December 7, 2012 Tax E-Alert: New Medicare Surtax Proposed Regs, Updated ITIN Guidance, FAQs on SSTSs No. 1 Tax Return Positions, Rollout of the 2012 Tax Checklist has begun and more... 


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    Join us on Jan. 10 for a webinar - with Karen Hawkins, Director of OPR, discussing conflicts of interest in tax practice.
           
      AICPA
    December 7, 2012
    Tax Section News
     
      Exclusive Tax Section member communications  
     
    In This Issue
        TOP NEWS  
    Proposed Regulations for New Medicare Surtax Effective January 1, 2013
    Updated ITIN Guidance
    IRS Extends Deadline to Amend Defined Benefits Plans under Section 436
    New FAQs on SSTSs No. 1 Tax Return Positions
    AICPA Comments on Proposed Circular 230 Regulations
    IRS to Finalize the Final Tangible Regulations in 2013
    IRS Starts Merchant Card Reporting Compliance Program
    Distributions from CRTs are Subject to the New Net Investment Income Tax (3.8 % Surtax)
    Tax News from the Journal of Accountancy
      TOOLS & RESOURCES
    What’s Happening on December 18?
    Interactive Tax Checklists (ITC) Expand to Include More Checklists
    Now They Will Believe You When You Say Taxes Are Everywhere
    Free! AICPA PFP Division Opens Forefield Advisor & Proactive Planning in Preparation for 2013 Toolkit through Year-End
    Proactively Plan for What’s Ahead with Sid Kess’ 2012 Video Courses
    Professional Development Team Looking for Individuals to Author Tax Courses
      UPCOMING EVENTS
    Pre-Conference Workshop for Emerging CPA Financial Planners at the AICPA Advanced PFP Conference
    New! Gearing Up for Tax Season – 2-part Webinar Series
    Tax Section Webinar Rebroadcasts Available
    Karen Hawkins Discusses Conflicts of Interest in Tax Practice
    TAX POWER HOUR

    December’s Focus is on Tax Return Billing: Hourly, Fixed Fee, Fee Schedule or Value Billing?
    Contact us

    taxsection@aicpa.org

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    Upcoming Events
     
    IRS "Fresh Start" Initiatives for Tax Liens, Installment Agreements and Offers in Compromise
    [REBROADCAST]
    Dec. 11 at 1pm ET
    Registration Options:
     • Discounted CPE (1 hour)
     
    Gearing Up for Tax Season - Part I: People, Process, Systems & Technology – Are You Ready?
    Dec. 12, 2012
    3pm – 4:30pm ET
    Registration Options:
     • Discounted CPE (1.5 hours)
     • Free Without CPE
     
    The 2012 Year-End Business Income Tax Update
    [REBROADCAST]
    Dec. 18 at 1pm ET
    Registration Options:
     • Discounted CPE (2 hours)
     
    Gearing Up for Tax Season - Part II: Staying in Balance – Delivering Great Service without Compromising Quality
    Dec. 19, 2012
    3pm – 4:30pm ET
    Registration Options:
     • Discounted CPE (1.5 hours)
     • Free Without CPE
     
    The Tax & Regulatory Aspects of Health Care Reform
    Dec. 20, 2012
    11am – 12:30pm ET
    Registration Options:
     • Discounted CPE (1.5 hours)
     
    Karen Hawkins Discusses Conflicts of Interest in Tax Practice
    Jan. 10, 2013
    1pm – 2pm ET
    Registration Options:
     • Discounted CPE (1 hour)
     • Free Without CPE
     
    Save the date! Top 10 Things to Know for the 2013 Filing season: Fiscal Cliff, Grand Bargain or Business as Usual? Jan. 15, 2013, at 2pm
    Registration link coming soon

    For a Full List of Upcoming Tax Section Webinars, Go to the Tax CPE & Events page on the AICPA’s Tax website.
       
    Next Tax Power Hour
     

    Tax Return Billing: Hourly, Fixed Fee, Fee Schedule or Value Billing?
    Dec. 13 from 1pm - 2pm ET
    Free, No CPE Available

    How do you bill for tax returns? This month, we have invited practitioners to share their stories. During the April 2012 Tax Power Hour, we asked participants how they billed for tax returns. Over 60% responded saying they used a combination of methods, not just one. Our panel will walk through each of these billing models and explore their pros and their cons. They will also share their experiences using multiple methods and transitioning from one model to another.

