WASHINGTON — Hurricane Florence victims in parts of North Carolina and elsewhere have until Jan. 31, 2019, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today.

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, this only includes parts of North Carolina, but taxpayers in localities added later to the disaster area, including those in other states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Sept. 7, 2018 in North Carolina. As a result, affected individuals and businesses will have until Jan. 31, 2019, to file returns and pay any taxes that were originally due during this period.

This includes quarterly estimated income tax payments due on Sept. 17, 2018, and the quarterly payroll and excise tax returns normally due on Sept. 30, 2018. Businesses with extensions also have the additional time including, among others, calendar-year partnerships whose 2017 extensions run out on Sept. 17, 2018. Taxpayers who had a valid extension to file their 2017 return due to run out on Oct. 15, 2018 will also have more time to file.

In addition, penalties on payroll and excise tax deposits due on or after Sept. 7, 2018, and before Sept. 24, 2018, will be abated as long as the deposits are made by Sept. 24, 2018.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2018 return normally filed next year), or the return for the prior year (2017). See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

 

Individual who reside or have a business in Beaufort, Brunswick, Carteret, Craven, New Hanover, Onslow, Pamlico and Pender counties may qualify for this relief. Additional counties may be added. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

AUGUST 2018

Senator Rob Portman (R-Ohio) has introduced a new bill in the Senate that would give the Internal Revenue Service the authority to regulate income tax return preparers. The bill is cosponsored by Senator Ben Cardin (D-Missouri). Read full article here. 

www.CPAPracticeAdvisor.com

WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Oct. 1, 2018.  The rates will be:  

• five (5) percent for overpayments [four (4) percent in the case of a corporation];
• 2 and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
• five (5) percent for underpayments; and
• seven (7) percent 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 July 2018 to take effect Aug. 1, 2018, based on daily compounding.

Revenue Ruling 2018-25, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2018-39, dated Sept. 24, 2018.

If you have clients who make business-related payments to charities or government entities for which they receive state or local tax credits, they can generally deduct the payments as business expenses. The IRS clarified that this general deductibility rule is unaffected by the recent notice of proposed rulemaking on the availability of a charitable contribution deduction for contributions under such programs.

For more information or to review updates on the implementation of the Tax Cuts and Jobs Act (TCJA), please visit the Tax Reform page of IRS.gov.

The final IRS Nationwide Tax Forum of the year begins in Orlando next week. The Orlando tax forum will be the last opportunity for tax professionals to participate in this year’s educational series and hear directly from the IRS on tax reform, cybersecurity and more.

Registered attendees can log in to check their information and download the training materials now. For more information or to register, visit the IRS Nationwide Tax Forum website.

In the ninth installment of the Tax Security 101 series, the IRS and its Security Summit partners urge tax professionals to be alert to subtle signs of data theft, noting cases where practitioners are victims of theft and don’t even know it. The IRS and its Security Summit partners have created a list of warning signs that an office may have experienced a data theft.

To review the list of warning signs, visit "Protect Your Clients; Protect Yourself: Tax Security 101." 

Beginning Oct. 14, e-Services users, after entering their accounts, will see a pop-up asking them to accept the terms of the updated user agreement. The IRS strongly encourages e-Service users to read this content and be ready to accept its terms when asked, as these changes will improve security for users.

To review the agreement, see Preview Updated e-Services User Agreement; Launch Set for October 14 or visit www.irs.gov/eservices.

Register for an IRS web conference on estimated taxes next Tuesday, Sept. 11, at 11 a.m. EST. The 60-minute web conference is part of the Paycheck Checkup campaign and will discuss:

• Ways to pay taxes: Withholding and estimated taxes
• "Paycheck Checkup": IRS’ online Withholding Calculator
• Who must make estimated tax payments and payment due dates
• Electronic Federal Tax Payment System (EFTPS) and Direct Pay
• Ways to avoid the estimated tax penalty
• Resources to help meet federal tax payment requirements

To register, visit https://www.webcaster4.com/Webcast/Page/1148/27314.

