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NSA Premieres New Digital Edition of NPA Magazine
Click to launch the full edition in a new window. The NPA Magazineis all new for 2010 with a contemporary look and a new emphasis on bringing cutting edge information, trends and best practice articles to its members. Designed for all levels of tax professionals, NPA Magazine focuses on the strategic issues they face every day. Presented in both digital and printed formats, the magazine will be packed with insights from today’s leaders in the industry—all designed to help members keep pace in a rapidly changing field. Click here to download the NPA Magazine now.
Application of Code Section 7216 Clarified in New Revenue Rulings: Yes, You Can Talk To Your Own Clients About Their Own Taxes
As tax return preparers should be aware, Code Section 7216 establishes a criminal penalty if a preparer knowingly or recklessly discloses or uses any information furnished to them for, or in connection with, the preparation of income tax returns for any purpose other than to prepare, or assist in preparing, any such returns. Exceptions can be provided in the regulations and NSA has long requested IRS to clarify the scope of this Code section. For example, a taxpayer provides his name and contact information for return preparation purposes. Can this information be used to contact the taxpayer for planning purposes? An overly zealous IRS agent (we hear there are some) may conclude that the preparer has disclosed this information to himself for tax planning and not tax return preparation purposes and assess a penalty.
The IRS has agreed with us that clarification is necessary and today, December 30, issued proposed and temporary regulations and related revenue rulings addressing the use or disclosure of tax return information by tax return preparers. According to IRS News Release 2009-121, "IRS Issues Proposed Regulations Adjusting Use of Some Taxpayer Information," the regulations and related revenue rulings under section 7216 enable tax return preparers to contact their clients regarding tax law developments that may affect the clients. Not surprisingly, the New Release finds that this would allow tax return preparers "to more effectively provide a range of services that taxpayers would ordinarily expect from preparers." Go figure. The IRS also recognized that "these services benefit taxpayers, increase voluntary compliance and improve tax administration."
The IRS guidance also clarifies that preparers can disclose information in connection with other routine business activities, such as obtaining professional liability insurance, the potential sale or purchase of a tax return preparer’s business, during the process of conducting client conflict-of-interest checks, and for other purposes.
The guidance is contained in Revenue Rulings 2010-4 and 2010-5, both of which will be published in IRB 2010-4. To view a copy of the IRS News Release and the Revenue Rules click here: http://www.irs.gov/newsroom/article/0,,id=217704,00.html
New York Tax Return Preparers: New Registration Rules? As NSAlert readers are aware, a law enacted earlier this year in New York required anyone considered a "tax return preparer" to register with the State and, if the preparer anticipated preparing ten or more New York returns, to both register and pay a $100 fee. Importantly, the law did not consider an individual a tax return preparer if that individual is:
• a Certified Public Accountant (CPA) or Public Accountant (PA) currently licensed in New York State
• an attorney currently licensed in New York State,
• an employee who is directly supervised by a New York state licensed CPA, PA, or attorney,
• an employee of a business that prepares the returns of that business, or
• a return preparer who is not compensated including volunteer tax preparers
However, legislation introduced in the New York Legislature on December 2, which was considered, approved and sent to the Governor for signature the same day would strike the "currently licensed in New York" requirement so that ANY attorney, CPA or PA is exempt from the registration requirement, no matter the state of licensure. Furthermore, the legislation provides this act shall take effect immediately. The bill is 2009 NYS A 23 v, Part D, Section 3.
House Estate Tax Measure
On December 3, 2009, the House of Representatives passed the Permanent Estate Tax Relief for Families, Farmers, and Small Business Act of 2009. If adopted by the Senate, the provisions will provide certainty for estate taxes and estate planning, largely by freezing the status quo as of this year. Click here for a CCH Special Tax Briefing.
2009 Health Care Reform & Tax Provisions With the unveiling of the Senate’s health care reform bill–the Patient Protection and Affordable Care Act – CCH has updated its Special Tax Briefing on the tax provisions of health care legislation, detailing differences between the Senate bill and the House version of health care reform–the Affordable Health Care for America Act. To read the Briefing, click here.