     
     
     
    Top News
     
    Proposed Regulations for New Medicare Surtax Effective January 1, 2013

    On Nov. 30, the IRS released Proposed Regulations, REG-130074-11 and Frequently Asked questions (FAQs) to help employers implement the additional .9% Medicare Surtax Tax for wages, self-employment income and other compensation, effective January 1, 2013.

    This tax is applied to all forms of wages, compensation and self-employment income for individuals with earning in excess of thresholds that apply to their tax filing status.

    Filing Status

    Threshold Amount

    Married filing jointly

    $250,000

    Married filing separately

    $125,000

    Single

    $200,000

    Head of household (with qualifying person)

    $200,000

    Qualifying widow(er) with dependent child

    $200,000

    Employers must begin withholding this additional .9% Medicare Surtax for employees with wages in excess of $200,000. For a joint return where neither spouse earns more than $200,000 but when combined, their earnings exceed $250,000, the tax is due but the employer will not be responsible for additional withholding. In these cases employees will have to make these additional tax payments on their own by requesting added withholdings from their employers or if there are earnings from self- employment they can be made through added estimated taxes.

    Updated ITIN Guidance

    On Nov. 29, the IRS issued updated ITIN guidance that incorporates most of the interim guidelines announced earlier in the year and makes them permanent. Most significantly, the individual taxpayer identification number (ITIN) applications submitted directly by individuals will continue to require original documentation (e.g., passports, driver’s licenses, national ID cards) or certified copies. On the other hand, certified acceptance agents (CAAs) will be able to certify the authenticity of the documents for adults – a positive change that was strongly advocated by the AICPA.

    This change means the applicant will not need to mail original documents to the IRS as required under the interim procedures. However, for the rules for dependents of ITIN holders will continue to require original documents or copies. Finally, new ITINs will be issued for a five-year period rather than an indefinite period. The updated procedures take effect January 1, 2013.

    IRS Extends Deadline to Amend Defined Benefit Plans Under Section 436

    The IRS has issued Notice 2012-70 modifying Notice 2011-96 by extending the deadline to amend defined benefit plans to satisfy the requirements of section 436.  The notice also provides relief from the requirements of section 411(d)(6).

    Specifically, a defined benefit plan can now be extended to the latest of:
    a) the last day of the first plan year beginning on or after January 1, 2013;
    b) the last day of the plan year that section 436 is first effective for the plan;
    c) the due date, including extensions, of the employer’s tax return for the tax year (as determined by Revenue Procedure 2007-44) that contains the first day of the plan year for which section 436 is first effective for the plan. 

    New FAQs on SSTSs No. 1 Tax Return Positions

    The SSTS Guidance Task Force of the Tax Practice Responsibilities Committee recently released information guidance, in the form of Frequently Asked Questions (FAQs), on Statement on Standards for Tax Services No. 1 – Tax Return Positions. These FAQs provide practitioners with real life examples they may run across while in practice.

    If you have additional questions, please contact Melanie Lauridsen; mlauridsen@aicpa.org.

    AICPA Comments on Proposed Circular 230 Regulations

    Recently the Internal Revenue Service (IRS) proposed amendments to Circular 230, the Regulations Governing Practice before the IRS. On Nov. 29, the AICPA submitted comments on the proposed regulations. The AICPA supports the proposed regulations and is particularly grateful for the simplification provided through the elimination of §10.35. If issued in final form in 2013, these changes will have a significant impact on CPAs and other tax professionals.
    Some of the major provisions under the proposed regulations include:

    Written Advice: The proposed amendment eliminates the complicated and costly “covered opinion” rules in current Circular 230 §10.35, and expands the written advice requirements of §10.37.

    Proposed §10.37 would establish one standard for all written tax advice by providing that practitioners must: (1) base all written advice on reasonable factual and legal assumptions; (2) exercise reasonable reliance; and (3) consider all relevant facts the practitioner knows or should know.

    Disclaimers: The disclaimers in email and other writings are eliminated under the proposed amendments. The overuse of these disclaimers has resulted in clients ignoring the disclaimer outright.