WASHINGTON – The Internal Revenue Service urges taxpayers who support dependents who can’t be claimed for the Child Tax Credit to do a paycheck checkup soon. The IRS Withholding Calculator can help these taxpayers make sure they have the right amount of tax taken out of their pay.

The Tax Cuts and Jobs Act, enacted in December 2017, added a new tax credit – Credit for Other Dependents. It is a non-refundable credit of up to $500 per qualifying person. Taxpayers may be able to claim the new credit for dependents that these taxpayers claimed a dependency exemption for in the past.

This change, along with others, can affect a family’s tax situation in 2018. Checking and adjusting withholding now can prevent an unexpected tax bill and even penalties next year at tax time.

The Credit for Other Dependents is available for dependents for whom taxpayers cannot claim the newly expanded Child Tax Credit. These dependents may include dependent children who are age 17 or older at the end of 2018, or parents or other qualifying relatives supported by the taxpayer. Families with qualifying children under the age of 17 should first review their eligibility for the expanded Child Tax Credit, which is larger.

The Credit for Other Dependents and the Child Tax Credit begin to phase out at $400,000 of modified adjusted gross income for joint filers and $200,000 for other taxpayers. For more information about these credits, visit Steps to Take Now to Get a Jump on Next Year’s Taxes on IRS.gov.

These credits are among many changes in the new law that will affect 2018 tax returns that people will file in 2019. The IRS Withholding Calculator, available on IRS.gov, can help people with dependents – and others – apply the new law correctly.

The IRS urges all taxpayers to complete their “paycheck checkup” as early as possible so that if a withholding amount adjustment is necessary, there’s more time for withholding to take place evenly throughout the year. Waiting means there are fewer pay periods to withhold the necessary federal tax – so more tax will have to be withheld from each remaining paycheck.

Taxpayers who change their withholding for 2018 should recheck their withholding at the start of 2019, especially taxpayers who reduce their withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. If taxpayers don’t submit a new Form W-4 for 2019, their withholding might be higher or lower than intended.

Using the Withholding Calculator

To use the Withholding Calculator, taxpayers should have their 2017 tax returns and most recent paystubs available to determine their proper withholding for 2018.

Calculator results depend on the accuracy of information entered. If a taxpayer’s personal circumstances change during the year, they should return to the calculator to check whether their withholding should be changed.

Employees can use the results from the Withholding Calculator to determine if they should complete a new Form W-4 and, if so, what information to enter on that form.

The Withholding Calculator does not request personally-identifiable information, such as name, Social Security number, address or bank account number. The IRS does not save or record the information entered on the calculator. As always, taxpayers should watch out for tax scams, especially via email or phone and be alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the Withholding Calculator or the information entered on it.

Adjusting withholding

The Withholding Calculator will recommend how to complete new Forms W-4. If a taxpayer is at risk of being under-withheld, the calculator will recommend an additional amount of tax withholding for each job. The taxpayer can enter these amounts on their respective Forms W-4.

Employees who need to complete a new Form W-4 should submit it to their employers as soon as possible. Employees with a change in personal circumstances that reduce the number of withholding allowances must submit a new Form W-4 with corrected withholding allowances to their employer within 10 days of the change.

Certain taxpayers – including those who don’t have enough income tax withheld by their employer – may have to pay estimated taxes. For additional information, refer to Publication 505, Tax Withholding and Estimated Tax.

Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state's department of revenue to learn more.

For information about steps taxpayers can take now to get a head start on next year’s taxes, including how the new tax law may affect them, visit IRS.gov/getready.

WASHINGTON – The Internal Revenue Service and the Security Summit partners warned tax professionals that savvy cybercriminals target IRS-issued identification numbers to help impersonate practitioners as well as taxpayers.

