federal agencies and characterized the IRS’s score as “very poor.”

During fiscal year (FY) 2019, the Advocate’s report says the IRS received approximately 100 million telephone calls, and customer service representatives answered only 29%. In recent years, the agency has scaled back in-person assistance, closing more than 10% of its Taxpayer Assistance Centers, generally requiring taxpayers to schedule appointments in advance, and reducing the number of taxpayers served by nearly half from FY 2015 to FY 2018.

The report says the IRS is also struggling to enforce the law with “fairness to all.” The IRS recently estimated it was unable to collect an annual average of about $381 billion in unpaid tax attributable to legal-source income for tax years 2011-2013. With approximately 122 million U.S. households in 2013, that suggests each U.S. household is effectively paying an average annual “surtax” of more than $3,000 to subsidize noncompliance by others.

The report says that “fairness to all” also requires that the IRS be accessible to taxpayers against whom it takes enforcement actions, such as wage garnishments, bank levies, or the filing of notices of federal tax lien. Levies often create economic hardships for individual taxpayers, and the law requires the IRS to release levies in those cases. Yet taxpayers often cannot reach the IRS to make it aware of their hardships. During FY 2019, the IRS’s Automated Collection System (ACS) more than doubled the number of levies it served (from about 200,000 in FY 2018 to about 428,000 in FY 2019), while the percentage of calls answered on the consolidated ACS telephone lines dropped from 49% to 31%. Wait times for taxpayers who got through increased from 24 minutes to 38 minutes.

The report urges the IRS to prioritize phone service for taxpayers against whom it takes collection action. “The IRS has an obligation to be accessible to these taxpayers, and it should not ramp up enforcement actions beyond the point where it has enough telephone assistors to handle the taxpayer calls those actions generate,” Roberts wrote.  

The report attributes the IRS’s shortcomings mostly to budget constraints but also to a culture in which the agency focuses on its own priorities without adequately factoring in the needs of taxpayers.

The IRS Does Not Receive Enough Funding to Meet Taxpayer Needs

Since FY 2010, the IRS budget has been reduced by about 20% after adjusting for inflation, and the number of full-time equivalent employees has declined by about 22%. The report points out that answering 100 million telephone calls, conducting audits, and taking enforcement actions require adequate staffing, and the IRS cannot substantially improve its performance without additional resources.

The report urges Congress to increase IRS funding and to change the budget rules to account for the revenue additional IRS appropriations are likely to generate. In FY 2018, the IRS collected nearly $3.5 trillion on a budget of about $11.4 billion. “It is economically irrational to underfund the IRS,” the report says. “If a company’s accounts receivable department could generate an ROI [return on investment] of 300:1 and the chief executive officer (CEO) failed to provide enough funding for it to do so, the CEO would be fired. Yet in general, the federal budget rules exclusively take into account outlays and ignore the revenue those outlays generate.”

In particular, the report recommends that Congress increase funding for taxpayer service and IT modernization. “Mostly because of antiquated technology, a smaller workforce, and an increasing workload, [the IRS] cannot afford to provide the quality of service that taxpayers deserve,” the report says.

The IRS Should Use the Taxpayer First Act as an Opportunity to Identify Taxpayer Needs and Preferences and Develop Initiatives to Meet Them

Despite the IRS’s significant funding limitations, the report urges the IRS to utilize the Taxpayer First Act requirements – to develop plans to revamp its taxpayer service strategy, organizational structure, employee training strategy, and technology priorities – as a roadmap for a once-in-a-generation reassessment of its objectives and operations.

Noting that the IRS often has developed strategies in a vacuum without soliciting taxpayer feedback and taking into account taxpayer needs and preferences, the report urges a full-scale “cultural shift.” “If the culture of the organization is one where employees look to minimize interactions with taxpayers in an effort to move work, or where taxpayers who owe money are automatically viewed negatively, then expanding digital services [alone] will not improve customer service,” Roberts wrote. “The IRS needs to take a holistic view of how it operates and understand what is and is not working.”

