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    Additional tax-related advocacy news and information is available from The CPA Advocate (AICPA’s advocacy newsletter), Tax Division advocacy webpage and Washington Tax Brief webcast series.

    Section 7216: Guidance and sample consent forms to comply with regulations involving disclosure and use of tax return information by tax return preparers. Download customizable versions of consent forms.

    UPDATE: RMD Regulations (July 2015)
    In a recent podcast, Bob Keebler provides an update on Notice 2015-49 issued July 9, 2015 regarding the use of lump sum payments to replace lifetime income being received by retirees under defined benefit pension plans. The IRS announced that it would amend regulations to provide that qualified defined benefit plans cannot replace any joint and survivor, single life, or other annuity currently being paid with a lump-sum payment or other accelerated distribution. The rules will be applied as of July 9, 2015, except for certain grandfathered transactions. Read more from the Journal of Accountancy.

    UPDATE: Proposed Regulations for ABLE Accounts (June 2015)
    On June 19, the IRS issued proposed regulations implementing Sec. 529A, which authorizes states to offer specially designed tax-favored accounts for the disabled (ABLE accounts). Sec. 529A was added by the Achieving a Better Life Experience (ABLE) Act of 2014, which was part of the Tax Increase Prevention Act of 2014. Contributions made to an individual’s ABLE account can be used to meet the individual’s qualified disability expenses. Read more about the proposed regulations from the Journal of Accountancy.

    UPDATE: FBARs Due June 30; New Guidance Limits Penalties (June 2015)
    The deadline for the Treasury Department to e-file the Report of Foreign Bank and Financial Accounts (FBAR) is June 30, and the penalties for noncompliance can be large. CPAs may need to do some digging with clients, who may not realize they are subject to file an FBAR. Learn more about e-filing FBARs in this article. FinCEN Report 114 details the requirements for the e-filing of FBARs.

    In May, the IRS issued interim guidance easing FBAR penalties. Prior to the memo, penalties for willful violations of FBAR filing requirements could be as high as 50% of the balance of the applicable accounts each year. The memo recommends a penalty of 50% of the highest aggregate balance of all unreported foreign financial accounts during the years under examination, allocated across all years based on the balances for the year. For non-willful violations, the memo recommends that if a taxpayer has more than one account, only one $10,000 penalty should be imposed each year, not $10,000 per account.

    Furthermore, in October, the IRS issued streamlined compliance procedures for taxpayers who have non-willfully failed to report offshore assets. Learn more in this Journal of Accountancy article.

    ADVOCACY: AICPA Urges IRS to Raise Safe Harbor Threshold in Tangible Property Regulations (April 2015)
    The AICPA reiterated its support for a higher de minimis safe harbor threshold for taxpayers who do not have an applicable financial statement (AFS), asking the IRS to increase it from $500 to $2,500 and adjust it annually for inflation. In a letter to the IRS, the AICPA noted, “Many small business owners stated [in an AICPA survey] that repairs are consistently over $500….A cell phone or printer easily cost over $500 and are replaced quickly.”

    In addition, the AICPA recommended that Treasury expand the definition of an approved AFS to include a reviewed set of financial statements, stating: “The AICPA believes the requirement that a taxpayer have an AFS to use the $5,000 de minimis threshold unfairly discriminates against smaller taxpayers, and recommends an alternative test to allow such taxpayers to use the de minimis rule.”

    UPDATE: Statute of Limitations Does Not Run Due to Failure to Make Foreign Financial Asset Disclosure  (April 2015)
    In IRS Technical Advice Memorandum 2014-018, the IRS describes the circumstance of an executor for a decedents estate filing the decedents final Form 1040. The executor does not report a foreign financial asset of the decedent, which Code Section 6038D requires should be reported on Form 8938 with the Form 1040. The executor also does not report income from such foreign financial asset on the estates Form 1041, and did not report the asset on the estate Form 706 which the estate was obligated to file. The three year statute of limitations for both the Form 1041 and Form 706 has expired. The TAM employs Code Section 6501(c)(8) to extend the statute of limitations on assessment for the estate income tax return and the Form 706. Practitioners should be aware of this area of risk when preparing returns for decedents and estates.

    UPDATE: Exclude Personal Information from Exempt Organization Applications and Returns (April 2015)
    You can prevent unwanted disclosure of private information, such as Social Security numbers, by not including it in exemption applications (Forms 1023 and 1024) and information returns (Forms 990, 990-EZ, 990-PF, 990-T, and Form 5227). The IRS does not require an organization to include any individual's Social Security or bank account number on a return or other form available to the public. Visit the Tax Section to learn more.

    ADVOCACY: AICPA Calls for Uniform Retirement Plan Types and Rules (March 2015)
    "Because qualified retirement plans are such a large source of retirement savings for many Americans, it is important that the tax rules governing the plans are as simple as possible," the AICPA observed when it sent eight recommendations to the Senate Finance Committee tax reform working group on savings and investment. Among the recommendations is a proposal to reduce the number of retirement plans and eliminate top heavy rules.

    ADVOCACY: AICPA Recommendations to Simplify Retirement Plans (March 2015)
    The AICPA submitted eight recommendations to the Senate Committee on Finance Tax Reform Working Group on Savings and Investment that would simplify employer-sponsored retirement plans and individual retirement accounts. In the letter to the working group, Troy Lewis, CPA, CGMA, chair of the AICPA Tax Executive Committee, wrote, “Because qualified retirement plans are such a large source of retirement savings for many Americans, it is important that the tax rules governing the plans are as simple as possible.” 

    UPDATE: How the AICPA’s New Confidentially Rule Interacts with Section 7216 (March 2015)
    The recently revised AICPA Code of Professional Conduct includes a new Confidential Client Information Rule under Section 1.700.001, which expands the guidance on maintaining the confidentiality of client information. The general thought previously has been that if CPA tax practitioners were complying with Sec. 7216 and revisions of its related regulations that went into effect six years ago (Regs. Secs. 301.7216-1 through 301.7216-3), they were complying with the less detailed AICPA code Rule 301, Client Confidential Information. Now that the new AICPA guidance with its expanded interpretations has taken effect (on Dec. 15, 2014), members are encouraged to assess their practices for compliance with both sets of rules.

    Sec. 7216 prohibits tax preparers from knowingly or recklessly disclosing any taxpayer information obtained in the process of preparing returns. The AICPA's Confidential Client Information Rule, on the other hand, is concerned with other confidential information not necessarily involving tax return preparation. A recent article in the Journal of Accountancy discusses the effect of these two requirements on CPAs.

    ADVOCACY: AICPA Recommends Estate Tax Portability Relief for Surviving Spouses (March 2015)
    The AICPA submitted a letter on March 19 to the IRS and the Department of the Treasury recommending relief for surviving spouses who would like to elect portability of their deceased spouse’s unused estate tax exemption. 
    The portability election must be made by a decedent’s executor on a timely filed Form 706.  However, executors of estates for decedents who died on January 1, 2014 or later may be unaware that a Form 706 is required to be filed (even for estates below the filing threshold) within 9 months of the date of death in order for the surviving spouse to make the portability election.  
    The AICPA requested that Treasury and IRS:

    • Permanently allow estates below the filing threshold 15 months after the death to file Form 706 in order to elect portability;
    • Provide a short Form 706-EZ to make the portability election; and
    • Allow the surviving spouse to file Form 706 for portability, if the executor chooses not to file the form because the estate is not otherwise required to do so.

