The IRS reminds the nation’s 730,000 federal tax return preparers that they must renew their Preparer Tax Identification Numbers (PTINs) for 2013. Also, preparers who have a competency test requirement should take the time now to schedule an appointment for the RTRP exam.

Anyone who is a paid federal tax return preparer must register with the IRS and have a PTIN, as must all Enrolled Agents. Additionally, some return preparers have new continuing education and competency test requirements.

NOTE FROM ASV: ASV is hosting an RTRP live prep course on December 17, 2012 in Sterling VA. For more information and to register, click here. 

The IRS recently announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2013.  In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.

Revenue Procedure 2012-41 sets forth inflation adjusted items for 2013, including a number of items of interest to tax-exempt organizations, including adjustments affecting the treatment of:

• dues paid to agricultural or horticultural organizations
• insubstantial benefit limitations for contributions associated with charitable fundraising campaigns
• the reporting exception for certain exempt organizations with nondeductible lobbying expenditures

As part of its efforts to support people in the areas hit by Hurricane Sandy, the IRS is expediting the review and approval process for organizations that are applying for tax-exempt status to provide relief for Hurricane Sandy’s victims.

Often, it’s best to use existing charities, including churches and other places of worship, because they tend to have fund-raising and distribution infrastructures already in place and frequently can administer relief programs more efficiently than newly formed organizations.
 
But those who have decided they would prefer to start their own charity should apply to the IRS for tax-exempt status by filing IRS Form 1023. At the top of the form write, “Disaster Relief, Hurricane Sandy.”

The IRS will expedite those applications and ensure they meet the legal requirements for tax exemption.  

More details are in IR-2012-87, IRS Expedites Charity Applications, Urges Use of Existing Charities.

Relief also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline. See IR-2012-83, IRS Provides Tax Relief to Victims of Hurricane Sandy; Return Filing and Tax Payment Deadline Extended to Feb. 1, 2013.

For current information that may apply to your charity, review the following:

• IR-2012-88, Treasury, IRS Announce Special Relief to Encourage Leave-Donation Programs for Victims of Hurricane Sandy
• IR-2012-86, Treasury and IRS Expand Availability of Housing for Hurricane Sandy Victims
• IR-2012-85, IRS Waives Diesel Fuel Penalty Due to Hurricane Sandy
• IR-2012-84, IRS Announces Qualified Disaster Treatment of Payments to Victims of Hurricane Sandy
• IR-2012-82, IRS Gives Additional Time to Taxpayers and Preparers Affected by Hurricane Sandy; File and Pay by Nov. 7

Check Help for Victims of Hurricane Sandy for the latest information.

WASHINGTON undefined As part of the administration’s efforts to bring all available resources to bear to support state and local partners impacted by Hurricane Sandy, the Treasury Department and the Internal Revenue Service today announced special relief intended to support leave-based donation programs to aid victims who have suffered from the extraordinary destruction caused by Hurricane Sandy.

Under these programs, employees may donate their vacation, sick or personal leave in exchange for employer cash payments made to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy.

Employees can forgo leave in exchange for employer cash payments made before Jan. 1, 2014. Under this special relief, the donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the amount of the cash payment. Details on this relief are in Notice 2012-69.

The IRS continues to monitor the situation and will provide additional relief related to Hurricane Sandy as needed.

Employers planning to claim an expanded tax credit for hiring certain veterans should act soon, according to the IRS. Many businesses may qualify to receive thousands of dollars through the Work Opportunity Tax Credit, but only if the veteran begins work before the new year.

Here are six key facts about the WOTC as expanded by VOW to Hire Heroes Act of 2011.

1. Hiring Deadline: Employers may be able to claim the expanded WOTC for qualified veterans who begin work on or after Nov. 22, 2011 but before Jan. 1, 2013.

2. Maximum Credit: The maximum tax credit is $9,600 per worker for employers that operate for-profit businesses, or $6,240 per worker for tax-exempt organizations.

3. Credit Factors: The amount of credit will depend on a number of factors. Such factors include the length of the veteran’s unemployment before being hired, the number of hours the veteran works and the amount of the wages the veteran receives during the first-year of employment.

4. Disabled Veterans: Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit.

5. State Certification: Employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency. The form must be filed within 28 days after the qualified veteran starts work. For additional information about your SWA visit the U.S. Department of Labor’s WOTC website.

6. E-file: Some states accept Form 8850 electronically.

Visit the IRS.gov website and enter ‘WOTC’ in the search field for forms and more details about the expanded tax credit for hiring veterans.