The report identifies the absence of an existing comprehensive customer service strategy that focuses on taxpayer needs and preference as the #1 most serious problem facing taxpayers.  It makes numerous recommendations to improve the customer experience, including that the IRS take the following actions:

• Conduct multi-disciplined, comprehensive research into taxpayer needs and preferences.
• Require that all IRS business units, including those charged primarily with enforcement, develop a detailed customer service strategy.
• Appoint a Chief Customer Experience Officer to coordinate service initiatives across IRS business units.
• Ensure that taxpayers who cannot work with the IRS digitally or whose issues are not resolved online can reach and work with an IRS employee.
• Address the needs of practitioners who interact with the IRS on behalf of large numbers of taxpayers.
• For each proposal included in its customer service strategy, include cost estimates, milestones, and taxpayer-focused performance measures so the effectiveness of the strategy in improving customer service can be measured over time.

The report expresses concern that the IRS declined to include the National Taxpayer Advocate or a Taxpayer Advocate Service (TAS) representative as part of a core team created to coordinate the agency’s Taxpayer First Act implementation activities. “I find this deeply concerning,” Roberts wrote. “Congress created the Office of the Taxpayer Advocate to serve as the statutory voice of the taxpayer within the IRS. No one has a better view into the problems that taxpayers and practitioners face day-to-day when working with the IRS than TAS. Over the last 20 years, TAS has worked more than 4.4 million cases resulting from problems with IRS systems or processes. That history with individual and business taxpayers’ problems gives TAS unique insight, perspective, and information that could be a key resource for identifying areas in need of improvement as the IRS develops a comprehensive customer service strategy.”

Other Major Issues Addressed

The National Taxpayer Advocate’s 2019 annual report has been consolidated and differs from prior reports in two ways. First, the Taxpayer First Act reduced the number of “most serious problems” the National Taxpayer Advocate must identify from at least 20 to ten. Second, the National Taxpayer Advocate initiated the Purple Book two years ago as a supplement to more detailed legislative recommendations proposed in the main volume of the report. This year, all legislative recommendations have been consolidated into the Purple Book, and the longer-form recommendations have been eliminated.

Overall, this year’s report identifies ten “most serious problems,” provides status updates on two problems identified in previous reports, makes dozens of recommendations for administrative change, makes 58 recommendations for legislative change, analyzes the ten tax issues most frequently litigated in the federal courts, and presents four research studies.

Among other problems addressed are the following:

Refund Delays. The report says too many taxpayers who file legitimate returns are being harmed because the IRS’s anti-fraud filters unnecessarily flag their returns and delay their refunds for weeks or months. During the 2019 filing season, the IRS used a new refund fraud filter (known as “Filter X”) that ultimately flagged and stopped the processing of nearly 1.1 million returns. More than half the refunds were eventually paid. The false positive rate for other non-identity theft refund fraud filters was 71% (meaning that 71 out of every 100 refunds stopped by these filters were eventually determined to be legitimate).

The increase in returns flagged by these filters (known as “pre-refund wage verification hold” cases) has had a significant impact on TAS’s case advocacy operations. The number of TAS cases generated by these filters has increased from about 20,000 in FY 2017 to about 92,000 in FY 2019. TAS case receipts have increased by 44% over the past two years, entirely attributable to this category of cases, and this work surge has increased the average cycle time of TAS cases across-the-board. TAS is working with the IRS to try to reduce this workstream of cases for the upcoming filing season.

Free File. The report says the Free File program is failing to promote the best interests of taxpayers, citing low usage and taxpayer confusion.  Under the program’s terms, 70% of individual taxpayers qualify to prepare their returns through Free File at no cost. Yet fewer than 2% of taxpayers use the program, the report finds, and over the past four years, fewer than half of taxpayers who have used Free File in one year have used it again the following year. The low initial usage rate and low repeat usage rate suggest taxpayers are not generally satisfied with the program. In addition, the report says the IRS incurs costs to administer the program and Free File members provided free tax software to at least 17.7 million taxpayers outside the Free File program during the 2019 filing season. It is likely that most, if not substantially all, of the 2.5 million taxpayers who used Free File software last year would have been able to file for free through company websites if Free File did not exist.