    Read more from the Journal of Accountancy.

    UPDATE: New Sec. 529A Credit Rules Will Allow State Accounts to Be Grandfathered (March 2015)
    The Internal Revenue Service has announced that, because a number of states may be setting up their own Achieving a Better Life Experience (ABLE) programs (which allow tax-free savings accounts to be set up to benefit disabled individuals) before the IRS has issued guidance on them, any state program set up before the guidance is issued will be deemed to comply with the rules. This Journal of Accountancy article provides more information.

    UPDATE: New Repair Regs Resources (February 2015)
    As reported in the Journal of Accountancy, on February 13, the IRS released Rev. Proc. 2015-20, the much anticipated relief permits small businesses to change a method of accounting on a prospective basis, and avoid completing and filing a Form 3115. The IRS released a set of FAQs on the tangible property repair regulations, which includes information on the applicability of the regulations, de minimis safe harbor election, simplified procedures for small business taxpayers and more. To ensure that the AICPA is providing our members with the most reliable information, the AICPA’s Tangible Property Resources webpage has been updated with sample 3115 resources (for applicable businesses), a repair regs flowchart, a sample client letter, an overview of the tangible property regulations, links to current and previous regulations, and more. Most resources on this page are open to all AICPA members.

    UPDATE: AICPA Calls for Missed Tax Election Relief (January 2015)
    If you or your client missed a deadline for one of 26 tax elections that are set by law, you (or the client) are out of luck.  That’s why the AICPA is calling on Congress to allow the IRS to grant relief as it does now for missed elections with deadlines set in regulation instead of statute.  Elections with deadlines set by law include installment payments for estate tax, innocent spouse relief and claiming an unused portion of the estate tax exclusion (known as portability). Read the AICPA’s letter requesting relief for taxpayers in certain situations when they miss a statutory deadline or make an error in choosing an election.

    UPDATE: Congress Passes Tax Extenders (December 2014)
    The House and Senate approved a one-year extension of tax provisions that expired at the end of last year; however, the bill does not address 2015 extenders, as negotiations on a broader bill fell apart. The bill is now with President Obama for his signature. Individual tax extenders in the bill include:

    • the tax deduction of expenses of elementary and secondary school teachers;
    • the tax exclusion of imputed income from the discharge of indebtedness for a principal residence;
    • the equalization of the tax exclusion for employer-provided commuter transit and parking benefits;
    • the tax deduction of mortgage insurance premiums; the tax deduction of state and local general sales taxes in lieu of state and local income taxes;
    • the tax deduction of contributions of capital gain real property for conservation purposes;
    • the tax deduction of qualified tuition and related expenses; and
    • the tax exemption of distributions from individual retirement accounts for charitable purposes.
    Listen to a podcast  from Bob Keebler providing a more detailed overview of the individual provisions in the tax extenders bill, noteworthy business provisions and the Achieving a Better Life Experience Act of 2014, which creates savings opportunities for individuals with disabilities. Send the following Forefield Alert to your clients.

    UPDATE: IRS Releases Guidance on After-Tax Rollovers (September 2014)
    The IRS released guidance in Notice 2014-54 on how to allocate pre- and after-tax amounts distributed from qualified retirement plans to multiple destinations. Notably, the new guidance allows workers to roll over after-tax amounts and convert the money to a Roth IRA, tax free. The rule applies to distributions made on or after September 19. Read more from Journal of Accountancy.

    ADVOCACY: AICPA Submits Comments to IRS on Material Participation of a Trust or Estate (September 2014)
    The AICPA submitted comments to the Department of the Treasury and the IRS relating to the issue of material participation by a trust or estate in a trade or business for purposes of section 469 of the Internal Revenue Code. The AICPA realizes that, after 28 years without guidance and two court decisions on which taxpayers are able to rely, the expanded scope of the section 1411 net investment income tax has created a broader need for all trusts and estates that have an interest in a trade or business to determine under section 469 whether the trust or estate materially participates in the trade or business. Specifically, AICPA suggests that guidance from the IRS or Treasury should: 

    • Incorporate the conclusions reached in the two court decisions;
    • Thoroughly address the complicated issues involved;
    • Provide comprehensive, administrable, and clear guidance;
    • Count the combined activities of any trustee or executor who, under local law, has fiduciary duties and responsibilities with respect to the trust or estate, irrespective of the capacity in which the individual is performing those activities and irrespective of whether the individual also owns an interest in the same trade or business;
    • Count the activities of employees and agents employed by the trust or estate to perform services in the trade or business;
    • Provide that the material participation tests for individuals set forth in Temp. Reg. § 1.469-5T(a) apply to trusts and estates;
    • Include a special rule to treat, for a certain period of time, an estate or former grantor trust as materially participating in any trade or business in which the decedent or deemed owner materially participated at the time of his or her death;
    • Provide that the character of the income is determined at the level of the trust or estate, and the character of any distributed income remains the same in the hands of the beneficiary;
    • Include a special rule to provide that the participation of the beneficiary of a qualified subchapter S trust is used to determine whether the trust’s gain from the sale of the S corporation stock is treated as active or passive;
    • Include a special rule to provide that the S portion and the non-S portion of an electing small business trust are treated as a single trust for purposes of applying the section 469 rules.
    • Provide that a trust or estate may qualify as a real estate professional under section 469(c)(7) and tests for how a trust or estate may qualify as a real estate professional.

    ADVOCACY: AICPA Urges Congress to Act Now on Tax Extenders  (September 2014)
    The AICPA sent a letter urging House and Senate tax committee members to immediately address the 57 tax provisions that expired at the end of 2013 and six provisions that expire at the end of 2014 so that taxpayers can have more certainty. “These ever-changing, often expiring, short-term changes to the tax laws make it increasingly difficult for small businesses and their owners to perform any long-term tax, cash-flow or financial planning. If businesses are not able to rely on these tax benefits for the long-term, they are limited in their ability to plan, invest, grow and expand, and hire additional workers,” the AICPA wrote. Acting now would also prevent unnecessary delays in the tax filing season and further distortions in financial reporting.

    ADVOCACY: Small Businesses Need Cash Method of Accounting, AICPA Tells Congress (July 2014)
    The AICPA called on a House small business panel to expand the cash method of accounting to small businesses. “The cash method of accounting is simpler in application, has fewer compliance costs, and does not require taxpayers to pay tax before receiving the income being taxed,” the AICPA said in its written testimony. The AICPA also noted the impact on professional service firms that are subject to state regulations limiting ownership to individuals who actively participate in the business — for them, the hardship “would increase significantly." Many states prohibit public accounting firms from allowing any passive (investor) ownership and a majority of the owners must hold active CPA licenses.

