IRS, Security Summit partners remind practitioners that all ‘professional tax preparers’ must create a written data security plan to protect clients

WASHINGTON — The IRS, state tax agencies and the nation’s tax industry today reminded all “professional tax preparers” that federal law requires them to create a written information security plan to protect their clients’ data.

The reminder came as the IRS and its Security Summit partners urged tax professionals to take time this summer to review their data security protections. To help them in this complex area, the Summit created a special “Taxes-Security-Together” Checklist as a starting point.

“Protecting taxpayer data is not only a good business practice, it’s the law for professional tax preparers,” said IRS Commissioner Chuck Rettig. “Creating and putting into action a written data security plan is critical to protecting your clients and protecting your business.”

Creating a data security plan is the second item on the “Taxes-Security-Together” Checklist. The first step for tax professionals involved deploying the “Security Six” basic steps to protect computers and email.

Although the Security Summit -- a partnership between the IRS, states and the private-sector tax community -- is making major progress against tax-related identity theft, cybercriminals continue to evolve, and data thefts at tax professionals’ offices remain a major threat. Thieves use stolen data from tax practitioners to create fraudulent returns that can be harder for the IRS and Summit partners to detect.

Create a data security plan under federal law

The Security Summit partners noted that many in the tax professional community do not realize they are required under federal law to have a data security plan.

The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley (GLB) Act, gives the Federal Trade Commission authority to set information safeguard regulations for various entities, including professional tax return preparers. According to the FTC Safeguards Rule, tax return preparers must create and enact security plans to protect client data. Failure to do so may result in an FTC investigation. The IRS also may treat a violation of the FTC Safeguards Rule as a violation of IRS Revenue Procedure 2007-40, which sets the rules for tax professionals participating as an Authorized IRS e-file Provider.

The FTC-required information security plan must be appropriate to the company’s size and complexity, the nature and scope of its activities and the sensitivity of the customer information it handles. According to the FTC, each company, as part of its plan, must:

• designate one or more employees to coordinate its information security program;
• identify and assess the risks to customer information in each relevant area of the company’s operation and evaluate the effectiveness of the current safeguards for controlling these risks;
• design and implement a safeguards program and regularly monitor and test it;
• select service providers that can maintain appropriate safeguards, make sure the contract requires them to maintain safeguards and oversee their handling of customer information; and
• evaluate and adjust the program in light of relevant circumstances, including changes in the firm’s business or operations, or the results of security testing and monitoring.

The FTC says the requirements are designed to be flexible so that companies can implement safeguards appropriate to their own circumstances. The Safeguards Rule requires companies to assess and address the risks to customer information in all areas of their operations.

Please note: The FTC currently is re-evaluating the Safeguards Rule and has proposed new regulations. Be alert to any changes in the Safeguards Rule and its effect on the tax preparation community.

IRS Publication 4557, Safeguarding Taxpayer Data, details critical security measures that all tax professionals should enact. The publication also includes information on how to comply with the FTC Safeguards Rule, including a checklist of items for a prospective data security plan. Tax professionals are asked to focus on key areas such as employee management and training; information systems; and detecting and managing system failures.

Additional data protection provisions may apply

The IRS and certain Internal Revenue Code (IRC) sections also focus on protection of taxpayer information and requirements of tax professionals. Here are a few examples:

• IRS Publication 3112 - IRS e-File Application and Participation, states: Safeguarding of IRS e-file from fraud and abuse is the shared responsibility of the IRS and Authorized IRS e-file Providers. Providers must be diligent in recognizing fraud and abuse, reporting it to the IRS, and preventing it when possible. Providers must also cooperate with the IRS’ investigations by making available to the IRS upon request information and documents related to returns with potential fraud or abuse.
• IRC, Section 7216 - This IRS code provision imposes criminal penalties on any person engaged in the business of preparing or providing services in connection with the preparation of tax returns who knowingly or recklessly makes unauthorized disclosures or uses information furnished to them in connection with the preparation of an income tax return.
• IRC, Section 6713 - This code provision imposes monetary penalties on the unauthorized disclosures or uses of taxpayer information by any person engaged in the business of preparing or providing services in connection with the preparation of tax returns.
• IRS Revenue Procedure 2007-40 - This legal guidance requires authorized IRS e-file providers to have security systems in place to prevent unauthorized access to taxpayer accounts and personal information by third parties. It also specifies that violations of the GLB Act and the implementing rules and regulations put into effect by the FTC, as well as violations of non-disclosure rules addressed in IRC sections 6713 and 7216, are considered violations of Revenue Procedure 2007-40. These violations are subject to penalties or sanctions specified in the Revenue Procedure.
   