The report makes several recommendations to improve the Free File program. In addition, it recommends that the IRS establish two usage goals for the program: (i) increase the Free File usage rate to a significantly higher yet attainable level, such as 10% of the 70% of individual taxpayers eligible to use the program, and (ii) increase the retention rate to 75% of taxpayers who used the program in the preceding year. If the established goals are not attained by 2025, the report recommends the IRS replace Free File with an alternative approach to make tax software available to taxpayers at no or low cost, such as through sole-source or multi-source contracts with tax software companies.

(On Dec. 30, 2019, after this report went to press, the IRS announced it had signed an addendum to its memorandum of understanding with Free File, Inc. that, among other things, prohibits Free File members from excluding their Free File landing pages from organic internet searches and removes a provision that had prohibited the IRS from creating and offering its own tax software to taxpayers or allowing taxpayers to file their returns directly with the IRS.)

TAS Research Studies

The report presents research studies on the following topics: 

• The subsequent compliance of taxpayers who received educational letters from the National Taxpayer Advocate after they appeared to have claimed the Earned Income Tax Credit (EITC) in error in the prior year. Generally, the study found the letters enhanced compliance both on the first return filed after the letters were sent and during the subsequent three-year period.
• IRS compliance with rules governing the imposition of two-year bans on eligibility for refundable tax credits. The Internal Revenue Code bans taxpayers from receiving the EITC, the Child Tax Credit, or the American Opportunity Tax Credit for two years if the IRS determines a taxpayer claimed the credit recklessly or with intentional disregard of rules and regulations. The ban is intended to deter frivolous claims. However, the amounts at stake represent a high percentage of the annual income of many eligible families, so it is critical that bans be imposed only in appropriate cases. A review of a representative sample of cases in which the bans were imposed as a result of audits of tax year 2016 returns shows the IRS often did not follow its own procedures: (i) in 53% of the cases, required managerial approval for imposing the ban was not secured; (ii) in 82% of the cases, the IRS did not adequately explain to the taxpayer why the ban was imposed, as required; (iii) in 61% of the cases in which the auditor was required to speak to the taxpayer before imposing the ban, no such conversation took place; and (iv) in 54% of the cases in which taxpayers submitted documents, it appeared from the documents submitted that the taxpayer believed he or she qualified for the credit.
• The specific deterrence implications of increased reliance on correspondence audits. Generally, the study found that face-to-face audits are consistently effective in promoting future reporting compliance, while future reporting compliance after correspondence audits is mixed. These results are consistent with a recent survey commissioned by TAS that found most taxpayers who underwent a face-to-face audit recalled the audit, while the majority of taxpayers subjected to a correspondence examination reported they had not been audited. 
• The extent to which the IRS continues to erroneously approve Form 1023-EZ applications. In 2014, the IRS introduced a streamlined tax-exemption application that does not require applicants to attach articles of incorporation or bylaws to their applications but merely requires them to “attest” that they meet the eligibility requirements. In 2019, TAS examined a representative sample of organizations that the IRS had approved as tax-exempt by reviewing articles of incorporation in 25 states that make articles of incorporation available online at no cost. TAS found that 40% of the approved organizations did not qualify for IRC § 501(c)(3) status based on their articles of incorporation.

Please visit www.TaxpayerAdvocate.irs.gov/2019AnnualReport for more information.

Related Items: 

• Complete Report: 2019 Annual Report to Congress 
• Executive Summary
• Purple Book

    
About the Taxpayer Advocate Service

TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Your local advocate’s number is available in your local directory and at https://taxpayeradvocate.irs.gov/contact-us. You may also call TAS toll-free at 877-777-4778. TAS can help if you need assistance resolving an IRS problem, if your problem is causing financial difficulty, or if you believe an IRS system or procedure isn’t working as it should. And our service is free. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to https://taxpayeradvocate.irs.gov. You can get updates on tax topics at facebook.com/YourVoiceAtIRS, Twitter.com/YourVoiceatIRS, and YouTube.com/TASNTA.

The Taxpayer Advocate Service will mark its 20th anniversary in March 2020. Created by Congress as part of the IRS Restructuring and Reform Act of 1998, TAS has two main statutory missions: (i) to assist taxpayers in resolving problems with the IRS and (ii) to identify areas in which groups of taxpayers are experiencing problems in their dealings with the IRS and make administrative and legislative recommendations to mitigate the problems. Over the past 20 years, TAS has assisted more than 4.4 million taxpayers, made hundreds of administrative recommendations adopted by the IRS, and proposed some 46 legislative recommendations that Congress has enacted into law. A key accomplishment was the IRS’s adoption and Congress’s later enactment of the Taxpayer Bill of Rights for which the National Taxpayer Advocate had long advocated. Visit the TAS website to learn more about TAS and how it can help you.

