June 19, 2019 CPA Continuing Education Society of PA IRS Updates Richard G. Furlong, Jr. Senior Stakeholder Liaison Communications & Liaison Division June 19, 2019 CPA Continuing Education Society of PA

Draft 2020 Form W-4 www.irs.gov/draftforms You can now view the IRS’ early draft of the 2020 Form W-4. www.irs.gov/draftforms Comments about the draft are welcome and must be submitted by July 1, 2019. The agency can’t respond individually to all comments due to the large volume expected, but we do appreciate the feedback and will consider all comments received. A near-final draft is expected to be released mid-to-late July. The summer release will give employers and payroll processors what they need to make system updates before the final form is released in November. The W-4 Instructions for employees are a part of this release and a separate set of instructions for employers will be available soon. The new W-4 form will better incorporate the changes ushered in by Tax Cuts and Jobs Act. The goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors. This draft Form W-4 is not for current use, but is a draft of the form to be used starting in 2020. Employees who have submitted a Form W-4 in any year before 2020 will not be required to submit a new form merely because of the redesign. Employers can continue to compute withholding based on the information from the employee’s most recently submitted Form W-4. The IRS encourages all payroll professionals to take advantage of this opportunity and send your comments on the draft.

Software systems for new W-4s Two software systems for old and new W-4 is not necessary Same set of withholding tables used for both forms Apply these tables separately to systems for new and old forms Additional guidance will be provided on the payroll calculations needed based on data fields on the new and old forms

Use of new W-4 New employees who fail to submit a Form W-4 after 2019 treated as single filer with no other adjustments Beginning in 2020, all new employees must used the redesigned form

No requirement to request new W-4s Employees hired before 2020 are not required to submit a new Form W-4 Withholding will continue based on a valid form previously submitted Do not treat employees as failing to furnish Forms W-4 if they don’t provide a new Form W-4

Adjustment for nonresident aliens Pub 15-T will provide instructions on the additional amounts to add to wages to determine withholding for nonresident aliens Nonresident alien employees should continue to follow special instruction in Notice 1392 when completing their Forms W-4

2020 Publication 15-T Draft of Publication 15-T, Federal Income Tax Withholding Methods, for use in 2020 issued June 7 Comments must be submitted by July 8, 2019 to be timely IRS will post a new draft this summer to show final computation of withholding Can’t provide updated withholding tables for 2020 until the final Pub 15-T is released in December

Why a Paycheck Checkup? Some law changes in the Tax Cuts and Jobs Act may affect your withholding Protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year Avoid too much withholding; you can receive more in your paychecks

IRS.gov/withholding

What do I need? Most recent pay stubs Most recent income tax return

Results

Your recap

What If I Have Too Much Withheld? File a new Form W-4 to: Avoid having too much withheld Put more in your regular paycheck

Resources: www.irs.gov/withholding Publication 505, Tax Withholding and Estimated Tax Form W-4, Employee’s Withholding Allowance Certificate Form 1040-ES, Estimated Tax for Individuals

W-2 scam Poses as company executive, asks payroll employee for list of all employees W-2s Targets: businesses, public schools, universities, tribes Employer/victims should email dataloss@irs.gov and provide POC Victims/non-victims should forward any suspicious W-2 emails (including full headers) to Phishing@irs.gov and use subject line: W2 Scam

W-2 spoof

Emerging employment tax issue Wellness Benefits Many employers, health insurers and unions provide employees with wellness plans or programs that are designed to promote the health of the employees Employer wellness programs often provide employees with rewards for taking certain actions intended to promote health

Emerging employment tax issue If the rewards are limited to section 213 medical expenses then usually they would not be wages subject to employment taxes An example is where the employer places a limitation on a gift card such that it may only be used for a section 213 medical expense, e.g., prescription medications

Emerging employment tax issue Some employers offer a wellness arrangement where they require the employee to pay a pre-tax premium (similar to a health plan premium through a cafeteria plan) and then, within the same pay period, reimburse the employee for almost the entire pre-tax premium Under existing law in IRC § 105 and 106, the amount of the reimbursement in this arrangement is wages subject to employment taxes

E-News for Payroll Professionals Subscribe to monthly editions of e-News for Payroll Professionals Get information specifically affecting federal payroll tax returns and the payroll community www.IRS.gov and search: e-News

Employer Identification Number (EIN) Application Changes Richard G. Furlong, Jr. Senior Stakeholder Liaison Communications & Liaison Division June 19, 2019 CPA Continuing Education Society of PA

EIN Application Lines 7a and 7b Bullet (28 pt.)

