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.

Viewers can also download the PowerPoint presentation from the recent rebroadcast of the Payments to Independent Contractors webinar.

Related link:

• FS-2015-21, Payments to Independent Contractors

The Small Business Health Care Tax Credit Estimator can help employers determine if they’re eligible for the Small Business Health Care Tax Credit this year and how much credit they might receive.

The new IRS.gov Penalties at a Glance page has information taxpayers can use to learn about penalty relief and determine if they qualify for penalty abatement.

You may be tempted to forget all about your taxes once you’ve filed your tax return. But don’t give in to temptation. If you start your tax planning now, you may avoid a tax surprise when you file next year. Now is a good time to set up a system so you can keep your tax records safe and easy to find. Here are some IRS tips to help you get ready for next year’s taxes:

• Take action when life changes occur — Certain life events can change the amount of tax you pay. Some examples are a change in marital status or the birth of a child. When events happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4, Employee's Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator tool on IRS.gov to help you fill out the form.
• Report changes in circumstances to the Health Insurance Marketplace — If you bought 2015 insurance coverage through the Health Insurance Marketplace, you should report changes in circumstances to the Marketplace when they happen. Reporting changes in your income or family size will help you avoid getting too much or too little advance payment of the premium tax credit. Receiving too much or too little in advance can affect your refund, or you may owe tax when you file.
• Keep records safe — Put your 2014 tax return and supporting records in a safe place. If you ever need your tax return or records, it will be easy for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid. You should use your tax return as a guide when you do your taxes next year.
• Stay organized — Make tax time easier. Have your family put tax records in the same place throughout the year. That way, you won’t have to search for misplaced records when you file next year.
• Shop for a tax preparer — If you want to hire a tax preparer to help you with tax planning, start your search now. Choose your tax preparer wisely. Use the Directory of Tax Return Preparers tool on IRS.gov to find tax preparers in your area with the credentials and qualifications that you prefer.
• Think about itemizing — If you claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A, Itemized Deductions, for a list of deductions.
• Stay informed — Subscribe to IRS Tax Tips to get emails about tax law changes, how to save money and much more. You can also get Tax Tips on IRS.gov or IRS2Go, the IRS mobile app. You’ll receive tips each weekday in the tax filing season and three days a week in the summer. You will also get Special Edition Tax Tips at other times during the year.

Bartering and trading? Each transaction is taxable to both parties

Sometimes, when the right opportunity presents itself, people are able to pay for goods and services they need or want by trading goods, or providing a service that they can perform in return. For example, a person who owns a lawn maintenance company may receive legal services from an attorney and pay for those services by providing an agreed upon amount of mowing and maintenance services at the attorney’s home or place of business. In this scenario, the fair market value of the legal services provided is taxable to the lawn maintenance company owner. At the same time, the fair market value of the lawn and maintenance services provided is taxable to the attorney or his firm.

This type of transaction — bartering or trading — can prove to be useful when cash-flow problems would otherwise hinder a person’s ability to secure needed goods and/or services. And, while there is no exchange of cash or credit, the fair market value of the goods and/or services that were exchanged are taxable to both parties and must be claimed as income on an individual or business’s income tax return.

When considering record keeping requirements, barter and trade transactions should be treated just like any other financial transaction or exchange. Original cost of goods being bartered or traded, transaction dates, fair market value at the time of the transaction, and other pertinent details, should be recorded to assist in the preparation of your income tax return and held for a period of three years in accordance with other documents and receipts used to substantiate income and expenses.

For more details on barter and trade transactions, please visit the Bartering Tax Center at IRS.gov.

Five key points about children with investment income

Special tax rules may apply to some children who receive investment income. The rules may affect the amount of tax and how to report the income. Here are five key points to keep in mind if your child has investment income:

1. Investment income. Investment income generally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust.

2. Parent’s tax rate. If your child's total investment income is more than $2,000 then your tax rate may apply to part of that income instead of your child's tax rate. See the instructions for Form 8615, Tax for Certain Children Who Have Unearned Income.

3. Parent’s return. You may be able to include your child’s investment income on your tax return if it was less than $10,000 for the year. If you make this choice, then your child will not have to file his or her own return. See Form 8814, Parents' Election to Report Child's Interest and Dividends, for more.