WASHINGTON ― The Internal Revenue Service confirmed that the nation’s tax season will start for individual tax return filers on Monday, Jan. 27, 2020, when the tax agency will begin accepting and processing 2019 tax year returns. 

The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.  

“As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS stands ready to help,” said IRS Commissioner Chuck Rettig. “We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov. The IRS and the nation's tax community are committed to making this another smooth filing season."

The IRS set the Jan. 27 opening date to ensure the security and readiness of key tax processing systems and to address the potential impact of recent tax legislation on 2019 tax returns.

While taxpayers may prepare returns through the IRS’ Free File program as well as many tax software companies and tax professionals before the start date, processing of those returns will begin after IRS systems open later this month.

“The IRS encourages everyone to consider filing electronically and choosing direct deposit,” Rettig said. “It’s fast, accurate and the best way to get your refund as quickly as possible.” 

Filing electronically flags common errors and prompts taxpayers for missing information. Taxpayers can get free help preparing and filing taxes through IRS Free File online or free tax help from trained volunteers at community sites around the country. The IRS also reminds taxpayers that they don’t have to wait until Jan. 27 to start their tax return or contact a reputable tax preparer. 

In addition, IRS tax help is available 24 hours a day on IRS.gov, the official IRS website, where people can find answers to tax questions and resolve tax issues online. The Let Us Help You page helps answer most tax questions, and the IRS Services Guide links to these and other IRS services.

WASHINGTON − The Internal Revenue Service today released a new annual report highlighting accomplishments across the nation’s tax agency during Fiscal Year 2019. 

“Internal Revenue Service Progress Update/Fiscal Year 2019 – Putting Taxpayers First” provides an overview of a variety of operations across taxpayer service, compliance and support areas. The 41-page document is built around the agency’s six strategic goals.  

“This report is about more than what happened during the past year,” IRS Commissioner Chuck Rettig wrote in the report’s opening message to taxpayers. “It’s also designed to provide insight into the people serving this country on behalf of the IRS and provide a glimpse into the future.” 

The report highlights the work of IRS employees supporting the nation’s tax system during the past year. This covers a variety of taxpayer service efforts, including development of a new Taxpayer Withholding Estimator, as well as operations support efforts on areas involving Information Technology modernization, Human Capital Office initiatives and others.  

The report also focuses on Criminal Investigation results and efforts involving civil enforcement. Ongoing compliance areas, among them micro-captives, syndicated conservation easements and virtual currency, are also included in the publication.  

The report also covers IRS implementation of new tax laws, ranging from steps to put in place provisions of the Tax Cuts and Jobs Act to ongoing work underway on the new Taxpayer First Act of 2019.  

The resource document is designed to complement other documents, including the annual IRS Data Book.  

“We continually strive to put taxpayers first,” Rettig said. “The IRS leadership team and our entire workforce are excited about the direction of our agency as outlined in this report.” 

WASHINGTON — The Internal Revenue Service today issued the 2020 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
• 17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
• 14 cents per mile driven in service of charitable organizations.

The business mileage rate decreased one half of a cent for business travel driven and three cents for medical and certain moving expense from the rates for 2019. The charitable rate is set by statute and remains unchanged.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details, see Rev. Proc. 2019-46.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than five vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2019-46.

Notice 2020-05, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.  In addition, for employer-provided vehicles, the Notice provides the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers may use the fleet-average valuation rule in § 1.61-21(d)(5)(v) or the vehicle cents-per-mile valuation rule in § 1.61-21(e).

WASHINGTON — The Internal Revenue Service today issued  final regulations providing details about investment in qualified opportunity zones (QOZ).

The final regulations modified and finalized the proposed regulations that were issued on October 28, 2018 and May 1, 2019.