  Many state laws govern or relate to the privacy and security of financial data, which includes taxpayer data. They extend rights and remedies to consumers by requiring individuals and businesses that offer financial services to safeguard nonpublic personal information. For more information on state laws that businesses must follow, consult state laws and regulations.

Where to report data theft for the IRS, states

To notify the IRS in case of data theft, contact the appropriate local IRS Stakeholder Liaison.

In some states, data thefts must be reported to various authorities. Email the Federation of Tax Administrators at StateAlert@taxadmin.org to get information on how to report victim information to the states.

Additional resources

Tax professionals also can get help with security recommendations by reviewing the recently revised IRS Publication 4557, Safeguarding Taxpayer Data, and Small Business Information Security: the Fundamentals by the National Institute of Standards and Technology.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.

The Taxes-Security-Together Checklist

During this special Security Summit series, the checklist highlights these key areas for tax professionals:

• Deploy “Security Six” basic safeguards
• Create data security plan
• Educate yourself on phishing scams
• Recognize the signs of client data theft
• Create a data theft recovery plan, and call the IRS immediately

IRS, Security Summit partners urge tax professionals to review their practices, enhance safeguards to protect taxpayer data

IRS YouTube Videos:
• Tax Security 2.0: Taxes-Security-Together Checklist: English

WASHINGTON — Leaders from the IRS, state tax agencies and the tax industry today called on tax professionals nationwide to take time this summer to review their current security practices, enhance safeguards where necessary and take steps to protect their businesses from global cybercriminal syndicates prowling the Internet.

Despite major progress by the IRS and the Security Summit partners against identity theft, evolving tactics continue to threaten the tax community and the sensitive data of taxpayers.
 
To help combat this, the Security Summit partners created a new “Taxes-Security-Together” Checklist to serve as a starting point for tax professionals. Beginning next week, the IRS and Summit partners will issue a series of five Tax Security 2.0 news releases highlighting “Taxes-Security-Together” Checklist action items.  
 
“The IRS, the states and the private sector tax industry have taken major steps to protect taxpayers and their data,” said IRS Commissioner Chuck Rettig. “But a major risk remains, regardless of whether you are the sole tax practitioner in your office or part of a multi-partner accounting firm. To help with this, we assembled a security checklist to assist the tax community. We hope tax professionals will use our checklist as a starting point to do everything necessary to protect their client’s data.”
 
The Security Summit — a partnership between the IRS, states and the private-sector tax community — started in 2015 to combat identity theft and protect taxpayers. Key IRS data show the Summit continues making major progress against tax-related identity theft. Between 2015 and 2018, key indicators showed:

• The number of taxpayers who reported to the IRS that they were victims of identity theft fell 71 percent. In 2018, the IRS received 199,000 identity theft affidavits from taxpayers compared to 677,000 in 2015. This was the third consecutive year this number declined.
• The number of confirmed identity theft returns stopped by the IRS declined by 54 percent, falling from 1.4 million in 2015 to 649,000 in 2018.

As the Summit has increased the tax community’s defenses against identity theft and refund fraud, cybercriminals continue to evolve. Increasingly, they look to data thefts at tax professionals’ offices to obtain large amounts of sensitive taxpayer data. Thieves then use stolen data from tax professionals to create fraudulent returns that are harder to detect.
 
The ‘Taxes-Security-Together’ Checklist
 
The Summit partners urge the tax community to review these basic security steps this summer. Some tax pros may routinely overlook these checklist items and others need to regularly revisit them. The steps are not only important for tax practitioners, but for taxpayers as well. Everyone has a responsibility to protect sensitive data.
 
The Taxes-Security-Together checklist highlights key security features 
 
√ Deploy the “Security Six” measures:

• Activate anti-virus software.
• Use a firewall.
• Opt for two-factor authentication when it’s offered.
• Use backup software/services.
• Use Drive encryption.
• Create and secure Virtual Private Networks.

√ Create a data security plan:

• Federal law requires all “professional tax preparers” to create and maintain an information security plan for client data.
• The security plan requirement is flexible enough to fit any size of tax preparation firm, from small to large.
• Tax professionals are asked to focus on key risk areas such as employee management and training; information systems; and detecting and managing system failures.

√ Educate yourself and be alert to key email scams, a frequent risk area involving:

• Learn about spear phishing emails.
• Beware ransomware.