4. Child’s return. If your child’s investment income was $10,000 or more in 2014 then the child must file their own return. File Form 8615 with the child’s federal tax return.

5. Net Investment Income Tax. Your child may be subject to the Net Investment Income Tax if they must file Form 8615. Use Form 8960, Net Investment Income Tax, to figure this tax. For more on this topic, visit IRS.gov.

Refer to IRS Publication 929, Tax Rules for Children and Dependents, for complete details on this topic. Visit IRS.gov/forms to view, download or print IRS forms and publications anytime.

Free tax guide focuses on tax benefits for members of the military

There are many tax benefits for members of the military and their families, including disabled veterans.

IRS Publication 3, Armed Forces’ Tax Guide, is a free booklet packed with valuable information and tips designed to help service members and their families take advantage of all tax benefits allowed by law. Information available in this publication includes:

• Certain combat pay can be excluded from income
• Armed forces reservist expenses whose reserve-related duties take them more than 100 miles from home can deduct their unreimbursed travel expenses as an adjustment to income rather than as a miscellaneous itemized deduction.
• Members of the armed forces on active duty who move because of a permanent change of station are not required to meet the time and distance tests to deduct eligible unreimbursed moving expenses.
• Low- and moderate-income service members often qualify for family-friendly tax benefits, such as the Earned Income Tax Credit. A special computation method is available for those who receive combat pay.
• Low- and moderate-income service members who contribute to an IRA or 401(k)-type retirement plan, such as the federal government’s Thrift Savings Plan, can often claim the Saver's Credit, also known as the Retirement Savings Contributions Credit, on Form 8880, Credit for Qualified Retirement Savings Contributions.
• Service members stationed outside the U.S. and Puerto Rico qualify for a two- month extension to file a federal income tax return. An extension to file does not mean you have an extension of time to pay any tax due.
• The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is extended for those serving in a combat zone.
• Service members may qualify to delay payment of income tax that becomes due before or during their period of service. See Publication 3 for details including how to request relief.

Service members who prepare their own return qualify to electronically file their federal return for free using IRS Free File. In addition, the IRS partners with the military through the Volunteer Income Tax Assistance program to provide free tax preparation to service members and their families at bases in the United States and around the world.

Special tax considerations for veterans with disabilities

Disability compensation and pension payments for disabilities paid either to veterans or their families by the Department of Veterans Affairs are not taxable. In addition, disabled veterans may be eligible to claim a federal tax refund based on:

• an increase in the veteran's percentage of disability from the Department of Veterans Affairs (which may include a retroactive determination) or
• the combat-disabled veteran applying for, and being granted, Combat-Related Special Compensation, after an award for Concurrent Retirement and Disability.

To do so, the disabled veteran must file an amended return, Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed tax return. See Publication 525, Taxable and Nontaxable Income, for more information.

Safeguard your tax records against natural disasters

Natural disasters can come without warning, leaving you with little time to prepare, so it’s important to keep your tax records safe. By taking a few simple steps, you can safeguard your records against natural disasters.

Create an additional set of electronic records

You should keep a duplicate set of records including bank statements, tax returns, identifications and insurance policies in a safe place, such as a waterproof container, and away from the original set.

Keeping an additional set of records is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are only provided on paper, these can be scanned into an electronic format. This way, you can save them to the cloud, download them to a storage device, such as an external hard drive or USB flash drive, or burn them to a CD or DVD.

Document valuables

Another step you can take to prepare for a disaster is photograph or videotape the contents of your home, especially items of higher value. The IRS Publication 584, Casualty, Disaster and Theft Loss Workbook, can help you compile a room-by-room list of belongings.

A photographic record can help prove the fair market value of items for insurance and casualty loss claims. Ideally, photos should be stored with a friend or family member who lives outside the area.

Update emergency plans

You should review your emergency plans annually. Personal and business situations change over time as do preparedness needs. If you own a business, be sure to update your plan when you hire new employees or make changes to your business functions, then share the update with your employees. Make your plans ahead of time and practice them.

IRS ready to help

If disaster strikes, call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return. Alternatively, transcripts showing most line items on these returns can be ordered by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.