The final regulations provide additional guidance for taxpayers eligible to make an election to temporarily defer the inclusion in gross income of certain eligible gain. The final regulations also address, the ability of such taxpayers’ eligibility to increase the basis in their qualifying investment equal to the fair market value of the investment on the date that it is sold, after holding the equity interest for at least 10 years.

The statute permits the deferral of all or part of a gain that would otherwise be included in income, if corresponding amounts are invested into a qualified opportunity fund (QOF). The gain is deferred until an inclusion event or Dec. 31, 2026, whichever is earlier. The final regulations provide a list of inclusion events.  Further, the final regulations provide guidance to determine the amount of income that must be included at the time of the inclusion event or December 31, 2026. 

The final regulations also address the various requirements that must be met to qualify as a QOF, as well as the requirements an entity must meet to qualify as a QOZ business.  In order to provide clarity, the final regulations have modified the proposed regulations for QOFs and QOZ businesses.  Specifically, the final regulations provide additional guidance on how an entity becomes a QOF or QOZ business, and the requirement that a QOF or QOZ business engage in a trade or business.  The final regulations retain the general approach of the proposed regulations but provide additional guidance and clarity to the rules regarding QOZ business property. 

Related forms, instructions and other information taxpayers need to take advantage of this update will be made available in January 2020.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

Notice 2020-03 provides guidance for the 2020 calendar year regarding withholding from periodic payments for pensions, annuities, and certain other deferred income under section 3405(a), including the rules for withholding from periodic payments under section 3405(a) when no withholding certificate has been furnished.

It will appear in IRB: 2020-3 dated Jan. 13, 2020.

WASHINGTON —The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2020.  The rates will be:  

• 5% for overpayments [4% in the case of a corporation];
• 2.5% for the portion of a corporate overpayment exceeding $10,000;
• 5% for underpayments; and
• 7% for large corporate underpayments. 

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. 

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2019, to take effect Nov. 1, 2019, based on daily compounding.

Revenue Ruling 2019-28, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2019-52, dated Dec. 23, 2019.

WASHINGTON — The Internal Revenue Service issued final regulations today on the Foreign Tax Credit, a long-standing tax benefit that generally allows individuals and businesses to claim a credit for income taxes paid or accrued to foreign governments.

The Tax Cuts and Jobs Act (TCJA) made major changes to the tax law, including revamping the U.S. international tax system. Specifically, several Foreign Tax Credit provisions were changed, including repeal of section 902, which allowed deemed-paid credits in connection with dividend distributions based on foreign subsidiaries’ cumulative pools of earnings and foreign taxes. TCJA also added two separate limitation categories for foreign branch income and amounts includible under the Global Intangible Low-Taxed Income (GILTI) provisions.

Additionally, the TCJA changed how taxable income is calculated for purposes of the Foreign Tax Credit limitation by disregarding certain expenses and repealing the use of the fair market value method for allocating interest expense. 

Finally, the TCJA made systemic changes to U.S. taxation of international income that impact the Foreign Tax Credit calculation. These systemic changes include the introduction of a participation exemption through a dividends received deduction for certain dividends in section 245A and the introduction of GILTI, which subjects to current U.S. taxation foreign earnings that would have been deferred under previous law, albeit at a lower tax rate and subject to extra Foreign Tax Credit restrictions. 

The IRS also issued Proposed Regulations today relating to the allocation and apportionment of deductions and creditable foreign taxes, foreign tax redeterminations, availability of Foreign Tax Credits under the Transition Tax, and the application of the Foreign Tax Credit limitation to consolidated groups.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.

WASHINGTON — The Internal Revenue Service today issued guidance for business travelers, updated to include changes resulting from the Tax Cuts and Jobs Act (TCJA). 

Revenue Procedure 2019-48, posted today on IRS.gov, updates the rules for using per diem rates to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.  Taxpayers are not required to use a method described in this revenue procedure and may instead substantiate actual allowable expenses provided they maintain adequate records.

Although TCJA suspended the miscellaneous itemized deduction that employees could take for non-reimbursed business expenses, self-employed individuals and certain employees, such as Armed Forces reservists, fee-basis state or local government officials, eligible educators, and qualified performing artists, that deduct unreimbursed expenses for travel away from home may still use per diem rates for meals and incidental expenses, or incidental expenses only.