√ Recognize the signs of client data theft:

• Clients receive IRS letters about suspicious tax returns in their name.
• More tax returns filed with a practitioner’s Electronic Filing Identification Number than submitted.
• Clients receive tax transcripts they did not request.

√ Create a data theft recovery plan including:

• Contact the local IRS Stakeholder Liaison immediately.
• Assist the IRS in protecting clients’ accounts.
• Contract with a cybersecurity expert to help prevent and stop thefts.

Security Summit partners/tax professionals urge review
 
“The states and our partners have made progress in the fight against tax-related identity theft, but criminals continue to evolve. We cannot let our guard down in this fight because our common enemy is well-funded, technologically skilled and savvy about state and federal tax processes,” said Sharonne Bonardi, president of the Board of Trustees of the Federation of Tax Administrators and Deputy Comptroller in Maryland. “To make this work, we need help from individual tax professionals across the nation.”

Checklist marks third year of Summit campaigns aimed at tax professional community

This year’s Tax Security 2.0 effort involving the Security Checklist is the third summer campaign in a row involving the Summit partners. The effort follows feedback and recommendations from the Electronic Tax Administration Advisory Committee (ETAAC) that encouraged the Summit partners to expand and intensify outreach efforts to the tax professional community on identity theft and security issues.

This year’s campaign also coincides with this summer’s IRS Nationwide Tax Forums, which will again feature a major focus on security protection for tax professionals. The sessions will provide continuing education credits for sessions led by experts from inside and outside the IRS. The American Coalition for Taxpayer Rights also will again sponsor special sessions with experts from the Pell Center for International Relations and Public Policy at Salve Regina University in Rhode Island.

Last year, Summit education effort focused on Protect Your Clients, Protect Yourself: Tax Security 101. In 2017, the campaign highlighted email schemes in Don’t Take the Bait.

Separate Summit initiatives focus on identity theft awareness for individual taxpayers and consumer alerts for developing tax scams and schemes.

Resources available for tax professionals
 
Tax professionals also can get help with security recommendations by reviewing IRS Publication 4557, Safeguarding Taxpayer Data, and Small Business Information Security: the Fundamentals by the National Institute of Standards and Technology.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.

WASHINGTON — The Treasury Department and Internal Revenue Service today issued legal guidance under the 2017 Tax Cuts and Jobs Act (TCJA) and the Consolidated Appropriations Act of 2018 providing information on certain deductions to cooperatives and their patrons.

The proposed regulations issued today provide guidance for cooperatives and their patrons on calculating the deduction for qualified business income - the QBI deduction - and the deduction for domestic production activities for agricultural or horticultural cooperatives and their patrons (the Section 199A(g) deduction). In addition, Notice 2019-27, posted today on IRS.gov, contains a proposed revenue procedure providing guidance on methods for calculating W-2 wages for purposes of section 199A(g).

Final regulations on the new QBI deduction were published on Jan. 18, 2019. The QBI deduction is available for tax years beginning after Dec. 31, 2017, for taxpayers, including certain patrons of cooperatives, with income from a domestic business operated as a sole proprietorship, a partnership, S corporation, trust or estate. The QBI deduction is up to 20 percent of the qualified business income from the business. Some taxpayers may also be allowed a deduction up to 20 percent of qualified real estate investment trust dividends and publicly traded partnership income. 

Patrons’ deduction

Certain patrons who conduct business through cooperatives may be able to include patronage dividends and similar amounts they receive from those cooperatives to calculate their own QBI deduction. For example, a farmer receiving patronage dividends from a marketing cooperative through which the farmer sells agricultural products may be able to include these dividends in calculating the QBI deduction from the farmer’s agricultural business. The proposed regulations provide guidance to cooperatives and patrons regarding the QBI deduction.

Certain patrons, like farmers, must reduce their QBI deduction if they receive qualified payments from specified agricultural or horticultural cooperatives. The QBI deduction must be reduced by either 9 percent of the QBI from each business related to the qualified payments, or 50 percent of the wages allocated to each such business, whichever is the smaller amount. The proposed regulations provide guidance to patrons regarding the reduction to the QBI deduction. 

Specified agricultural or horticultural cooperatives’ deduction

Specified agricultural or horticultural cooperatives are allowed a Section 199A(g) deduction for income attributable to domestic production activities, which is similar to the domestic production activities deduction under former Section 199 before its repeal by the TCJA. Cooperatives cannot pass through any portion of their Section 199A(g) deduction to patrons structured as C corporations, unless they are specified agricultural or horticultural cooperatives. The proposed regulations provide guidance to cooperatives and patrons regarding the Section 199A(g) deduction.