Links:

• Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans
• VOW to Hire Heroes Act - Frequently Asked Questions and Answers
• Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit

IRS YouTube Videos:

• Work Opportunity Tax Credit - English | Spanish

Washington – The Internal Revenue Service today alerted employers and other taxpayers that because Hurricane Sandy is designated as a qualified disaster for federal tax purposes,  qualified disaster relief payments made to individuals by their employer or any person can be excluded from those individuals’ taxable income.

Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

The IRS also announced that the designation of Hurricane Sandy as a qualified disaster means that employer-sponsored private foundations may provide disaster relief to employee-victims in areas affected by the hurricane without affecting their tax-exempt status.  Like all charitable organizations, employer-sponsored private foundations should follow the guidance in Publication 3833, Disaster Relief: Providing Assistance Through Charitable Organizations, in providing assistance to employees or their family members affected by Hurricane Sandy. 

Related Item: Help for Victims of Hurricane Sandy

The Internal Revenue Service is issuing a warning about a new tax scam that uses a website that mimics the IRS e-Services online registration page.

The actual IRS e-Services page offers web-based products for tax preparers, not the general public. The phony web page looks almost identical to the real one.

The IRS gets many reports of fake websites like this. Criminals use these sites to lure people into providing personal and financial information that may be used to steal the victim’s money or identity.

The address of the official IRS website is www.irs.gov. Don’t be misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov.

If you find a suspicious website that claims to be the IRS, send the site’s URL by email to phishing@irs.gov. Use the subject line, 'Suspicious website'.

Be aware that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

If you get an unsolicited email that appears to be from the IRS, report it by sending it to phishing@irs.gov.

The IRS has information at www.irs.gov that can help you protect yourself from tax scams of all kinds. Search the site using the term “phishing.”

Links:

• Suspicious e-Mails and Identity Theft
• Reporting Phishing
• Identity Theft resource page
• Publication 4523, Beware of Phishing Schemes (PDF)

IRS YouTube Videos:

• Phishing-Malware - English | Spanish | ASL

IRS Podcasts:

• Protect Yourself From Identity Theft - English | Spanish       

WASHINGTON undefined The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2013.  In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Highlights include:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000, up from $58,000 and $68,000 in 2012.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up from $173,000 and $183,000.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012.  For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000.  For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125; and $29,500 for married individuals filing separately and for singles, up from $28,750.

Below are details on both the unchanged and adjusted limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Commissioner annually adjust these limits for cost of living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

The limitations that are adjusted by reference to Section 415(d) generally will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,000 to $17,500 for 2013.  This limitation affects elective deferrals to Section 401(k) plans, Section 403(b) plans, and the Federal Government’s Thrift Savings Plan.

Effective January 1, 2013, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $200,000 to $205,000.  For a participant who separated from service before January 1, 2013, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2012, by 1.0170.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2013 from $50,000 to $51,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2013 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,000 to $17,500.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $250,000 to $255,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $165,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,015,000 to $1,035,000, while the dollar amount used to determine the lengthening of the 5 year distribution period is increased from $200,000 to $205,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $115,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500.  The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $375,000 to $380,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $11,500 to $12,000.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,000 to $17,500.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes remains unchanged at $100,000.  The compensation amount under Section 1.61 21(f)(5)(iii) remains unchanged at $205,000.

The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3).  After taking the applicable rounding rules into account, the amounts for 2013 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $34,500 to $35,500; the limitation under Section 25B(b)(1)(B) is increased from $37,500 to $38,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $57,500 to $59,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $25,875 to $26,625; the limitation under Section 25B(b)(1)(B) is increased from $28,125 to $28,875; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $43,125 to $44,250.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $17,250 to $17,750; the limitation under Section 25B(b)(1)(B) is increased from $18,750 to $19,250; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $28,750 to $29,500.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions is increased from $5,000 to $5,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $92,000 to $95,000.  The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $58,000 to $59,000.  The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $173,000 to $178,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $173,000 to $178,000.  The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $110,000 to $112,000.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,039,000 to $1,066,000. 

WASHINGTON undefined For tax year 2013, the Internal Revenue Service announced today annual inflation adjustments for more than two dozen tax provisions.

• The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012.
• The amount used to reduce the net unearned income reported on a child’s tax return subject to the “kiddie tax,” is $1,000, up from $950 for 2012.
• The foreign earned income exclusion rises to $97,600, up from $95,100 in 2012.

Details on these inflation adjustments and others such as the low-income housing credit, the dollar limits for high-deductible health plans and other amounts can be found in Revenue Procedure 2012-41, which will be published in Internal Revenue Bulletin 2012-45 on Nov. 5, 2012.