Responsible Party with SSN Bullet (28 pt.)

Definition of Responsible Party The “responsible party” is the individual who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. The individual identified as the responsible party should have a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets.

Foreign Entity Responsible Party Bullet (28 pt.)

Entities Commonly Using EINs Single Member Limited Liability Companies (SMLLC) Estates and trusts Parent companies forming subsidiaries Employer retirement plans Tax Lien participants – some states have tax lien auctions where an EIN is used as part of a lottery process.

Updating the Responsible Party

Identity Theft Presentation for Tax Professionals Richard G. Furlong, Jr. Senior Stakeholder Liaison Communications & Liaison Division June 19, 2019 CPA Continuing Education Society of PA

Today’s Presentation IDT progress snapshot Data security requirements for tax pros Protect your business Data theft signs for tax pros What to do in case of a data loss How to help client/victims What’s new for 2019 and beyond

Security Summit Progress Report Between 2015 and 2018: Number of taxpayers reporting they were IDT victims (Form 14039) fell 71 percent; Number of confirmed IDT returns stopped by IRS fell by 54 percent; The IRS protected a combined $24 billion in fraudulent refunds; Financial industry partners recovered an additional $1.4 billion in fraudulent refunds.

Cyberthieves Target Tax Pros Five to seven data theft reports weekly in 2018 Hundreds of tax pros Tens of thousands of clients Spear phishing emails – posing as potential customers, tax software, cloud storage providers or IRS Unprotected accounts, computer systems, wireless access

Protect Your Business See Publication 4557, Safeguarding Taxpayer Data Review your security measures Anti-virus software and firewall Two-factor authentication (coupled with strong passwords) Backup software/services and drive encryption Secure Virtual Private Networks Create a data security plan Federal law requires all “professional tax preparers” to create and maintain an information security plan for client data Follow “Safeguards Rule” Designate a responsible person

Protect Your Business Create Data Security Plan (continued) Identify/assess risks Design and implement safeguards Use providers who maintain security Evaluate and adjust as needed Protect your EFIN, PTIN and CAF number Contact IRS Stakeholder Liaisons; states at StateAlert@taxadmin.org Sign up for e-News for Tax Professionals, Quick Alerts and/or IRS Social Media Identify and assess your risks

Data Theft Signs Clients that haven’t filed get refunds, authentication letters, tax transcripts Client returns reject – returns already filed Number of returns filed exceeds your number of clients Computers impacted: Running slow Cursor moving on its own Network computers locking up

Responding to a Data Theft Create a data theft response plan Contact IRS Stakeholder Liaisons Contact states at StateAlert@taxadmin.org Contact cybersecurity expert/insurance carrier Review FTC site: IdentityTheft.gov Review IRS Publication 5293, Data Security Resource Guide for Tax Professionals

Victim Assistance Taxpayer Protection Program letters 4883C – requests taxpayers call the IRS within 30 days to confirm filing the return 5071C – requests taxpayers use an online identity verification tool to confirm filing the return 5747C – requests taxpayers make an appointment at IRS office; for data breach victims 5447C – requests taxpayers with foreign addresses call the IRS 6042C – requests more information from suspected business victims

Victim Assistance Identity Theft Victim Assistance Program Form 14039 – Identity Theft Affidavit File only if unable to e-file; instructed to do so by IRS Do not file if client receives a TPP letter Complete Box 1, mail with paper tax return Identity Protect PIN issued after case is resolved

Identity Protection PIN 6-digit number helps prevent thief from filing fraudulent return in your client’s name Issued automatically to confirmed identity theft victims Online opt-in program – California, Delaware, D.C., Florida, Georgia, Illinois, Maryland, Michigan, Nevada and Rhode Island Expansion – roll out to other states in the future; must use online tool

The Future – 2019/2020 Faxing of individual and business transcripts to end - TBD Third-party mailings from Forms 4506, 4506-T and T-EZ to end - TBD Unmasked wage transcripts are available EIN applicants must be individuals Data security awareness efforts continue; Tax Security 2.0: Taxes-Security-Together Checklist

Monitor Your EFIN, PTIN and CAF Numbers Richard G. Furlong, Jr. Senior Stakeholder Liaison Communications & Liaison Division June 19, 2019 CPA Continuing Education Society of PA

Stolen EFINs, PTINs and CAFs Thieves impersonate tax pros to: File fraudulent returns Submit Power of Attorney forms Call Practitioner Priority Service line Attempt to access client accounts Attempt to access e-Services IRS responses include: 2-factor authentication for e-Services accounts Authorization requirements for PPS callers Redacted tax transcripts