    UPDATE: One-IRA-Rollover-a-Year Rule Effective in 2015 (July 2014)
    Starting in 2015, taxpayers will only be able to make one rollover per year no matter how many IRAs they own.

    Following up on its promise earlier in the year to follow the Tax Court’s holding in Bobrow v. Commissioner that the limit of one rollover per year applies on an aggregate basis and not on an IRA-by-IRA basis, the IRS withdrew a proposed regulation from 1981, which had provided otherwise. The IRS also announced that the new rule will not apply to any rollover that involves a distribution that occurs before January 1, 2015.

    The IRS reiterated that the new interpretation of Sec. 408(d)(3)(B) will not affect an IRA owner’s ability to transfer funds from one IRA trustee to another (as opposed to the taxpayer’s getting a check and making the transfer himself or herself) because those transactions are not considered rollovers under Rev. Rul. 78-406 and therefore are not subject to the one-a-year limit.

    Read more from the Journal of Accountancy.
    Listen to a “60 Second Planner” audio clip with Bob Keebler on this topic, courtesy of Leimberg Information Services, Inc. (LISI).

    ADVOCACY: IRS Voluntary Program for Tax Preparers is Unlawful and Improper, Says AICPA (June 2014)
    After repeated requests to the IRS to obtain public comment on its proposed program to certify unlicensed preparers or to consider alternatives, the AICPA sent a letter to the agency expressing strong concern that the program “would cause significant legal problems.”

    AICPA President and CEO Barry Melancon and AICPA Board Chairman William E. Balhoff observed that implementing the program “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.” 

    The AICPA outlined several policy and legal concerns with both the agency’s legal basis to create such a program, as well as the process that the IRS used.  However, Melancon and Balhoff also noted that it valued its relationship with the IRS:  “We have sought to work with the IRS to achieve workable solutions to regulate tax return preparers and protect the public, and we stand ready to continue these efforts.” 

    ADVOCACY: AICPA Speaks up for Members on Net Investment Income Tax (June 2014)
    While progress has been made in simplifying the regulations for the NIIT, the AICPA would like to see more changes to ease the burden on taxpayers. In a letter to the IRS and Treasury, the AICPA offered detailed suggestions that included:

    • Increasing the threshold amounts and adjusting them for inflation to make the optional simplified reporting method available to more taxpayers.
    • Giving taxpayers the option of including their entire chapter 1 gain or excluding their entire chapter 1 loss from the disposition of certain active interests in pass-throughs to reduce the burden of calculating the loss or gain subject to the tax
    • Providing a simplified safe harbor method for tiered pass-through dispositions

    UPDATE: New Rules for Providing Written Tax Advice Finalized (June 2014)
    The IRS issued final regulations under Circular 230 on the rules for practitioners to provide written tax advice and certain other related provisions (T.D. 9668), adopting the proposed regulations (REG-138367-06) issued in September 2012 with some modifications. The regulations require practitioners to base written advice on reasonable factual and legal assumptions and to consider all relevant facts that the practitioner knows or reasonably should know. Practitioners must use reasonable efforts to identify the facts relevant to written federal tax advice. Read more from the Journal of Accountancy.

    ADVOCACY: AICPA Proposes a Level Playing Field for PFIC Filers (May 2014)
    The complex passive foreign investment company (PFIC) rules apply to more and more U.S. taxpayers, resulting in compliance costs for minor shareholders that “can, at times, far exceed the underlying tax potentially imposed by the PFIC rules,” the AICPA told the IRS commissioner and Treasury officials in comments. The PFIC Task Force of the International Tax Technical Resource Panel recommends 10 ways to address the disparity between the treatment of direct and indirect shareholders and the related compliance costs.

    ADVOCACY: AICPA Opposes Proposed Voluntary IRS Preparer Registration Program (May 2014)
    In a letter to IRS Commissioner John Koskinen, AICPA expressed opposition to the “voluntary certification” program proposed by the IRS in the aftermath of the Loving case. The AICPA has “deep concerns with regard to a voluntary system, and the speed with which the IRS is moving to implement such a system,” AICPA President and CEO Barry C. Melancon, CPA, CGMA and Jeffrey A. Porter, CPA, chair of the AICPA Tax Executive Committee, wrote. “We believe a voluntary program would create confusion regarding the relative proficiencies of the various types of preparers. In addition, the proposed voluntary system would undoubtedly leave the impression among most taxpayers that certain tax return preparers are endorsed by the Internal Revenue Service.” For complete details, see the full press release

    UPDATE: Erroneous IRS Notices on E-Filed Forms 1041 (May 2014)
    The AICPA has contacted the IRS regarding erroneous notices sent to fiduciaries who e-filed Form 1041 with a balance due. The problem seems to have been caused when an electronically filed tax return was posted “one cycle earlier” than the mailed payment. As a result, a CP161 notice may have been generated showing an amount due (including penalties and interest).  We understand that the IRS is addressing this glitch and issuing corrected notices.

    If the taxpayer made the payment timely and the payment check has cleared, the IRS should issue a CP210 notice to reverse the penalty and interest and clarify that no payment is owed. This problem should resolve itself for most of the incorrect notices. If you have a client who received such an incorrect notice and the IRS has not yet corrected this situation, you can contact the IRS directly even without a power of attorney if “yes” is checked in the Paid Preparer Authorization box on the bottom of page 1.

    UPDATE: IRS Finalizes Rules on Distributions to Pay Insurance Premiums (May 2014)
    Final regulations issued by the IRS on Friday state that distributions from qualified retirement plans that are used to pay for accident or health insurance premiums are taxable (T.D. 9665), unless a statutory exclusion applies. However, distributions used to pay for disability insurance to replace retirement plan contributions in the event of a participant’s disability are not taxable if they meet certain requirements. Read more from the Journal of Accountancy.

    UPDATE: AICPA Testimony on State Taxes on Non-Resident Employees (April 2014)
    The AICPA testified that the current patchwork of rules for taxing employees who temporarily work in another state "unnecessarily creates complexity and costs for both employers and employees." For example, a non-resident is subject to tax after working 59 days in Arizona, 15 days in New Mexico and 14 days in Connecticut. The Mobile Workforce Simplification Act, which would address this issue by setting a 30-day threshold for all states, may be considered by the House Judiciary Committee soon and has strong bipartisan support. 

    UPDATE: Proposed Legislation to Lighten NIIT, Income Tax Burden on Estates (April 2014)
    The AICPA submitted a legislative proposal to Congress to treat estates and certain trusts as married persons filing separately for both income tax and the net investment income tax purposes. This proposal highlights the excessive tax burden placed on an estate compared with the tax burden that the decedent had during his or her life, as well as provides a solution to these inequalities. Currently, an individual’s estate is subject to the top rate of 39.6% on annual taxable income in excess of $12,150. 

    ADVOCACY: AICPA Recommendations for NIIT and CRTs (March 2014)
    In a comment letter, the AICPA made several recommendations to the IRS regarding how forthcoming final regulations should apply the net investment income tax rules to charitable remainder trusts. The comments focus on the proposed regulations’ elective simplified method for calculating a CRT’s net investment income and attributing that net investment income to the beneficiary’s annuity or unitrust distribution. Read more from the Journal of Accountancy.

