IRS Issues Chapter 3 pp. 59-87 2018 National Income Tax Workbook™

p. 59 IRS Issues Data Security and Tax Scams IRS Online Tools Form 2848, Power of Attorney Passport Revocations and Denials Voluntary Certification Program for Professional Employer Organizations Current Status of IRS Implementing the TCJA

Issue 1: Data Security and Tax Scams p. 60 Practitioners have a duty to safeguard taxpayer data Taxpayer data: any information obtained or used in preparation of a tax return

Safeguard Data p. 60 Designate employee(s) to coordinate an information security system Identify internal and external risks Design and implement information safeguards Oversee service providers Evaluate and adjust information security program as needed

Security Summit p. 61 Private + public-sector partnership to combat identity theft 2017 Results Fewer reports of identity theft Fewer fraudulent returns processed Backlog of identity theft reports were reduced 372,000 to 34,000

Security Summit pp. 61-62 2018 Initiatives Form W-2 verification box Add’l data for authentication Name/ SSN of signor Payment/filing history Parent company information

Information Sharing p. 62 Information Sharing and Analysis Center Facilitate information exchange Provide a forum for taxpayer discussion Promote data analysis

Tax Scams p. 62 Cyberthieves continue to target tax practitioners IRS recommends practitioners Use security software Watch out for scams Protect personal data

Tax Scams Cont. pp. 63-64 Hotmail user scam – fake Microsoft sign-in W-2 scam – tricks payroll personnel IRS refunds scam – fake page with malware IRS TAC scam – IRS TAC on caller ID Professional association scam – fake emails Ghost preparers – steal refunds IRS-impersonation phone scam– fake ID #

Issue 1 p. 65 Data Security and Tax Scams Recent scams cont., Dirty Dozen scams Phishing Phone scams Identity theft Return preparer fraud Fake charities Inflated refund claims Excessive claims for business credits

Dirty Dozen p. 65 Fake emails/websites Threatening phone calls Identity theft Dishonest preparers Fake charities Inflated Refund Claims

Dirty Dozen Cont. pp. 65-66 Claiming fuel tax/research credits Inflated deductions Fake income Tax protester arguments Abusive tax shelters Hiding $ offshore

Sample Letter p. 66 Figure 3.1 Alerts clients to potential scams Gives tips for protection Offers assistance

Figure 3.2 p. 67 How to Report Fraud, failure to pay, crime, etc. Identity theft Abusive tax schemes Preparer misbehavior Abusive tax promoter Fake IRS emails or websites Etc.

Issue 2 pp. 68-71 IRS Online Tools E-Services Registration After December 10, 2017, all users must revalidate identities using Secure Access IRS FAQs Common Errors IE 11 and higher – no other browsers Don’t use old bookmarks Multiple attempts to login → lockout

IRS Online Accounts p. 71 IRS.gov/account View amounts owed Pay online/payment plan Access records, payment history, and recent return

Issue 3 p. 72 Form 2848, POA Qualifying student Authorized representatives Attorneys, CPAs, EAs, etc. Form revisions Intermediate service providers Partnership representatives Qualifying student

Authentication Alert p. 73 PPS now verifying identity of agent SSN DOB

Issue 4 pp. 74 Passport Revocations and Denials Taxpayers with seriously delinquent tax debt IRS certifies debt to the State Department for action Passports may not be issued Previously issued passports may be revoked or limited First certifications sent in February 2018

p. 74 Passport Revocations and Denials Seriously Delinquent Tax Debt Debt has been assessed Debt is more than $51,000 Administrative remedies exhausted

Passport Revocations p. 74 Doesn’t include: Timely payment under IA or OIC Pending CDP hearing to contest levy Innocent spouse relief

Passport Revocations p. 74 Also doesn’t include: Bankruptcy Tax-related identity theft Federal disaster Pending IA or OIC Accepted adjustment

p. 74 Passport Revocations and Denials Postpone certification if in designated combat zone 90 day hold before denial so TP can Resolve errors Make payment Enter into a payment arrangement

pp. 75-76 Passport Revocation - Notice Notify TP at time of certification Written notification (Notice CP598C) Reversal of Certification Debt is fully paid Debt is no longer seriously delinquent Certification of debt is erroneous State Dept. notifies TP if denied or revoked