The revenue procedure makes clear that TCJA amended prior rules to disallow a deduction for expenses for entertainment, amusement, or recreation paid or incurred after Dec. 31, 2017.  Otherwise allowable meal expenses remain deductible if the food and beverages are purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment.

The IRS annually issues guidance providing updated per diem rates; Notice 2019-55 provides the rates that have been in effect since Oct. 1, 2019.

Related items:

• IRS Publication 535, Business Expenses
• IRS Publication 463, Travel, Gift, and Car Expenses

WASHINGTON – The IRS today reminded tax professionals to review their e-Services account to ensure all contact information is accurate and to add or remove users. Reviewing e-Services information is just one of the tasks tax pros should complete now to get ready for 2020.

Here’s a to-do list for the rest of 2019:

Update e-Services information
E-Services offers a suite of tools to assist tax pros. These tools include the e-file application, the Transcript Delivery System (TDS) and a secure mailbox. New e-Services users must first register and verify their identities using Secure Access authentication.

Principals, principal consents or authorized responsible officials/delegated users must update the e-file application to ensure that all contact information is accurate. Individuals no longer associated with the firm must be removed from the application.

New delegated users must be added to the e-file application. Firms that will need to use the e-Services TDS should ensure the appropriate people are approved on the application to avoid any delays in accessing client transcripts.

Firms opening new offices where electronic transmissions will occur also must submit new e-file applications. E-file providers should review Publication 3112, IRS e-file Application and Participation, to determine additional actions they should take.

The IRS reminds tax pros that the Electronic Filing Identification Number (EFIN) is not transferrable and cannot be sold, rented, leased, or provided with software purchased. It can only be obtained from the IRS. Providers who sell, transfer or close their business operations must notify the IRS within 30 days.

Renew PTINs
Anyone who prepares or helps prepare tax returns for compensation must have a Preparer Tax Identification Number (PTIN) and renew it each year. Tax preparers have until Dec. 31, 2019, to renew or register for PTINs for the 2020 filing season. Anyone who is an enrolled agent must also have a PTIN and renew it annually.

Update power of attorney/third-party authorization records
Tax pros who have existing power of attorney or third-party authorization (Forms 2848 and 8821) for clients should review those records. If the taxpayer is no longer a client, tax professionals should submit revocations to end the authorization. They can follow the revocation instructions outlined in Publication 947, Practice Before the IRS and Power of Attorney. This will help safeguard taxpayer records.
 
Review security safeguards
All paid tax preparers, regardless of firm size, must have written information security plans as required by the Federal Trade Commission. IRS Publication 4557, Safeguarding Taxpayer Data, offers an overview of basic security measures and information about the FTC’s Safeguards Rule.

Now also is a good time for tax professionals to hire a cybersecurity expert to review office digital safeguards. At a minimum, tax pros should perform a “deep scan” for viruses on all digital devices. Other security tips are available at Taxes-Security-Together Checklist. Tax pros should protect both their PTIN and EFIN from theft.

Review Practitioner Priority Service options
The Practitioner Priority Service (PPS) is any tax pro’s first point of contact for account-related issues. Before calling, they should be sure to review the PPS page. Faster solutions are often available on IRS.gov. The quickest way to obtain a client’s transcripts is by using IRS e-Services and the Transcript Delivery System. After registering for e-Services, tax pros can receive account transcripts, wage and income documents, tax return transcripts, and verification of non-filing letters online. 

Tax pros must verify their identity before PPS representatives can provide help. This process includes providing their Social Security number and date of birth. If a tax pro has a client in the room, they should consider having them step out or, alternatively, ask the client to make an oral disclosure authorization or oral tax information authorization to the IRS representative.

Identify the local Stakeholder Liaison
The IRS has specialists nationwide who can help tax pros who suffer a security breach that effects their clients. When a data theft occurs, contact the local IRS Stakeholder Liaison immediately.

Register for e-News for Tax Professionals and subscribe for quick alerts
The IRS offers multiple registration-based list-services to assist tax professionals. For a weekly roundup of news releases and guidance, register for e-News for Tax Professionals or other IRS subscriptions. There also are social media platforms just for tax professionals. Subscribe for quick alerts to keep up to date on events that affect authorized IRS e-file providers, transmitters and software developers.