    ADVOCACY: Tax Incentives for Higher Ed Expenses (March 2014)
    Approximately 1.5 million taxpayers failed to claim an education deduction they qualified for, in a study by the Government Accountability Office.  The simplification of over 13 education tax incentives, long endorsed by the AICPA, is picking up momentum in Congress and is included in the Tax Reform Act.  In response to recent bills and proposals,  the AICPA made several recommendations to further ease compliance, such as making the new American Opportunity Tax Credit 100% refundable and available for graduate-level and professional degree courses.

    ADVOCACY: AICPA Confirms Digital Signatures Allowed for Form 8879 (March 2014)
    On March 12, IRS issued a QuickAlert announcing revisions to electronic signature guidance for Forms 8878 and 8879.  However, the AICPA discovered that a key reference to the permissions for digital signature only referenced Form 8878, raising question about whether digital signatures were permitted on Form 8879 as well.  The AICPA worked with the IRS to clarify the changes.  As a result, the IRS updated the page Signing an Electronic Tax Return with two critical changes. First, the words “and 8879” were added to the following statement: “EROs may use an electronic signature pad to have taxpayers sign Forms 8878 and 8879.” Secondly, the words “or electronic signature” were added to the following sentence: “This does not alter the requirement that taxpayers must sign Form 8878 and Form 8879 by a handwritten or electronic signature.” As a result, authorization for digital signatures for Form 8879 is now explicitly authorized.

    UPDATE: IRS Announces It Will Follow the Tax Court's One-Rollover-per-Year Decision (March 2014)
    In Announcement 2014-15, the IRS has indicated it will follow the Tax Court decision in Bobrow v. Commissioner, which held that a taxpayer may make only one tax-free, 60-day rollover between IRAs within each 12-month period, regardless of how many IRAs he or she maintains. However, the IRS will not apply this new interpretation to any rollover that involves an IRA distribution occurring before January 1, 2015. Listen to a brief audio clip from Bob Keebler on Bobrow v. Commissioner and view a Forefield client alert that discusses the case.

    UPDATE: IRS Guidance on Electronic Signatures – AICPA Issues Caution (March 2014)
    On March 11, the IRS updated Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns (the updated publication is only available in electronic form on the IRS website). Some interpreted these changes to mean that the IRS is accepting e-signatures on Form 8879, IRS e-file Signature Authorization. However, a careful review and analysis of the changes suggests that the IRS has only clarified two Form 8879 rules.

    1. The IRS explained that preparers can accept copies of signed e-file authorization forms. For example, clients can fax or email a copy of their Form 8879 that contains a handwritten signature. This clarifies the often misunderstood notion that preparers need to receive the original, signed document before transmitting the return. 
    2. Only the Self-Select PIN method provides for a completely paperless process where clients can authorize transmission without a handwritten signature on an e-file authorization form. NOTE: There are additional steps to validate your client's identity and your client must appear in person for part of the process.

    Read more, courtesy of the AICPA Tax Division. The AICPA advocacy team will be reaching out to the IRS to request additional clarity on this new guidance. A longer, more expansive discussion of these rules is in development and is scheduled to be released in the May 2014 Tax Adviser. 

    UPDATE: President Obama’s Budget Proposal Contains Limitations on Retirement Accounts (March 2014)
    President Obama’s proposed 2015 budget would limit tax deductible contributions to 401(k)s and IRAs to 28% of income and cap retirement savers' tax-deferred accounts to an amount needed to produce a joint and 100% survivor annuity of $210,000 beginning at age 62 (presently $3.2 million). The budget would also eliminate the carried interest provision that allows income from managed retirement investments to be taxed at the capital gains rate, while dropping the "chained" consumer price index proposal reducing Social Security cost-of-living adjustments.

    Additionally, it would require that Roth IRAs follow the same required minimum distribution rules as other retirement accounts (RMDs at 70 ½ similar to traditional IRAs). It also establishes a 5-year rule for IRAs inherited by (most) non-spouse beneficiaries, requiring that distributions be taken out over a five year period of time, and establishes 60-day rollover rule for IRAs inherited by non-spouse beneficiaries. Finally, the budget includes mandatory automatic IRA enrollment for small businesses and RMD elimination for small retirement accounts of $100,000 (cumulative across all retirement plans).

    Even though these provisions may not be enacted, it’s helpful to know what the President’s legislative agenda for this year is. We will monitor and keep you apprised of any developments.

    ADVOCACY: AICPA Seeks Extensions for Cost Basis Reporting (March 2014)
    During the 2013 filing season, AICPA members and their clients experienced significant confusion trying to comply with final regulations (T.D. 9616) for cost basis reporting for stocks and mutual funds. AICPA recently asked the IRS to extend all the reporting effective dates by one year to allow reporting entities more time to prepare. AICPA’s proposal would move the initial tracking of cost basis for options and debt instruments from January 1, 2014 to January 1, 2015, transfer reporting from January 1, 2015 to January 1, 2016, and reporting for complex debt instruments from January 1, 2017 to January 1, 2018.

    UPDATE: Form 8960 Instructions Released (February 2014)
    The IRS released final instructions for Form 8960, Net Investment Income Tax – Individuals, Estates, and Trusts. Access resources from the PFP Section on the 3.8% NIIT in the Planning for ATRA and the Net Investment Income Tax Toolkit, including archived webcasts checklists, newsletters, articles and more. See NIIT specific resources on this page.

    REMINDER: Review Software NIIT Calculations Carefully (February 2014)
    Tax practitioners need to be very careful reviewing the NIIT calculations from their software programs as we are hearing various cases where the software is not defaulting correctly or overrides may not easily or successfully happen.  For example, some software programs:

    • are not correctly computing NII on Form 1041 K-1s,
    • are not allowing the grouping of an activity involving the rental of personal property with an active trade or business, and
    • are excluding rental income for expats from the NIIT calculation when it should be included in the NIIT calculation. 

    The instructions to Form 8960 at the bottom left hand corner of page four contain, "Special Rules For Certain Passive Income", that makes it clear that passive activities properly grouped with trades or businesses in which the taxpayer materially participates are treated as non-passive and, consequently, not subject to NIIT. This matches what the statute and regulations state.   Some software programs may need to fix their software for this clarification.  Tax practitioners should be extra careful checking the Form 8960 calculations this year.

    IRS Releases 2013 Form 8960 for NIIT (January 2014)
    The IRS released Form 8960, Net Investment Income Tax for Individuals, Estates and Trusts. Access resources from the PFP Section on the 3.8% NIIT in the Planning for ATRA and the Net Investment Income Tax Toolkit, including archived webcasts checklists, newsletters, articles and more. See NIIT specific resources on this page.

