Partners,

Due to an error, taxpayers are receiving Identity Protection PIN letters with an incorrect year listed. Taxpayers and tax professionals should be advised the IP PIN listed on the CP 01A Notice dated January 4, 2016 is valid for use on all individual tax returns filed in 2016.

The notice incorrectly indicates the IP PIN issued is to be used for filing the 2014 tax return when the number is actually to be used for the 2015 tax return.  The IRS emphasizes the IP PIN listed on the CP 01A notice is valid for the 2015 returns. Taxpayers and their tax professionals should use this PIN number for 2015 tax returns, which the IRS will begin accepting from taxpayers starting Jan. 19, 2016.

The IRS apologizes for the confusion and any inconvenience.

FAQ:

When were the CP01A notices mailed?

The notices are all dated January 4, 2016 but were mailed in late December. Taxpayers are receiving these now through mid-January.

What does an IP PIN do?

An IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return. When you have an IP PIN, it prevents someone else from filing a tax return with your SSN. 

If a return is e-filed with your SSN and an incorrect or missing IP PIN, our system will reject it until you submit it with the correct IP PIN or you file on paper. If the same conditions occur on a paper filed return, we will delay its processing and any refund you may be due for your protection while we determine if it’s yours.

Does this issue affect anything else involving the IP PIN process?

No.

WASHINGTON ― Following a review of the tax extenders legislation signed into law last week, the Internal Revenue Service announced today that the nation’s tax season will begin as scheduled on Tuesday, Jan. 19, 2016.

The IRS will begin accepting individual electronic returns that day. The IRS expects to receive more than 150 million individual returns in 2016, with more than four out of five being prepared using tax return preparation software and e-filed. The IRS will begin processing paper tax returns at the same time. There is no advantage to people filing tax returns on paper in early January instead of waiting for e-file to begin.

“We look forward to opening the 2016 tax season on time,” IRS Commissioner John Koskinen said. “Our employees have been working hard throughout this year to make this happen. We also appreciate the help from the nation’s tax professionals and the software community, who are critical to helping taxpayers during the filing season.”

As part of the Security Summit initiative, the IRS has been working closely with the tax industry and state revenue departments to provide stronger protections against identity theft for taxpayers during the coming filing season.

The filing deadline to submit 2015 tax returns is Monday, April 18, 2016, rather than the traditional April 15 date. Washington, D.C., will celebrate Emancipation Day on that Friday, which pushes the deadline to the following Monday for most of the nation. (Due to Patriots Day, the deadline will be Tuesday, April 19, in Maine and Massachusetts.)

Koskinen noted the new legislation makes permanent many provisions and extends many others for several years. "This provides certainty for planning purposes, which will help taxpayers and the tax community as well as the IRS," he said.

The IRS urges all taxpayers to make sure they have all their year-end statements in hand before filing, including Forms W-2 from employers, Forms 1099 from banks and other payers, and Form 1095-A from the Marketplace for those claiming the premium tax credit.

“We encourage taxpayers to take full advantage of the expanding array of tools and information on IRS.gov to make their tax preparation easier,” Koskinen said.

Although the IRS begins accepting returns on Jan. 19, many tax software companies will begin accepting tax returns earlier in January and submitting them to the IRS when processing systems open.

Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. The IRS anticipates issuing more than nine out of 10 refunds in less than 21 days. Find free options to get tax help, and to prepare and file your return on IRS.gov or in your community if you qualify. Go to IRS.gov and click on the Filing tab to see your options.

• Seventy percent of the nation’s taxpayers are eligible for IRS Free File. Commercial partners of the IRS offer free brand-name software to about 100 million individuals and families with incomes of $62,000 or less;
• Online fillable forms provides electronic versions of IRS paper forms to all taxpayers regardless of income that can be prepared and filed by people comfortable with completing their own returns.
• The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) offer free tax help to people who qualify. Go to irs.gov and enter “free tax prep” in the search box to learn more and find a VITA or TCE site near you, or download the IRS2Go app on your smart phone and find a free tax prep provider. 

The IRS also reminds taxpayers that a trusted tax professional can provide helpful information and advice about the ever-changing tax code. Tips for choosing a return preparer and details about national tax professional groups are available on IRS.gov.

WASHINGTON — The Internal Revenue Service today issued the 2016 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, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 54 cents per mile for business miles driven, down from 57.5 cents for 2015
• 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
• 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute.

The standard mileage rate for business 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 four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.  Notice 2016-01 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. 

Who Must Report?

As a governmental, Tribal, tax-exempt or for-profit employer, if you are an applicable large employer you are subject to the Affordable Care Act information reporting requirements. These requirements apply to you whether or not you offered health coverage to your employees.