IRS and Treasury welcome public comments on these proposed regulations and notice of proposed revenue procedure. For details on submitting comments, see the proposed regulations and notice. Taxpayers may rely on these proposed regulations if they apply the rules in their entirety until final regulations are published.

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

WASHINGTON — During Small Business Week, the Internal Revenue Service is highlighting tax reform changes that impact depreciation and expensing for nearly every business. In some cases, these changes allow small business owners and the self-employed to write off the cost of machinery, equipment and other property more quickly.

This year, National Small Business Week is May 5-11. For more than 50 years, the week has recognized the important contributions of America’s entrepreneurs and small business owners. The IRS is reminding small businesses and self-employed individuals about tax benefits and reporting rules.

Here is some key information to keep in mind.

100 percent, first-year ‘bonus’ depreciation

The bonus depreciation percentage is now 100 percent for qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. This means that businesses can often write off the full cost of most depreciable property in the first year they use it in their business. Depreciable business assets with a recovery period of 20 years or less and certain other property usually qualify. This means that machinery, equipment, computers, appliances and furniture generally qualify. Special rules apply for longer production period property and certain aircraft.

In addition, qualified film, television and live theatrical productions are among the types of property that may qualify for 100 percent bonus depreciation.
 
Businesses can immediately expense more

Businesses may elect to expense all or part of the cost of what is often referred to as Section 179 property and deduct it in the year they place the property in service. The maximum deduction is increased to $1,000,000, and the phase-out threshold  is increased to $2,500,000. These amounts, adjusted annually for inflation, apply to property placed in service in tax-year 2019.

Section 179 property includes business equipment and machinery, office equipment, livestock and, if elected, qualified real property. Taxpayers can elect to include certain improvements made to nonresidential real property. See New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act for more information.

Depreciation limitations on luxury automobiles

The Tax Cuts and Jobs Act (TCJA) changed depreciation limits for passenger vehicles placed in service starting in tax-year 2018. If a business doesn’t claim bonus depreciation, the greatest allowable depreciation deduction is:

• $10,000 for the first year,
• $16,000 for the second year,
• $9,600 for the third year, and
• $5,760 for each later taxable year in the recovery period.

If 100 percent bonus depreciation is claimed, the greatest allowable depreciation deduction is:

• $18,000 for the first year,
• $16,000 for the second year,
• $9,600 for the third year, and
• $5,760 for each later taxable year in the recovery period.

These amounts apply to property placed in service starting in 2018.

Applicable recovery period for real property

The general recovery period for residential rental property is 27.5 years. TCJA changed the alternative depreciation system recovery period for residential rental property from 40 years to 30 years. Under the new law, a real property trade or business electing out of the interest deduction limit must use the alternative depreciation system to depreciate any of its residential rental property. These changes apply starting in tax-year 2018.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.  Business owners can refer to the Tax Reform Provisions that Affect Businesses page for updates.

More resources:

• Publication 535, Business Expenses
• Publication 946, How to Depreciate Property
• Publication 5318, Tax Reform: What's New for Your Business -- English | Spanish
• Additional First Year Depreciation Deduction (Bonus) FAQs
• FS-2018-9, New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act

Tax Cuts and Jobs Act: A Comparison for Businesses

IRS YouTube videos:
IRS Withholding Calculator Tips – English
Estimated Tax Payments – English | Spanish | ASL

WASHINGTON — As part of Small Business Week, the Internal Revenue Service today reminds small business owners and self-employed people that they can avoid a surprise tax bill and possibly a penalty by making estimated tax payments during the year.

This year, National Small Business Week is May 5-11. For more than 50 years, the week has recognized the important contributions of America’s entrepreneurs and small business owners.

By law, everyone must pay tax as they earn income. Estimated tax is the method used to pay tax on income that is not subject to withholding. For small business owners and self-employed people, that usually means making quarterly estimated tax payments as they earn or receive income during the year. They need to pay as they go, so they don’t owe.

Individuals, including sole proprietors, partners and S corporation shareholders, generally must make estimated tax payments if they expect to owe tax of $1,000 or more when they file their 2019 tax return. Often, this includes people involved in the sharing economy. Corporations generally must make these payments if they expect to owe tax of $500 or more on their 2019 tax return.