    ADVOCACY: AICPA Voices Strong Support for Senate Finance Committee Discussion Draft on Tax Administration Reform and Simplification (January 2014)
    In a letter to Senate Finance Committee Chairman Baucus and Ranking Member Hatch, the AICPA said that it “strongly supports the efforts by the Senate Committee on Finance on tax administration reform and simplification.” Responding to the Finance Committee’s Nov. 20, 2013 discussion draft, Senate Committee on Finance Chairman’s Staff Discussion Draft of Provisions to Reform Tax Administration, the AICPA outlined recommendations it believes will reduce taxpayers’ compliance costs, encourage voluntary compliance through an understanding of the rules, and facilitate enforcement actions.  The AICPA’s recommendations include reforms related to information returns, identity theft and tax fraud, closing the tax gap, expanding electronic filing and tax filing improvements.

    UPDATE: IRS Releases Draft Form 5227 and Instructions (January 2014)
    The IRS released draft Form 5227, Split-Interest Trust Information Return, and draft instructions.  Form 5227 includes dramatic changes due to section 1411 of the IRC, which imposes the 3.8% net investment income tax.

    ADVOCACY: AICPA Calls for Permanent Tax Relief for Disaster Victims (December 2013)
    To treat all taxpayers in declared disaster areas fairly and consistently, the AICPA is asking that 10 permanent provisions be added to the tax code.  Currently, the government deals with each disaster as an individual event, which means taxpayers may get different treatment for similar losses; they often do not even know what treatment they will receive until the government enacts the required relief.  In a letter to Congress and the IRS, the AICPA calls for provisions to help businesses and property owners, such as a five-year carryback period for net operating losses and tax-free withdrawals up to $100,000 from qualified retirement plans if the money is repaid in five years.

    ADVOCACY: AICPA Recommends that IRS Issue Additional DOMA Guidance (December 2013)
    The AICPA identified 17 areas in which the IRS should provide additional guidance to taxpayers and tax practitioners as a result of the U.S. Supreme Court’s decision ruling the Defense of Marriage Act (DOMA) unconstitutional. This request for additional guidance covers income tax, estate and gift tax and other issues.  Among the issues on which the AICPA requested guidance are:

    • The status of certain civil unions and registered domestic partnerships;
    • Whether special notations are needed on amended returns to aid in the processing of forms filed by couples who choose to amend their returns to convert to joint status;
    • Whether a same-sex married employee who requests that his/her employer file to obtain a FICA tax refund must also amend his/her Form 1040 to change the filing status;
    • The tax treatment of payments that qualify as alimony to/from a former same-sex marriage partner;
    • The tax-free transfer of property between spouses;
    • The process for estates to claim portability of the estate tax exemption if they did not file Form 706 because they were below the filing threshold; and
    • How taxpayers must report, or track, previously reported gifts that are now eligible for the marital exclusion and for gift splitting.

    Read the comment letter.

    ADVOCACY: AICPA Calls on IRS to Provide Shutdown Plan for Input (November 2013)
    The AICPA asked the IRS to announce its plans now for how it will operate if there is another federal government shutdown in January.  Practitioners should be able to provide input into such a plan, the AICPA noted in a letter to the IRS.  The AICPA is deeply concerned about the potential impact such a shutdown would have in light of the fact that only 9.3% of the agency was deemed essential during the Oct. 15 filing deadline. 

    ADVOCACY: AICPA Recommends Changes to 3.8% NII Tax on International Entities (August 2013)
    The AICPA recently submitted recommendations to the IRS for the proposed regulations that provided guidance for the Net Investment Income (NII) tax and its effects on international entities (controlled foreign corporations CFCs and passive foreign investment corporations PFICs).  Under section 1411, the new 3.8% NII tax imposes a tax on unearned income on investments of certain individuals, estates, and trusts, and certain foreign entities whose income is above the statutory threshold amounts.  Subpart F and PFIC income should be treated as “other income” and not dividend income for purposes of the 3.8% tax, the AICPA told the IRS.

    UPDATE: Consolidated and Extended Relief Now Available for Late S Elections (August 2013)
    The IRS released Rev. Proc. 2013-30, which provides a simpler framework for requesting relief for late S corporation elections, including those for ESBT, QSST, QSub, and late corporate classifications that the taxpayer intended to start with the original election.  The procedure will provide a single source for requesting relief; the IRS also included a flowchart for determining availability.

    ADVOCACY: AICPA Opposes Combining Partnership and S Corporation Regimes (August 2013)
    In a letter to the House Ways and Means Committee Chairman and Ranking Member, the AICPA objected to a proposal in Option 2 of Chairman Camp’s Small Business Tax Reform discussion draft. The proposed reform would eliminate the current Subchapter S and Subchapter K regimes and replace them with a single, unified regime.  While the AICPA is in favor of simplifying the tax system, the new system, as proposed, would result in significant complexity and corresponding costs. 

    ADVOCACY: AICPA Requests Administrative Relief for Missed or Late QTIP and QRT Elections (August 2013)
    The AICPA petitioned to Congress requesting that the IRS be given authority to grant section 9100 relief for missed and late Qualified Terminable Interest Property (QTIP) and Qualified Revocable Trust (QRT) elections.  Section 9100 relief is helpful when practitioners or taxpayers inadvertently do not file elections or file them late; however, section 9100 does not currently provide relief for many elections with statutory due dates, such as the QTIP and QRT elections.

    ADVOCACY: AICPA Recommends Section 736(b)(2) Partnership Payments Be Exempt from 3.8% NII Tax (August 2013)
    For proposed regulations covering IRC section 736(b)(2), the AICPA recommended that certain partnership payments not be subject to the 3.8% net investment income tax under four specified circumstances.  In a recent letter to the IRS, the AICPA outlined what it considers appropriate basis for the exceptions, including level of participation by partners, nature of the business operated within the partnership, and nature of the payments received among other criteria.

    UPDATE: IRS Releases Draft Net Investment Income Tax Form (August 2013)
    Last week, the IRS posted a draft version of new Form 8960, which will be used to compute the 3.8% net investment income tax imposed on high-income individuals and trusts and estates starting this year. On Form 8960, taxpayers will calculate total investment income and total deductions and modifications (such as investment interest expense and state taxes) to arrive at net investment income. The form provides separate tax calculations for individuals and for trusts and estates.  Now that the draft form (which is one page) has been released, taxpayers and practitioners can examine it and address areas where the IRS has requested comments by September 27. Read more from the Journal of Accountancy.

    ADVOCACY: AICPA Speaks Up Against Limits on Cash Methods of Accounting (July 2013)
    The AICPA voiced its objections to a proposal that would prohibit many pass-through entities, farmers and personal service corporations from using the simpler cash method of accounting.  Under the Small Business Tax Reform Discussion Draft released by Ways and Means Committee Chairman Dave Camp, only individuals and certain taxpayers with average gross receipts of $10 million or less would be eligible for the cash method.  In a letter to committee leaders, the AICPA urged them to consider the financial burden that the proposal would place on businesses. “The proposal would require these companies to change to the accrual method, force their owners to pay tax before they have the cash to pay it, and add to complexity and costs,” the AICPA stated.