To help protect against this threat used on the Dark Web, the IRS, state tax agencies and the tax industry reminded practitioners that they must maintain, monitor and protect their Electronic Filing Identification Numbers (EFINs) as well as keep tabs on their Preparer Tax Identification Numbers (PTINs) and Centralized Authorization File (CAF) numbers.

This is the sixth in a series called "Protect Your Clients; Protect Yourself: Tax Security 101." The Security Summit awareness campaign is intended to provide tax professionals with the basic information they need to better protect taxpayer data and to help prevent the filing of fraudulent tax returns.

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

Cybercriminals sometimes post stolen EFINs, PTINs and CAF numbers on the Dark Web as a crime kit for identity thieves who can then file fraudulent tax returns. EFINs are necessary for tax professionals or their firms to file client returns electronically. PTINs are issued to those who, for a fee, prepare tax returns or claims for refund. CAF numbers are issued when tax practitioners or their firms file a request for third-party access to client files.

These identification numbers may only be obtained directly from the IRS.

Here’s what tax professionals can do to protect these important numbers from identity thieves:

Maintaining EFINs

Once a tax professional has completed the EFIN application process and received an EFIN, it is important that they keep their account up-to-date at all times. This includes:

• Review the e-File application periodically. Tax professionals’ e-file application must be updated within 30 days of any changes such as individuals involved, addresses or telephone numbers. Failure to do so may result in the inactivation of an EFIN.
• Ensure proper individuals are identified on the application, and update as necessary. The principal listed on the application is the individual authorized to act for the business in any legal or tax matters. Periodically access the account.
• Add any new principals or responsible officials promptly.
• Update any business address changes, including adding new locations.
• EFINs are not transferable; if selling the businesses, the new principals must obtain their own EFIN.
• There must be an EFIN application for each office location; for those expanding their business, an application is required for each location where e-file transmissions will occur.

Monitoring EFINs, PTINs and CAFs

Tax professionals can obtain a weekly report of the number of tax returns filed with their EFIN and PTIN. For PTIN holders, only those preparers who are attorneys, CPAs, enrolled agents or Annual Filing Season Program participants and who file 50 or more returns may obtain PTIN information. Weekly checks will help flag any abuses by cybercriminals. Here’s how:

For EFIN totals:

• Access the e-Services account and the EFIN application;
• Select “EFIN Status” from the application;
• Contact the IRS e-help Desk if the return totals exceed the number of returns filed.

For PTIN totals:

• Access the online PTIN account;
• Select “View Returns Filed Per PTIN;”
• Complete Form 14157, Complaint: Tax Return Preparer, to report excessive use or misuse of PTIN.

For those with a Centralized Authorization File (CAF) number, make sure to keep authorizations up to date. Tax professionals should make an annual review to identify outstanding third-party authorizations for people who are no longer their clients. It is important that tax professionals remove authorizations for taxpayers who are no longer their clients.

See “Withdrawal of Representation” in Publication 947, Practice Before the IRS and Power of Attorney. Information also is available in the instructions for Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, for additional information on withdrawing representation.

Protecting EFINs

The same good security habits for protecting client data also can protect the EFIN. Those include the use of strong anti-virus software, strong and unique passwords, two-factor authentication where available.

• Learn to recognize and avoid phishing scams; do not open links or attachments from suspicious emails, most data thefts begin with a phishing email.
• Secure all devices with security software and let it automatically update.
• Use strong passwords of eight or more mixed characters; use phrases that are easily remembered and password protect all wireless devices.
• Encrypt all sensitive files/emails and use strong password protections.
• Backup sensitive data to a safe and secure external source not connected fulltime to the network.
• Wipe clean or destroy old computer hard drives that contain sensitive data.

In addition to these steps, the Security Summit reminds all professional tax preparers that they must have a written data security plan as required by the Federal Trade Commission and its Safeguards Rule. They 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, QuickAlerts and Social Media.