Estimated tax is used to pay not only income tax but other taxes such as self-employment tax and alternative minimum tax. Estimated tax requirements are different for farmers and fishermen. Publication 505, Tax Withholding and Estimated Tax, has more information about these special estimated tax rules.

How and when to pay estimated taxes

The next quarterly estimated tax payment for 2019 is due June 17. Taxpayers may have to pay estimated tax for 2019 if their tax was more than zero in 2018. See the worksheet in Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations, and Publication 505 for details on how to figure estimated tax payments.

Using the Electronic Federal Tax Payment System (EFTPS) is the easiest way for individuals and businesses to make estimated tax payments. Using EFTPS, they can access a history of their payments, so they know how much and when they were made. Corporations must deposit payments using the EFTPS. For more information, refer to Publication 542, Corporations.

Wage-earners who also have business income can often avoid having to pay estimated tax by asking their employer to withhold more tax from their earnings. The IRS urges anyone in this situation to do a Paycheck Checkup, using the IRS Withholding Calculator. If the calculator suggests a change, they can then submit a new Form W-4 to their employer. This form has a special line to enter any additional withholding amount.

Penalty for underpayment of estimated tax

Anyone who pays too little tax through withholding, estimated tax payments or a combination of the two may owe a penalty. In some cases, the penalty may apply if their estimated tax payments are late, even if they’re due a refund.

For tax year 2019, the penalty will generally apply to anyone who pays less than 90 percent of the tax reported on their 2019 income tax return during the year through withholding, estimated tax payments or a combination of the two. People who base their estimated tax payments on last year’s tax will normally avoid a penalty if they pay 100 percent of the amount shown on Line 15 of their 2018 Form 1040 (110 percent if their income was more than $150,000).

Exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled and recent retirees. In addition, anyone who receives income unevenly during the year can often avoid or lower the penalty by annualizing their income and making unequal payments throughout the year. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts (or Form 2220, Underpayment of Estimated Tax by Corporations), for more on the penalty. Refer to the Form 1040 Instructions or Form 1120 Instructions for where to report the estimated tax penalty.

Here’s a reminder for those who still need to file for tax-year 2018. An expanded estimated tax penalty waiver may be available to those who paid too little tax during 2018. See Form 2210 and its instructions and Form 843, Claim for Refund and Request for Abatement, for details.  

More information:

• Estimated Taxes
• IRS.gov/payasyougo
• Self-Employment Tax, Social Security and Medicare Taxes
• Sharing Economy Tax Center
• Self-Employed Individuals Tax Center
• IRS Tax Calendar for Businesses and Self-Employed
• Filing and Paying Your Business Taxes
• FS-2019-6: Basics of estimated taxes for individuals
• Publication 5318, Tax Reform: What's New for Your Business -- English | Spanish

WASHINGTON — The Internal Revenue Service today reminded small businesses that recent tax reform legislation lowered the backup withholding tax rate to 24 percent and the withholding rate that usually applies to bonuses and other supplemental wages to 22 percent. The agency also urged employers to encourage their employees to check their withholding using the IRS Withholding Calculator.

This year, National Small Business Week is May 5-11. For more than 50 years, the week has recognized the important contributions of America’s entrepreneurs and small business owners.

Backup withholding

Under a key change made by the Tax Cuts and Jobs Act (TCJA) enacted in December 2017, the backup withholding tax rate dropped from 28 percent to 24 percent, effective Jan. 1, 2018. Backup withholding applies in various situations, including when a taxpayer fails to supply their correct taxpayer identification number (TIN) to a payer. Usually, a TIN is a Social Security number (SSN), but in some instances, it can be an employer identification number (EIN), individual taxpayer identification number (ITIN) or adoption taxpayer identification number (ATIN). Backup withholding also applies, following notification by the IRS, where a taxpayer under-reported interest or dividend income on their federal income tax return.

Publication 1281, Backup Withholding for Missing and Incorrect Name/TINS, now available on IRS.gov, has information designed to help any payer required to impose backup withholding on their payees. Among other things, the publication features answers to 34 frequently asked questions.

When backup withholding applies, payers must backup withhold tax from payments not otherwise subject to withholding. This includes most payments reported on Form 1099, such as interest, dividends, payments to independent contractors and payment card and third-party network transactions.

Payees may be subject to backup withholding if they:

• Fail to give a TIN,
• Give an incorrect TIN,
• Supply a TIN in an improper manner,
• Under-report interest or dividends on their income tax return, or
• Fail to certify that they’re not subject to backup withholding for under-reporting of interest and dividends.