    ADVOCACY: AICPA Calls for Simplification of Education Tax Incentives (July 2013)
    The AICPA recently laid out several proposals to Congress to clean up overlapping education tax credits, recommending that features of existing education tax credits be combined into one simplified tax credit. The AICPA also recommended repealing certain deductions and educational savings bonds, and then merging the Coverdell Education Savings Accounts into Section 529 accounts to simplify and harmonize education savings tools.

    ADVOCACY: AICPA Recommends Changes to Medicare Surtax Proposed Regulations (June 2013)
    On June 17, the AICPA submitted comments on proposed regulations under Section 1411 regarding the new 3.8% Medicare surtax on net investment income. In his letter, AICPA Tax Executive Committee Chair Jeffrey Porter notes that the IRS’s guidance on Sec. 1411 "generally provides a reasonable approach to interpreting, implementing, and complying with the new [net investment income] tax rules." However, in response to the proposed regulations, the AICPA is making 16 detailed recommendations. Read more in this Journal of Accountancy article. Proposed regulations issued on November 30, 2012 answered many questions. Review a summary of some of the most important clarifications from Bob Keebler.

    ADVOCACY: AICPA Requests Clarification from IRS on Conversion of Disregarded Entities to Partnerships (June 2013)
    The AICPA Partnership Taxation Technical Resource Panel recommended that the IRS issue additional guidance regarding the conversion of disregarded entities to partnerships with respect to Revenue Ruling 99-5. The issues that the AICPA requested clarification from the IRS include the treatment of liabilities upon conversion of a disregarded entity to a partnership and the treatment of non-recognition transactions that result in the conversion of a disregarded entity to a partnership. 

    ADVOCACY: AICPA Recommends Simpler Small Business Tax Rules to Congress (May 2013)
    The AICPA made recommendations focused on simplification of the tax rules for small businesses and pass-through entities, including reforming tax return due dates and adjustments. The AICPA submitted a letter with a written statement for the May 15th House Ways and Means Committee Select Revenue Subcommittee hearing. The hearing was in response to Chairman Camp's small business tax reform discussion draft. Significant opinions by the AICPA included:

    • The AICPA opposes the limitation on use of cash method of accounting imposed on non-natural persons and the elimination of exceptions for personal service corporations and farmers.
    • The AICPA supports the availability of the cash method for an increasing level of gross receipts for small businesses.

    The AICPA supports the proposed new due dates for Partnership, S Corporation, and C Corporation returns and the automatic 6-Month extension of corporate income tax returns.

    ADVOCACY: AICPA Addresses “Challenging Tax Season” and IRS Budget with House (May 2013)
    Jeffrey Porter, Chair of the AICPA Tax Executive Committee, submitted written testimony on May 6 to the House Ways and Means Committee in response to the Committee’s recent hearing on “Internal Revenue Service Operations and the 2013 Tax Return Filing Season.” It was recommended that Congress pass legislation that would permit taxpayers to report de minimis changes in their income from a corrected Form 1099 or amended Schedule K-1 in the year of receipt of the amended form. This recommendation would remedy the issue of taxpayers having to file amended returns or incur penalties due to minimal changes in income because of amended forms.

    The AICPA also advocated for Congress to review funding levels of the IRS’s 2014 fiscal year budget. It was recommended that the IRS be given the resources necessary to properly process tax returns and enforce the tax laws, which is vital to maintaining a voluntary compliance tax system. The AICPA believes that the any increase in enforcement funding must be balanced with positive responses to the taxpaying public as customers, which has become difficult, as the IRS’s role has expanded from one concentrated on tax collection to one focused on distributing benefits to a variety of individuals and businesses.

    ADVOCACY: AICPA Sends Tax Reform Proposals and Principles to Ways and Means (May 2013) 
    In April 2013, the AICPA offered numerous recommendations to congressional study groups for ways to improve tax laws for individuals, businesses and exempt organizations. This is a significant step as the 11 study groups formed by House Ways and Means Committee Chair Dave Camp will likely be critical influences on tax reform legislation. The AICPA submitted comments to the following House Ways & Means Tax Reform Working Groups:

    AICPA Comments on IRS's Proposed Guidance Regarding Cancellation of Debt (April 2013)
    On April 1, the AICPA submitted comments to the IRS regarding proposed guidance governing how to report the cancellation of debt. The AICPA believes changes are needed to the filing requirements for Form 1099-C, Cancellation of Debt. Specifically, AICPA recommended that:

    • The IRS require lenders to issue Form 1099-C only upon the legal discharge of a debt, which will occur at the earlier of the expiration of the applicable statute of limitations or when all collection efforts by the lender or surrogate collection organizations have ceased.
    • The IRS amend the applicable regulations so that a Form 1099-C is issued only for the year that a debt is legally discharged, which would solve the timing problem created because the current 36-month non-payment testing period results in a Form 1099-C being issued several years after the debt is legally discharged. 
    • The IRS collaborate with other government agencies involved with credit card and other debts to ensure that the rules for legal discharge of debt are applied so that borrowers do not receive a Form 1099-C if the lender or 3rd party purchaser of the debt intends to continue collection efforts.

    UPDATE: Penalty Relief Announced for Payments Related to Delayed Forms (March 2013)
    Under Notice 2013-24, relief is available to individuals and businesses filing extensions for tax returns claiming tax benefits using forms that were not released until March by the IRS. The relief applies to the late-payment penalty, normally 0.5% per month, charged on tax payments made after the regular filing deadline. Taxpayers must still estimate their expected tax liability and pay the estimated amount by the original due date and will still be subject to interest for any tax payment made after the original deadline. This relief applies to any of the forms delayed until February or March, primarily due to the January enactment of the American Taxpayer Relief Act. 

    UPDATE: House Discussion Draft Proposes Tax Reform to Help Small Businesses (March 2013)
    House Ways and Means Committee Chairman Dave Camp recently released a discussion draft of tax reforms to help small businesses. Part 2 of the discussion draft proposed simplification of business tax return due dates, an initiative that has been championed by the AICPA. The proposal would alleviate the problem of receiving late Schedule K-1 information, which often prevents the pass-through owners from filing accurate and timely returns. The proposal creates a logical set of due dates focused on allowing a more timely flow of information from pass-through entities to their owners.

    ADVOCACY: AICPA Legislation Would Adjust Due Dates to Address K-1 Issue (February 2013)
    Taxpayers and preparers have long struggled with problems created when Schedule K-1s arrive late, sometimes within days of (before or after) the extended due date of many returns and up to a month after the extended due date of business returns, including Forms 1065, 1120S, 1120, and 1041.  This makes it difficult, if not impossible, to file a timely, accurate tax return.  An AICPA-backed bill has been re-introduced in both houses of Congress to alleviate this problem. If enacted this year, it would take effect for tax year 2014 (2015 filing season).   For more information on the legislation and proposed due dates, go to the AICPA's Due Dates webpage

    ADVOCACY: AICPA Raises Concerns About IRS Delays in Release of Tax Forms (February 2013)
    In a Feb. 15 letter to the IRS, the AICPA raised concerns about the impact in the IRS’ delay in releasing certain tax form is having on taxpayers and CPAs. These form delays are causing taxpayers and tax preparers to face a very compressed and difficult filing season.