You are an applicable large employer for 2015 if you had 50 or more full-time employees, including full-time equivalent employees, in 2014.

What Must You Report?

If you were an applicable large employer in 2015, you must file information returns with the IRS and provide statements to each employee who was a full-time employee for at least one month of the year about health coverage you offered or to show that you did not offer health coverage.

What Forms Must Be Used To Report?

• Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return: used to report to the IRS summary information for each employer and to transmit Forms 1095-C to the IRS.
• Form 1095-C, Employer-Provided Health Insurance Offer and Coverage: used to report required information to your employees and to report information about each employee to the IRS.

What Are The Due Dates For Reporting?

• Forms 1095-C must be provided to your employees by February 1, 2016.
• Forms 1094-C and 1095-C are due to the IRS by February 29, 2016, if filing on paper, or March 31, 2016, if filing electronically.

More Information

For more information, see our questions and answers about Reporting of Offers of Health Insurance Coverage by Employers on IRS.gov/aca.

WASHINGTON —The Internal Revenue Service today simplified the paperwork and recordkeeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

“We received many thoughtful comments from taxpayers, their representatives and the professional tax community, said IRS Commissioner John Koskinen. “This important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers.“

Responding to a February comment request, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. Moreover, the cost of many commonly expensed items such as tablet-style personal computers, smart phones, and machinery and equipment parts typically surpass the $500 threshold.

As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.

The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.

Further details on this change can be found in Notice 2015-82, posted today on IRS.gov.

It has come to our attention that an email is being issued to tax preparers asking them to update their e-Services information. The link provided in the email to access e-Services appears to be a phishing scam to capture e-Services usernames and passwords. Additionally, some tax preparers have received scam telephone calls, again attempting to capture e-Services usernames and passwords.

If you receive an email like this, do not click on the link and ignore the phone calls.  If you mistakenly clicked on the link, please call the IRS e-help Desk using this toll free number for help. Scam calls should be ignored and reported to the Federal Trade Commission.

Remind your clients that it’s now the time to begin planning to take full advantage of their employer’s health flexible spending arrangement (FSA) during 2016.

The IRS and certain payroll service providers are partnering to test a new Verification Code that will help validate data on the Form W-2. The Verification Code, if present on the Form W-2, should be entered on the electronic return when prompted by the software.

Have you renewed your Preparer Tax Identification Number (PTIN) for 2016? All current PTINs will expire Dec. 31, 2015.

WASHINGTON— The Internal Revenue Service today reminded non-credentialed tax return preparers of major upcoming changes regarding which tax return preparers can represent clients in matters before the IRS beginning in 2016, and take action by Dec. 31, 2015, to avoid being affected.

The IRS also announced that federal tax return preparers will soon pay less for a preparer tax identification number (PTIN).

Last year the IRS announced pending changes to limited practice authorities for non-credentialed tax return preparers. (Rev. Proc. 2014-42)

Effective for tax returns and claims for refunds prepared and signed after Dec. 31, 2015, the limited right to represent clients before the IRS held by non-credentialed preparers will be accorded to only those preparers participating in the IRS Annual Filing Season Program, a voluntary continuing education (CE) program.   The changes in the limited representation rules have no impact on returns prepared and signed by non-credentialed preparers on or before Dec. 31, 2015.

Non-credentialed tax return preparers who participate in the Annual Filing Season Program will continue to have limited rights to represent clients. This enables them to represent taxpayers whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service. The tax return preparer must participate in the Annual Filing Season Program for both the year of return preparation and the year of representation to represent their client.

There are no changes to representation rules for enrolled agents, certified public accountants, and attorneys. These tax professionals continue to have unlimited practice rights and can represent any taxpayer before any IRS office, including collection and appeals, regardless of whether they prepared the tax return in question.  

To participate in the Annual Filing Season Program, non-credentialed tax return preparers must complete either 15 or 18 hours of continuing education from IRS-approved CE providers. The CE must be completed by Dec. 31, 2015, in order to receive a 2016 Annual Filing Season Program Record of Completion.

More information about Annual Filing Season Program requirements is available on IRS.gov.

PTIN Fee Revised

Effective Nov. 1, 2015, the annual fee for 2016 PTINs will be $50 for both new applications and renewals. The IRS will collect $33 as a user fee to support program costs and a third-party vendor will receive $17 to operate the online system and provide customer support.

In preparation for the fee change, PTIN open season, which normally begins in mid-October, will begin in early November. PTIN open season is when the IRS begins accepting renewals and new registrations for the upcoming year.

Federal agencies are required to review user fees every other year and make adjustments as appropriate. The current PTIN fee is $64.25 for a new registration and $63 for renewal.

More information about the updated user fee is available in TD 9742 and REG-121496-15.