To stop backup withholding, the payee must correct any issues that caused it. They may need to give the correct TIN to the payer, resolve the under-reported income and pay the amount owed, or file a missing return. The Backup Withholding page, Publication 505, Tax Withholding and Estimated Tax, and Publication 1335, Backup Withholding Questions and Answers, have more information.

Payers report any backup withholding on Form 945, Annual Return of Withheld Federal Income Tax. The 2019 form is due Jan. 31, 2020. For more information about depositing backup withholding taxes, see Publication 15, Employer’s Tax Guide. Payers also show any backup withholding on information returns, such as Forms 1099, that they furnish to their payees and file with the IRS.

Bonuses and other supplemental wages

TCJA also lowered the tax withholding rates that normally apply to bonuses, back wages, payments for accumulated leave and other supplemental wages. In most cases, the new rate is 22 percent, effective Jan. 1, 2018. For payments exceeding $1 million, the rate is 37 percent. See Publication 15 for details.

Paycheck Checkup

Small businesses can help their employees by encouraging them to do a Paycheck Checkup. In addition, any business owner, such as a corporate officer, who receives wages from their business should also consider checking their withholding. The same goes for anyone who has a sideline business but continues to receive wages from another employer.

Though a good idea any year, checking withholding is especially important this year given the number of changes brought about by the TCJA.

The easiest way to do a Paycheck Checkup is to use the Withholding Calculator on IRS.gov. Then, based on its recommendations, fill out and submit a new Form W-4. In many instances, this means claiming fewer withholding allowances or having an extra flat-dollar amount withheld from an employee’s pay.  
       
Taxpayers who itemized in the past who now choose to take advantage of the increased standard deduction, as well as two-wage-earner households, employees with non-wage sources of income and those with complex tax situations, are at most risk of having too little tax withheld from their pay. Boosting tax withholding as early as possible in 2019 is the best way to head off another tax-time surprise next year. Anyone who had an important life change, such as getting married, getting divorced, buying a home or having a baby should also consider a Paycheck Checkup.

WASHINGTON — In support of National Small Business Week, May 5-11, the Internal Revenue Service is emphasizing the many IRS online resources available to help small business owners and self-employed individuals handle the tax aspects of their business.

For more than 50 years, the week has recognized the important contributions of America’s entrepreneurs and small business owners.

For this year’s Small Business Week, the IRS will issue a series of news releases and tax tips focused on key topics such as:

• Withholding taxes,
• Data security tips,
• Estimated tax payments,
• Business credits and deductions and
• Expanded tax benefits for depreciation and expensing.

The IRS also has products and information on the sharing economy, including a Sharing Economy Tax Center, to help people quickly find answers to tax questions, as well as helpful tips and tax forms for business taxpayers. A YouTube video, Your Taxes in a Sharing Economy, also helps those working in the sharing economy understand their tax responsibilities.

Small business/ self-employed products

• Small Business and Self-Employed Tax Center  — an online resource featuring links to a variety of useful tools, including Small Business Taxes: The Virtual Workshop, a downloadable tax calendar and common forms with instructions. The Center provides help on everything from how to get an Employer Identification Number online to information and tips about IRS audits.
• Self-Employed Individual Tax Center — a resource for sole proprietors and others who are in business for themselves. This site has many useful tips and references to tax rules a self-employed person may need to know.
• IRS YouTube Video Channel — watch videos for small businesses on the Small Business playlist.
• Online Learning and Educational Products  — a page with tools to help taxpayers learn about taxes on their own time and at their own pace. For example, the IRS Tax Calendar for Businesses and Self-Employed has important tax dates for businesses.
• E-News for Small Businesses — a free electronic mail service that offers tax information for small business owners and self-employed individuals, including reminders, tips and special announcements.
• Information for small businesses is also available through IRS social media channels, including tax tips and other resources. Spread these messages by sharing the @IRSsmallbiz, @IRSnews, @IRSTaxPros and @IRSenEspanol tweets. 

WASHINGTON — The Internal Revenue Service is seeking qualified applicants for nomination to the Electronic Tax Administration Advisory Committee (ETAAC).

The ETAAC provides an organized public forum for discussion of issues in electronic tax administration, such as prevention of identity theft and refund fraud. ETAAC supports the overriding goal that paperless filing is the preferred and most convenient method of filing tax and information returns. ETAAC members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and the tax industry to fight electronic fraud.