    The letter states that while the AICPA is pleased with the recent release of Form 4562 (Depreciation and Amortization) and Form 8863 (Education Credits), the Institute remains concerned about the continuing delay in the release of 29 other forms. The AICPA requested a dialogue with the IRS to gain more clarity on IRS’ plans to release the remaining forms, and provide taxpayers with potential reasonable cause relief from failure to file, failure to pay, and estimated tax penalties.

    ADVOCACY: AICPA Proposes Tax Code Cleanup (February 2013)
    While many major tax policies continue to be debated in Washington, the AICPA believes many technical issues can be resolved with less controversy, making practitioners and taxpayers' lives easier. The AICPA recently submitted our Compendium of Legislative Proposals on provisions in the Internal Revenue Code that need attention. The Compendium covers a broad range of problems that continue to vex preparers and taxpayers such as overlapping education tax incentives and varying mileage rates and proposes solutions that help simply tax administration.

    UPDATE: Tax Season News (February 2013)
    Catch up on the latest news from the IRS affecting your clients this tax season, including:

    • Revised Form 8949 for 2012 Now Available 
    • IRS releases changes to 5471 and 8621 Form Instructions
    • More Hurricane Sandy Filing Extensions and a Funding Package from Congress
    • IRS Issues Form 8958, Allocation of Tax Amounts Between Registered Domestic Partners and Same Sex Spouses in Community Property States
    • New IRS Audit Guide on Family Limited Partnerships
    • IRS To Start Processing Form 8863, Education Credits on February 14th

    UPDATE: IRS Postpones Effective Date of New Procedures for Consents to Disclose (February 2013)
    Rev. Proc. 2013-19, issued Feb. 6, delays the date that taxpayer consents to disclose and consents to use tax return information must contain the mandatory language recently issued in Rev. Proc. 2013-14. The original effective date of Jan. 14, 2013, has been moved back to Jan. 1, 2014. Read more from Journal of Accountancy.

    ADVOCACY: IRS Reopens PTIN Registration System (February 2013)
    On February 2, the IRS reopened its PTIN registration system, following an AICPA letter urging the IRS to address the issue and clarification from the district court that struck down the IRS’ return preparer registration program. The court refused the IRS’ request to suspend its injunction on the program, but it did clarify that the injunction does not affect the IRS's requirement that preparers use a preparer tax identification number. Read more from Journal of Accountancy.

    UPDATE: New Section 7216 Guidance (Jan. 2013)
    As accounting firms continue preparations for the 2013 tax filing season, CPAs should closely review the final regulations and new revenue procedure recently released by the IRS under IRC Section 7216.  This Code section involves the disclosure or use of tax return information by a tax return preparer.  Some aspects to be aware of include:

    • Accounting Services. The preamble to the final regulations (TD 9608) suggests that the solicitation of a current tax client about new accounting services (including payroll return preparation) may necessitate obtaining the written consent of the client.
    • Rev. Proc. 2013-14 provides revised language that tax return preparers must include in written consent forms provided to clients regarding disclosures or use of tax return information.
    • Electronic Signatures. Rev. Proc. section 6 addresses the procedures for taxpayers furnishing the tax return preparer with an electronic signature verifying that the taxpayer consented to the disclosure or use of the tax return information.
    • Consent Form Language. Rev. Proc. section 7 provides examples of the modified language for consent forms to be provided to clients filing returns in the Form 1040 series.
    • Effective Date. Consents obtained on or after January 1 must contain the modified consent form language highlighted in the Rev. Proc.

    UPDATE: U.S. District Court Strikes Down IRS Preparer Regulation Program (Jan. 2013)
    On January 18, the United States District Court struck down the IRS registered tax return preparer program and enjoined it from enforcing the regulations (Loving, No. 12-385 (D.D.C. 1/18/13)). The IRS immediately issued a statement saying they "have confidence in the scope of its authority to administer the program." Indeed, on January 23, the IRS filed a motion to suspend the District Court’s injunction pending appeal which the Service intends to file within 30 days.

    Simply stated, the District Court indicated in its ruling that Congress never contemplated that the 1884 law that created rules for practice before Treasury, Circular 230, would define “practice” to cover tax return preparation. However, the pre-existing Circular 230 rules, beyond the new tax return preparation rules, continue to apply to CPAs, attorneys, & Enrolled Agents.

    Because the Court’s injunction was effective immediately, the IRS closed down the PTIN registration system. The unavailability of the PTIN system creates an administrative challenge for CPAs who may still need to renew their PTIN or obtain one for the first time – actions still required by the Internal Revenue Code. The AICPA has contacted IRS and they are aware of this issue and are working to resolve it. The AICPA continues to monitor the situation and interact with the IRS, and will keep you informed of any developments.

    UPDATE: American Tax Relief Act Signed by President Obama (January 2013)
    Pulling back from the “fiscal cliff” at the 13th hour, Congress preserved most of the George W. Bush-era tax cuts and extended many other lapsed tax provisions. Shortly before 2 a.m. Tuesday, January 1, the Senate passed the American Taxpayer Relief Act (ATRA), H.R. 8. The House of Representatives approved the bill by a vote of 257–167 late on Tuesday evening, after plans to amend the bill to include spending cuts were abandoned. The bill was signed by President Obama on Wednesday, January 2. Notable items for financial planners include:

    1. All the individual marginal tax rates under EGTRRA and JGTRRA are retained (10%, 15%, 25%, 28%, 33%, and 35%). A new top rate of 39.6% is imposed on taxable income over $400,000 for single filers, $425,000 for head-of-household filers, and $450,000 for married taxpayers filing jointly ($225,000 for each married spouse filing separately).
    2. The personal exemptions and itemized deductions phaseout is reinstated at a higher threshold of $250,000 for single taxpayers, $275,000 for heads of household, and $300,000 for married taxpayers filing jointly.
    3. A 20% rate applies to capital gains and qualified dividends for individuals above the top income tax bracket threshold; the 15% rate is retained for taxpayers in the middle brackets. The zero rate is retained for taxpayers in the 10% and 15% brackets.
    4. The exemption amount for the AMT on individuals is permanently indexed for inflation. Relief from AMT for nonrefundable credits is retained.
    5. The estate and gift tax exclusion amount is retained at $5 million indexed for inflation ($5.12 million in 2012), but the top tax rate increases from 35% to 40% effective Jan. 1, 2013. The estate tax “portability” election, under which, if an election is made, the surviving spouse’s exemption amount is increased by the deceased spouse’s unused exemption amount, was made permanent by the act.
    6. If an employer offers a designated Roth 401(k) plan, ATRA will now allow individuals to convert their existing 401(k) to a Roth 401(k) whether or not the individual is allowed to take a distribution from the plan

    Read more details from the Journal of Accountancy and Michael Kitces. Personalize and send the following Forefield Alert on the legislation to your clients.