Administration Proposes More Required E-Filing By Preparers The Administration’s budget for FY 2010 contains a provision that could lead to more required e-filing by tax return preparers. The proposal, which would be effective for calendar year 2011 returns if adopted, is as follows:
Current Law: The Department of the Treasury currently may issue regulations regarding when tax returns must be filed electronically on magnetic media or in other machine-readable form. But the regulations may not require individuals, estates, or trusts to file their tax returns electronically. In addition, the regulations may not require any person to file electronically unless the person files at least 250 tax returns during the calendar year.
Reasons for Change: Electronic filing benefits taxpayers and the IRS because it decreases processing errors, expedites processing and payment of tax refunds, and allows the IRS to efficiently maintain up-to-date taxpayer records.
Proposal: The proposal generally would maintain the current rule that regulations may not require any person to file electronically unless the person files at least 250 tax returns during the calendar year. But the proposal also would provide an exception to this rule under which regulations may require electronic filing by tax return preparers (as currently defined in the Internal Revenue Code) who file more than 100 tax returns in a calendar year. The proposal also would allow regulations requiring tax return preparers who file more than 100 returns (or any other person who files more than 250 returns) to file electronically tax returns for individuals, estates, or trusts. The proposal would be effective for tax returns required to be filed after December 31, 2010.
Allow us to summarize: the regulations may not require e-filing unless a person files at least 250 tax returns per year, in which case the regulations may require e-filing by a tax return prepare who files more than 100 tax returns per year. Got it? This provision appears on page 106 of the General Explanation of the Administration’s Fiscal Year 2010 Revenue Proposals, a complete copy of which you may find at the following weblink: http://www.treas.gov/offices/tax-policy/library/grnbk09.pdf
2009 State Bills
Did you ever wonder what your officers and committees were doing while you were preparing tax returns? Not that those officers and committee members did not also have tax returns they were preparing for clients. Well, to give you just a glimpse, the attached table gives you a sample of some of the state legislative efforts just one of your committees was following during tax season. By "following" we mean not just reading about it, but actively participating in some cases with legislators as they debate your well-being, whether your are a CPA, attorney, EA, ACAT credential holder or are just working on your first credential.
IRS 941 Forms & The Stimulus Act The stimulus bill - technically the American Recovery and Reinvestment Act of 2009 - bill provides a 65% subsidy for COBRA continuation premiums for up to 9 months for workers who have been involuntarily terminated, and for their families. To qualify for premium assistance, a worker must be involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidy would terminate upon offer of any new employer-sponsored health care coverage or Medicare eligibility. Workers who were involuntarily terminated between September 1, 2008 and enactment, but failed to initially elect COBRA because it was unaffordable (note: how is that determination made?), would be given an additional 60 days to elect COBRA and receive the subsidy. The employer is reimbursed for the cost of the subsidy by treating the amount that is reimbursable to the entity as a credit against its liability for payroll taxes (if this amount is insufficient, IRS or Treasury will directly reimburse the employer).
The IRS released a revised Form 941 so that employers can properly report their employment tax liabilities under the new law. A copy of the new Form 941, 941ss and instructions can be found below: Form 941 Form 941ss Form 941 Instructions
Amendments to Circular 230 Made Final; 'Limited Practice Rights' Retained The Treasury Department on Tuesday, September 25 issued final rules making amendments to Circular 230. NSA Members will recall that proposed rules had been issued on February 8, 2006. NSA is pleased that the Treasury Department has agreed with our objection to the proposal to do away with the so-called "limit practice rights" for those individuals who prepared a return. Under the proposal, these individuals, who are not otherwise covered by Circular 230 because they are not attorneys, CPAs, EAs or PAs, could not even respond to IRS questions about a return they had prepared. This provision has not been retained in the final rules and we applaud Treasury for heeding the advice of practitioners to drop this rule. To quote the Treasury: "the authorization in §10.7(c)(viii), which allows an individual, who was not otherwise a practitioner, to represent a taxpayer during an examination if that individual prepared the return for the taxable period under examination, is retained. An unenrolled return preparer who prepared the taxpayer's return for the year under examination, therefore, may continue to negotiate with the IRS on behalf of that taxpayer during an examination or bind that taxpayer to a position during an examination." Click here for a copy of the regulation. NSA Urges Senate to Ban Tax Strategy Patents NSA praised the U.S. House of Representatives for passing H.R. 1980, the Patent Reform Act of 2007, which includes a section that would prohibit patents on tax strategies, which are allowed under current law, and urged the Senate to act promptly on this matter as well.
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