Maintain Your EFIN Application Only the IRS can issue EFINs Review periodically for accuracy and updates Update change in business operations within 30 days Changes in address, phone numbers or personnel Add or remove authorized users (responsible officials, principal consent, delegated users, etc.) Know when a new EFIN is needed New ownership of a firm (EFIN not transferable) New location that transmits e-File returns

Monitor Your EFIN For EFIN weekly totals: Go to e-Services Access e-File Application Search by name Select “EFIN Status”

Report Suspected EFIN Abuse Bullet (28 pt.) Too many returns filed with your EFIN? Contact e-Help Desk (866) 255-0654

Monitor Your PTIN Monitor “Returns Filed per PTIN” Information available via online PTIN system for tax preparers who meet both of the following criteria: Have a professional credential or are an Annual Filing Season Program participant, and Have at least 50 Form 1040 series tax returns processed in the current year

How to Access PTIN Information To access “Returns Filed Per PTIN” information, follow these steps: Log into your PTIN account From the Main Menu, find “Additional Activities” Under Additional Activities, select “Summary of Returns Fied.”

Summary of Returns Filed Chart Bullet (28 pt.)

Report Misuse of your PTIN

Maintain Your POA Files A CAF number is assigned the first time you file a third-party authorization with IRS.  Review your Power of Attorney submissions annually Withdraw your POA for clients you no longer represent by mailing or faxing the existing POA to the IRS using the “Where to File” chart. Write “Withdraw” at the top.

Monitor Your CAF Number Using stolen CAF numbers to try to obtain tax transcripts is the latest ID theft trend. Receiving unexpected tax transcripts is a sign of identity theft. Contact the IRS if there is suspected abuse of your CAF number. Review Publication 4557, Safeguarding Taxpayer Data, for additional security steps

Practitioner Priority Service (PPS) Richard G. Furlong, Jr. Senior Stakeholder Liaison Communications & Liaison Division June 19, 2019 CPA Continuing Education Society of PA

Practitioner Priority Service (PPS) Practitioner Priority Service is a nationwide toll-free, account related service available to tax practitioners. PPS Account Service is available to tax practitioners (individuals and businesses) who provide tax advice, prepare income taxes or act on the taxpayer’s behalf and are calling in regards to an account related issue before the IRS.

Practitioner Priority Service (PPS) PPS serves tax practitioners as the first point of contact for assistance regarding their clients' account related issues. Improves overall consistency and quality of taxpayer service. Available to tax practitioners with valid Form 2848, Form 8821, Form 8655 or other third party designee authorizations.

Practitioner Priority Service (PPS) Hours of Service: 7:00 a.m. to 7:00 p.m. local time Alaska & Hawaii follow Pacific Time Puerto Rico practitioners- 8:00 a.m. to 8:00 p.m. local time.

Practitioner Priority Service (PPS) PPS Toll-Free Line is staffed in 7 locations that handle Individual Accounts issues. Individual Accounts Brookhaven Buffalo Memphis Nashville Philadelphia Pittsburgh

Practitioner Priority Service (PPS) PPS Toll-Free Line is staffed in 3 that specialize in Business Account issues Business Accounts Cincinnati Oakland Ogden

Practitioner Priority Service (PPS) The following account related services are offered in all Accounts Management locations. Resolving taxpayer account problems by: Locating and applying payments Explaining IRS communications (i.e., notices and letters) Providing general procedural guidance and timeframes

Practitioner Priority Service (PPS) Continued from previous slide: Resolving taxpayer account problems by: Making account adjustments Securing taxpayer income verification Providing transcripts of taxpayer accounts

Practitioner Priority Service (PPS) Services that are Out of Scope for Accounts Management PPS Assistors Tax Law questions Accounts assigned to: Automated Collection Services (ACS) cases, Automated Under Reporter (AUR) cases, Correspondence Examination cases, or Cases assigned to Revenue Officer Calls for specific employees

Practitioner Priority Service (PPS) PPS voice options: Option 1 - Tax Law questions Option 2 - Individual Accounts not in collection or examination status Option 3 - Business Accounts not in collection or examination status Option 4 - Automated Collection System (ACS) status Option 5 - Automated Under Reporter (AUR) status Option 6 - Correspondence Examination

Contact Information Richard G. Furlong, Jr. Senior Stakeholder Liaison Communications & Liaison 267-941-6343 richard.g.furlong@irs.gov