Issue 5 p. 77 Voluntary Certification Program Established by the IRS Certified professional employer organization (CPEO) May be treated as employer and responsible for federal employment taxes

CPEOs p. 77 Performs some or all employment tax withholding, reporting, and payment May also manage HR, employee benefits, worker’s comp claims, and UI claims

p. 77 CPEO Certification Certification requirements Business entity (not disregarded) Created or organized in US One or more physical locations in US History of tax compliance Managed by experienced individuals Audited financial statements Bond and financial review requirements

p. 78 CPEO Certification Certification requirements cont. Reporting requirements Compute taxable income under accrual method Verify continuing compliance Notify IRS of any material changes affecting certification

pp. 78-79 CPEO Certification Denial or revocation of certification Failure to report and pay taxes Misconduct Sanctions Lack of experience

p. 79 CPEO Certification Business location CPEO must have one or more established business locations in the US CPEO must be created or organized in US or under law of any state Majority of CPEO applicants or responsible individuals must be US citizens or residents CPEO must use only financial institutions subject to supervision and examination by state or federal authority

p. 79 CPEO Certification Financial statements Working capital CPEO applicant must provide a copy of annual audited financial statements Working capital Opinion from CPA that it has positive working capital

p. 80 CPEO Certification Working capital exceptions: CPEO has negative working capital for no more than 2 consecutive fiscal quarters of that fiscal year CPEO gives an explanation for the failure IRS determines that the failure does not present a material risk to the collection of employment taxes

p. 80 Voluntary Certification Program for Professional Employer Organizations Bond requirement Greater of 5% of the CPEO’s liability or $50,000 for periods beginning on April 1 of any calendar year Reporting requirement Quarterly attestations

CPEO Liability p. 80 Work site employee – CPEO treated as employer EE covered by CPEO contract Performs services for ER At least 85% covered by CPEO contract

p. 81 CPEO Wage Base & Credits For work site employee, CPEO is treated as successor or predecessor employer for FICA, FUTA, add’l Medicare Work site credit applies to customer, not the CPEO

Issue 6 p. 81 Current Status of IRS National Taxpayer Advocate (NTA) claims IRS needs more funding IRS maintains technology is necessary to improve taxpayer services Online transactions Online accounts Etc.

Current Status of IRS pp. 81-82 2017 245,500,000 returns $3.4 trillion taxes collected 70.5% filed electronically 2,500,000 used free file

p. 82 Current Status of IRS Almost half billion visits to irs.gov Taxpayer assistance to 53,000,000 In 2017, 934,000 individual return audits .6% chance of audit

pp. 83-84 National Taxpayer Advocate Report to Congress Private debt collection undue burden Online accounts, but TPs low participation Unreal audits EE training budget reduced

National Taxpayer Advocate p. 83 Purple Book recommendations: Competency std. for preparers More time for S election Form 941 reports by EE Mailbox rule for e-submissions Levy on retirement only for flagrant conduct

p. 84 Taxpayer Feedback Comprehensive Taxpayer Attitude Survey 95% say it is civic duty to pay taxes 50% paid a professional to prepare and file their returns 79% were satisfied with IRS interaction

Issue 7 pp. 85-86 Implementing TCJA To implement the TCJA: Create or change forms and publications Update processing systems Retrain workers Educate the public TIGTA estimates IRS needs add’l $397 billion

p. 86 Implementing TCJA Implementation also includes: Reprograming 140 interrelated systems Creating and/or revising 450 tax forms, publications, and instructions Publishing guidance, notices, FAQs Preparing workers Taxpayer assistance and outreach

p. 86 Implementing TCJA

p. 87 Implementing TCJA Tax practitioner and taxpayer education IRS Communication and Liaison function taxpayer outreach initiative Events and sessions across the country Creating electronic materials for practitioners

p. 87 Implementing TCJA Guidance plan Identifies guidance projects Tax Reform Implementation Office Lead and coordinate implementation

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