    General Standard of Competence: The revised §10.35 establishes a general standard that a practitioner must exercise competence when engaged in practice before the IRS. Proposed §10.35 defines competent practice to include the knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged.

    IRS to Finalize the Final Tangible Property Regulations in 2013

    On Nov. 20, the IRS announced (via Notice 2012-73) that the final regulations for depreciation and capitalization of tangible property assets will be not be issued until 2013. The final regulations will contain numerous changes from the temporary regulations. Accordingly, the effective date of the temporary regulations has been extended to January 1, 2014 instead of January 1, 2012. Taxpayers choosing to apply the temporary regulations during the extended period may continue to obtain the automatic consent of the Commissioner of Internal Revenue to change their method of accounting under Rev. Proc. 2012-19 and Rev. Proc. 2012-20.

    For more information, please refer to our tangible property resources webpage for additional tools and aids to consider.

    Merchant Card Reporting Rears Its Head Again

    The IRS recently announced a Form 1099-K, Payment Card and Third Party Network Transaction, compliance program.  According to IRS officials, the goal of the Form 1099-K compliance program is to ensure that taxpayers are properly reporting their income without requiring them to reconcile merchant card information. Read this latest blog by AICPA Senior Manager Benson Goldstein for more details and contact information - we would like to hear from you if you have clients who receive notices under this program.  

    Distributions from CRTs are Subject to the New Net Investment Income Tax (3.8% Surtax) Starting in 2013

    The IRS and Treasury issued proposed regulations regarding the new 3.8% Medicare surtax.  The proposed regulations (REG-130507-11) and FAQs provide much anticipated guidance under new IRC section 1411 regarding the net investment income tax (NIIT).

    An immediate planning opportunity to consider, before 2013, concerns the application of the surtax to charitable remainder trust (CRTs) distributions. According to the new proposed regulations, distributions of post December 31, 2012 net investment income of CRTs will be subject to the 3.8% surtax. Therefore, CRT distributions of income and capital gains realized and recognized before December 31, 2012 will not be subject to the surtax.  Accordingly, selling appreciated CRT assets in calendar year 2012 may reduce the amount of the surtax on future CRT distributions. Likewise, deferring the sale of CRT loss assets and the payment of expenses until 2013 may also reduce the tax burden on future CRT distributions.

    The AICPA Tax Division will be developing comments on the proposed regulations; the comments are due by March 5.

    For more information on the proposed regulation, see the AICPA impact summary page.  Also, for more resources and tools on the estate tax impact of the Medicare tax, visit the AICPA estate tax impact of Medicare tax page and 2012 year-end planning tools page.

    Tax News from the Journal of Accountancy
      • IRS issues proposed regs. on 3.8% net investment income tax (12/04/12)  
    • Guidance issued on additional Medicare tax (12/03/12)
    • Income from partnership is self-employment income where taxpayer chose not to be a partner (11/30/12)
    • New ITIN procedures issued for 2013 filing season (11/29/12)
    • Rev. proc. updates guidance on adequate disclosure of return positions (11/26/12)
    • Standard mileage rates go up a penny in 2013  (11/21/12)
    • Effective date of tangible property regs. delayed  (11/20/12)
    • Failure to enact AMT patch could push start of tax season to March for millions, IRS warns  (11/20/12)
    • Hurricane Sandy victims can take hardship distributions, loans from retirement plans  (11/16/12)
    • Modernized e-File is improving, but IRS can’t retire legacy system yet  (11/14/12)
    • How can the nonpayment testing period for COD income be improved?   (11/13/12)
    AICPA TOOLS & RESOURCES
     
    What’s Happening on December 18?

    The updated Tax Practitioner’s Toolkit materials will be out!  Among the items you will find:

    • A new client satisfaction survey
    • Enhanced implementation checklists
    • Updated tweets to communicate with clients
    • More professional advertisements

    Save time and money by downloading these resources!  And when a new tax law gets enacted, the AICPA will create a brochure that summarizes it for you to customize and provide your clients. 

    But you don’t have to wait for Congress to act to talk to clients or your community– download the Tax Planning PowerPoint or client letters for your individual and small business clients. 