The IRS is looking for up to 10 qualified individuals who will serve three-year terms beginning in September 2019. Applicants should have experience in such areas as state tax administration, cybersecurity and information security, tax software development, tax preparation, payroll and tax financial product processing, systems management and improvement and implementation of customer service initiatives. The IRS also encourages representatives from consumer groups with an interest in tax issues to apply. Applications will be accepted through May 29, 2019.

Nominations of qualified individuals may be made by letter and received from organizations or the individuals themselves. Applicants should complete the ETAAC application and include a short statement of interest and a resume. In addition, they should describe and document their qualifications, past and current affiliations and dealings with cybersecurity and electronic tax administration. Applicants must complete and submit a tax check waiver form and are also subject to an IRS practitioner background check and an FBI criminal background check. More information is available on IRS.gov.

ETAAC is a Federal Advisory Committee established by the Internal Revenue Service Restructuring and Reform Act of 1998.

Questions about the ETAAC and the application process can be e-mailed to publicliaison@irs.gov.

WASHINGTON — The Internal Revenue Service today announced it seeks civic-minded volunteers to serve on the Taxpayer Advocacy Panel (TAP). The TAP is a federal advisory committee that listens to taxpayers, identifies major taxpayer concerns and makes recommendations for improving IRS service and customer satisfaction.

Taxpayers interested in serving on the panel may apply through May 3, 2019.

To the extent possible, the TAP includes members from all 50 states, the District of Columbia, Puerto Rico and one international member who represents U.S. taxpayers working, living or doing business abroad or in a U.S. territory. Each member is appointed to represent the interests of taxpayers in their geographic location as well as taxpayers overall.

“In trying to comply with an increasingly complex tax system, taxpayers may find they need different services than the IRS is currently providing,” said Nina E. Olson, the National Taxpayer Advocate. “The TAP is vital because it provides the IRS with the taxpayers’ perspective as well as recommendations for improvement. This helps the IRS deliver the best possible service to assist taxpayers in meeting their tax obligations.” 

The TAP reports annually to the Secretary of the Treasury, the IRS Commissioner and the National Taxpayer Advocate. The Office of the Taxpayer Advocate is an independent organization within the IRS that provides support for and oversight of the TAP.

To be a member of the TAP, a person must be a U.S. citizen, be current with his or her federal tax obligations, be able to commit 200 to 300 volunteer hours during the year and pass a Federal Bureau of Investigation criminal background check. Members cannot be federally-registered lobbyists. In addition, current Department of the Treasury or IRS employees cannot serve on the panel, and former Department of the Treasury or IRS employees and former TAP members must have a three-year separation from their service to be considered for appointment. Tax practitioner applicants must be in good standing with the IRS (meaning not currently under suspension or disbarment).

New TAP members will serve a three-year term starting in December 2019. Applicants chosen as alternate members will be considered to fill any vacancies that open in their areas during the next three years.

The TAP is seeking members in the following locations: Alaska, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, New York, North Carolina, North Dakota, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Texas, Utah, Vermont, West Virginia, Wisconsin and Wyoming.

The panel is seeking alternates in the following locations: Alaska, Arkansas, Connecticut, Delaware, Florida, Hawaii, Idaho, Kansas, Maine, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Vermont and Wyoming.

Federal advisory committees are required to have a balanced membership in terms of the points of view represented. As such, applicants from under-represented groups, like Native Americans and non-tax professionals, are encouraged to apply. All timely applications, however, will be given consideration.

The IRS is pleased to announce 25 new members were selected for 2019. The new members join the returning members to round out the 59-member panel for 2019.

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WASHINGTON — The Internal Revenue Service and the Security Summit partners today announced new results from 2018 that show major progress in the fight against tax-related identity theft and added protection for thousands of taxpayers and billions of dollars.

Since forming the Security Summit in 2015, the IRS, state tax agencies and the private-sector tax industry enacted joint initiatives, many invisible to taxpayers, that have resulted in fewer fraudulent tax returns entering tax processing systems, fewer confirmed identity theft returns being stopped, fewer bad refunds being issued and fewer Americans identifying themselves as victims of tax-related identity theft.

“The IRS and the Security Summit continue to make tremendous inroads in the battle against identity theft,” said IRS Commissioner Chuck Rettig. “In 2018, our partnership protected more taxpayers and more tax dollars from tax-related identity theft. At a time when many in the private sector continue to struggle with these issues, the tax community has made major progress working together to stop identity theft and refund fraud.”