    Interactive Tax Checklists (ITC) Expand to Include More Checklists
    taxpowerhour

    Last year, the AICPA launched an online version of their comprehensive checklists to give CPAs the flexibility of accessing checklists anywhere and collaborating with staff much easier. The updated Interactive Tax Checklists for 2012 are rolling out now and many more forms are included in this year’s release.  Checklists available now are:

    • Individual (Form 1040)
    • Partnership (Form 1065)
    • C Corporation (Form 1120 C)
    • S Corporation (Form 1120 S)
    • Divorce Issues
    • Passive Activity
    • Uniform Capitalization
    • Long-term Contracts
    • Installment Sales

    Not sure what these are all about? Read the FAQs or view the tutorial. They are easy to learn and use and will save you a lot of time. (And don’t worry, PDFs can still be downloaded if needed.)  So get a jump on the season - start on your scope of engagement now and receive updates automatically whenever a new tax law is enacted.

    Also, if you used the ITC last year and found it helpful, we’d love to hear from you!  Please contact amaloney@aicpa.org.

    Now They Will Believe You When You Say Taxes Are Everywhere

    Is there an easy way to help your friends, family or clients understand their estimated total tax obligation?  Send them the link to this 2-minute video from AICPA on the Total Tax Insights™ calculator, a great online tool that gives them a handle on the number and types of taxes they pay – they might be surprised.

    Proactively Plan for What's Ahead with Sid Kess' 2012 Video Courses

    Tax Section members save 20% on Sid Kess’ new editions of the 2012 Individual Tax Returns Video Course and 2012 Corporate Tax Returns Video Course.  Be sure you're fully up-to-date this tax season with practical tax preparation and tax planning guidance.

    Free! AICPA PFP Division Opens Forefield Advisor & Proactive Planning in Preparation for 2013 Toolkit through Year-End

    2012 presents an unprecedented opportunity for you to differentiate your firm and services and show that you provide significant value to your clients by having all of their financial planning needs in mind.  If tax cuts and current estate, gift and GST exemptions are extended, at some point in the near future, change will occur and a plan needs to be in place to be ready to act when appropriate.  The AICPA Personal Financial Planning Division is sharing two of its most popular tools (Forefield Advisor and the Proactive Planning in Preparation for 2013 Toolkit) at no charge until December 31 to help you educate and plan for your clients now.  If you are a PFP Section member or CPA/PFS credential holder, you already have access to these resources as part of your membership.  To access these tools, go to the Personal Financial Planning section of Fiscal Cliff page.

    Professional Development Team Looking for Individuals to Author Tax Courses

    The AICPA’s Professional Development team is looking for individuals who are interested in authoring a tax course(s).  We offer several types of courses, including individual and business updates as well as fiduciary, tax-exempt organizations and private foundation courses.  If you’re interested in learning more about these courses and becoming an author, please contact Jennifer Pierson at jpieson@aicpa.org.

    UPCOMING EVENTS
     
    Pre-Conference Workshop for Emerging CPA Financial Planners at the AICPA Advanced PFP Conference

    January 21 – 23, 2013
    Aria Resort and Casino, Las Vegas, NV

    For the first time, the PFP Division is offering a pre-conference workshop at the AICPA Advanced PFP Conference: The Next Generation Advisor:  An Interactive Case Study Approach to Communicating Personal Financial Planning Concepts to Your Clients. This workshop is for emerging CPA financial planners with a focus on deepening client relationships through communication. Practitioners with five or fewer years of experience in personal financial planning and up to 15 years in the CPA profession are invited to attend the Advanced PFP conference for a reduced price and will receive complimentary registration for this workshop, networking receptions and more

    This is an excellent opportunity for an experienced practitioner to introduce less experienced staff to this conference. To take advantage of this offer, email financialplanning@aicpa.org with your or your emerging professional's name, contact information and brief professional history/CV. An AICPA PFP Division representative will respond to your email with next steps and registration information.

    taxpowerhour

    New! Gearing Up for Tax Season – 2-part Webinar Series

    This webinar series was inspired by the overwhelming popularity of the November Tax Power Hour on Gearing Up for Tax Season.  We heard your feedback and created this 2-part webinar series to allow enough time to cover everything – soup to nuts!  With all the uncertainty and likely last-minute tax law changes, we are expecting this upcoming busy season to be especially challenging. It is time to start preparing.   This 2-part series will walk through all the major processes and practice issues you are contemplating that tax practitioners finalizing your plans for the busy season.

    Part I, Gearing Up for Tax Season:  People, Process, Systems & Technology – Are You Ready?
    Dec. 12 from 3pm – 4:30pm ET

    This session is essentially a repeat of the November Tax Power Hour.  However, we extended it to 90 minutes and moved the discussions associated with client acceptance, quality control and managing expectations to Part II to allow more time to talk about practice management issues.  In Part I, we will focus on practice operations and will cover the usual suspects, including organizers & engagement letters, using client portals, staffing and scheduling, tax return processing procedures, managing the e-file process and general office administration challenges.

    This webinar wouldn’t be complete if we didn’t discuss and explore strategies to respond to last-minute tax law changes so that your compliance and client services can operate smoothly.

    Part II, Gearing Up for Tax Season: Staying in Balance – Delivering Great Service without Compromising Quality
    Dec. 19 from 3pm – 4:30pm ET

    This session will explore the softer side of practice – where internal quality control procedures either impede or enhance great customer service, and why it is important to set then continue to manage client expectations.  We will explore questions such as: How do you screen clients? When do you fire a client? What are your ethical requirements as tax practitioners? What are the factors in a Quality Control system?  We will also discuss the expanded Circular 230 requirements for tax practitioners to have a system in place to ensure that their procedures are consistent with Circular 230.

    For each session, discounted CPE is available for Tax Section members, or Tax Section members may opt to attend free, without CPE.

    Two Tax Section Webinar Rebroadcasts Still Available

    IRS "Fresh Start" Initiatives for Tax Liens, Installment Agreements and Offers in Compromise
    (Rebroadcast on Dec. 11 from 1pm – 2 pm ET)
    The IRS has liberalized the requirements to qualify for offers in compromise and installment agreements.

    2012 Year-End Business Income Tax Update
    (Rebroadcast on Dec. 18 from 1pm – 3pm ET)
    This webinar will discuss the latest developments in legislation, tax cases, IRS regulations and other guidance impacting C corporations, S corporations, partnerships, and limited liability companies.

    Discounted CPE is available for Tax Section members.

    Karen Hawkins Discusses Conflicts of Interest in Tax Practice

    Jan. 10 from 1pm – 2pm ET

    Join us as Karen Hawkins explains Conflicts of Interest in plain English.  Most practitioners are not aware of the gray area that their clients situations may be placing them into.  This webinar will help explain various factors to consider when bringing on a new client and factors to consider with existing clients through everyday examples.  Discounted CPE is available for Tax Section members, or Tax Section members may opt to attend free, without CPE.

    Save the Date: Top 10 Things to Know for the 2013 Filing season: Fiscal Cliff, Grand Bargain or Business as Usual?

    Each year, the Individual Income Tax Technical Resource Panel offers a webinar on the critical issues to know for the upcoming tax filing season.  This year’s Webinar is scheduled for January 15, 2013, at 2 pm ET, and will include a detailed discussion of the top issues you’ll face preparing 2012 tax returns and planning for 2013. 

    Registration links will be available soon on the Tax CPE & Events page.

    December’s Tax Power Hour Focuses on Tax Return Billing: Hourly, Fixed Fee, Fee Schedule or Value Billing?
    taxpowerhour

    How do you bill for tax returns? This month, we have invited practitioners to share their stories. During the April 2012 Tax Power Hour, we asked participants how they billed for tax returns. Over 60% responded saying they used a combination of methods, not just one. Our panel will walk through each of these billing models and explore their pros and their cons. They will also share their experiences using multiple methods and transitioning from one model to another.

    The Tax Power Hour is our monthly webcast series for Tax Section members only. This free, hour-long talk focuses on strategies to help tax practitioners save time, reduce stress and run an efficient practice through practical discussions on topics such as Practice Management, Business Development, Leveraging Technology and more. Speakers are tax practitioners and other experts sharing their advice and best practices to help make you more profitable.

    If you missed a previous Tax Power Hour, you can listen again anytime. Archives are available for one year after each event.

     
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