Key annual indicators mark major progress

The Security Summit held its first meetings in 2015 and enacted its first round of initiatives in 2016. The Summit partners shared dozens of elements from tax returns that could be indicators of fraud such as the length of time to prepare the return. The IRS enhanced and expanded its fraud filters and added protections to business as well as individual tax returns. States requested more information such as driver’s license numbers. Software providers strengthened password requirements to protect accounts and added multi-factor identity authentication. Debit card companies tightened their practices, and more financial institutions helped recover fraudulent refunds.

As part of this team effort, the Summit partners established the Identity Theft Tax Refund Fraud Information Sharing and Analysis Center (IDTTRF-ISAC) to detect and prevent identity theft tax refund fraud. There are now 65 groups participating in the ISAC, able to react and respond quickly as scams arise.

As the Summit partners made these and other changes, the overall results improved immediately as fewer fraudulent returns entered IRS processing systems. Here are key, calendar-year 2018 indicators and how they compare to the 2015 base year:

• Between 2015 and 2018, the number of taxpayers reporting they were identity theft victims fell 71 percent. These are taxpayers who file identity theft affidavits. In 2018, the IRS received 199,000 reports from taxpayers compared to 677,000 in 2015. This was the third consecutive year this number declined. There were 242,000 identity theft reports in 2017 and 401,000 in 2016. 
• Between 2015 and 2018, the number of confirmed identity theft returns stopped by the IRS declined by 54 percent. For 2018, there was a slight, 9 percent uptick in the number of confirmed identity theft returns, 649,000 compared to 597,000 in 2017. But the 2018 count is still significantly below the 883,000 in 2016 and the 1.4 million in 2015.
• Between 2015 and 2018, the IRS protected a combined $24 billion in fraudulent refunds by stopping the confirmed identity theft returns. In 2018, the 649,000 confirmed fraudulent returns tried to obtain $3.1 billion in refunds. The IRS protected $6 billion in 2017, $6.4 billion in 2016 and $8.7 billion in 2015.
• Between 2015 and 2018, financial industry partners recovered an additional $1.4 billion in fraudulent refunds. The financial industry is a key partner in fighting identity theft, helping the IRS and states recover fraudulent refunds that may have been issued. But as fewer fraudulent tax returns enter the system, fewer fraudulent refunds are being issued. In 2018, financial institutions recovered 84,000 federal refunds totaling $112 million for the IRS. Institutions recovered 144,000 refunds worth $204 million in 2017, 124,000 refunds worth $281 million in 2016 and 249,000 refunds totaling $852 million in 2015.

“Despite these major successes, more work remains,” Rettig said. “Identity thieves are often members of sophisticated criminal syndicates, based here and abroad. They have the resources, the technology and the skills to carry on this fight. The IRS and the Summit partners must continue to work together to protect taxpayers as cyberthieves continue to evolve and adjust their tactics.”

Identity thieves adjust; take aim at businesses, tax professionals

As the Security Summit partners make progress, identity thieves continue to change their targets and tactics. Two areas of concern are business identity theft and data theft from tax professionals.

The number of businesses reporting they are victims of tax-related identity theft increased by 10 percent for 2018, with 2,450 reports compared to 2,233 reports in 2017. Following in the footsteps of successful work protecting individual taxpayers, the Security Summit partners have enacted similar protections for business tax returns given that business identity theft is a relatively new area.

Identity thieves use several different tactics with businesses. They may file a fraudulent tax return, a fraudulent quarterly tax payment or use stolen Employer Identification Numbers (EINs) to create fraudulent Forms W-2. Thieves also may impersonate business executives to convince payroll or finance employees to disclose employee W-2 information or make wire transfers. Partnerships, trusts and estates also can be at risk for tax-related identity theft.

Because of Security Summit efforts, criminals need more personal data details to impersonate taxpayers, so they have targeted tax professionals and their information. Theft of taxpayer information held by tax professionals remains a major issue. Thieves can breach practitioners’ computer systems, steal client data and file fraudulent tax returns before a preparer may even know they have been victimized.

Thieves may also steal the tax practitioners Electronic Filing Identification Number (EFIN) or Preparer Tax Identification Number (PTIN) to help with identity theft and filing false returns. Tax professionals who experience a data theft should contact their IRS stakeholder liaison immediately for assistance.

Individuals, businesses and tax professionals can find more information about identity theft, how to identify it, how to prevent it and how to report it at IRS.gov/identitytheft.