    UPDATE: Section 7216 Final Regulations Issued (December2012)
    The Internal Revenue Service issued final regulations on Wednesday on the circumstances in which tax return preparers can use or disclose taxpayer information. The regulations adopt rules issued in 2010 as temporary regulations, and they cover what lists practitioners may compile to solicit return preparation business, transfers of such lists in the sale of a practice, statistical compilations of taxpayer information, and conflict-of-interest reviews. Source:

    Also, in Rev. Proc. 2013-14, the IRS has provided guidance to tax return preparers about the format and content of taxpayer consents to disclose and consents to use tax return information and modified the mandatory language required on each taxpayer consent. The guidance applies to individuals filing a return in the Form 1040 series. The revenue procedure also lists specific requirements for electronic signatures when a taxpayer executes an electronic consent to the disclosure or consent to the use of the taxpayer’s tax return information. 

    UPDATE: Updated ITIN Guidance (November 2012)
    On November 29, 2012, 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.

    ADVOCACY: AICPA Comments on Proposed Revisions Circular 230 (November 2012)
    Proposed regulations were released in September 2012 to eliminate the old section 10.35 covered opinion standards. AICPA submitted comments on the proposed revisions on November 29, 2012. The AICPA supports the proposed regulations and is particularly grateful for the simplification provided through the elimination of Section 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.

    UPDATE:  IRS Proposes Detailed Regs on Medicare Surtax, Including Immediate CRT Planning Opportunity (November 2012)
    On Nov. 30, the IRS and Treasury issued proposed regulations regarding the new 3.8% Medicare surtax on net investment income (“Medicare surtax”), as well as proposed regulations on the additional 0.9% Medicare tax. The IRS also issued FAQs on the 3.8% Medicare surtax proposed regs and posted Q&As to provide employers and payroll service providers information that will help them as they prepare to implement the additional 0.9% Medicare tax.

    The proposed regulations on the 3.8% Medicare surtax (REG-130507-11) provide much anticipated guidance under new IRC section 1411, as added by the Health Care and Education Reconciliation Act of 2010. Section 1411 imposes a 3.8% tax on some net investment income of individuals, estates, and trusts that have income above the statutory threshold amounts (MFJ $250,000, S/HOH $200,000, MFS $125,000, estates and trusts $11,650). The Medicare surtax will start to apply in 2013 (i.e., tax years beginning after Dec. 31, 2012).  However, the regs generally are proposed to be effective for 2014 and future tax years (i.e., tax years beginning after Dec. 31, 2013). The special computational rules for charitable remainder trusts (CRTs) are proposed to apply to 2013 and future tax years (i.e., tax years beginning after Dec. 31, 2012). Taxpayers may rely on the proposed regs for purposes of complying with section 1411 until the effective date of the final regs. Treasury and the IRS intend to finalize regs under section 1411 in 2013. 

    One aspect of the new proposed regulations concerns the application of the Medicare surtax to charitable remainder trust distributions and creates an immediate planning opportunity to consider before 2013.  According to the new proposed regulations, while CRTs are exempt from the new 3.8% Medicare surtax, distributions of post-Dec. 31, 2012 net investment income of CRTs will be subject to the 3.8% Medicare surtax. Therefore, CRT distributions of income and capital gains realized and recognized before Dec. 31, 2012 will not be subject to the surtax, but CRT distributions of income and capital gains realized and recognized after 2012 will be subject to the surtax.  Accordingly, selling appreciated CRT assets in calendar year 2012 may reduce the amount of the Medicare 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. Special thanks to Bob Keebler for immediately pointing out this planning tip.

    For more information on the proposed regulations, see the AICPA proposed regs CRT impact summary page and read articles on the 3.8% Medicare surtax and 0.9% additional Medicare tax proposed regs from the Journal of Accountancy.  Also, for more resources and tools on the Medicare surtax, see the Proactive Planning in Preparation for 2013 Toolkit. The AICPA Tax Division will be developing comments on the proposed regulations, which are due by March 5, 2013. 

    ADVOCACY: AICPA Submits Comments to IRS on Proposed Regulations Regarding Shareholder Debt of S Corporations (November 2012)
    On Nov. 13, the AICPA submitted a letter to the IRS supporting the IRS’s proposed regulation to clarify the proper treatment of shareholder debt of S corporations.  The AICPA also suggested that IRS include in the regulation an example it provided to help tax preparers better understand basis for S corporation shareholders. AICPA Tax Executive Committee Chairman Jeffrey A. Porter, CPA, wrote, “The proposed regulations will, when final, substantially reduce the uncertainty clouding the proper treatment of shareholder debt under section 1366 of the Internal Revenue Code.  We appreciate and applaud the Service for adding more clarity and fairness in tax administration.” In an effort to provide further clarity, the AICPA recommended and offered specific language for inclusion in any final regulations regarding the issue of bona fide indebtedness.

    ADVOCACY: AICPA Suggests Improvements to the Partnership De Minimis Section 704(b) Proposed Regulation (November 2012)
    On Nov. 2, the AICPA submitted comments on the proposed regulations (REG-109564-10) that withdraws the de minimis exception of Treas. Reg. § 1.704-1(b)(2)(iii)(e) (the “De Minimis Exception”) regarding a partner’s distributive share. The proposed regulation was withdrawn because the rule may have resulted in unintended tax consequences. The AICPA comments address the withdrawal of the De Minimis Exception and suggest an alternative that will reduce the burden of complying with the substantial economic effect rules without diminishing the safeguards that the current rules provide. The AICPA believes that partnerships that pose little to no risk to the underlying policies of section 704(b) should be excluded from the complicated substantial economic effect rules.

    ADVOCACY: AICPA Letter on Pro Rata Distributions and the Creation of a Second Class of Stock for S Corps (October 2012)
    In an Oct. 23 letter to the IRS, the AICPA recommended that the IRS incorporate two private letter rulings into regulations to allow distributions associated with taxable income to be made, regardless of the year in which taxable income is modified. The AICPA’s letter also requests for the IRS to confirm that S corporations can make both pro rata distributions according to current stock ownership and other distributions that meet the varying interest rule. Moreover, the letter requests the IRS to clarify that a distribution in the current year can take into account varying interests of both the preceding and current years without creating a second class of stock.

    ADVOCACY: AICPA Suggests Legislative Proposal for Form 1041-A Filing Exception for Trusts with Charitable Deductions Only from Flow-Through Entities (October 2012)
    On Oct. 19, the AICPA submitted a legislative proposal to the leadership of the tax-writing committees in Congress to provide a legislative exception for filing the Form 1041-A for trusts with charitable deductions only from flow-through entities.  Previously, on Sept. 14, 2010, the AICPA submitted a similar regulatory/administrative proposal to the IRS asking for a similar filing exception.  The IRS had informally responded at that time that the suggestion seemed worth considering, but that it would take years for regulations to be issued on this.  Since the AICPA continues to hear from members concerned about this issue and the other filing exceptions under section 6034(a) are legislative, the AICPA decided to suggest this legislative proposal as well now.

    UPDATE: IRS Proposes Changes to Circular 230  (September 2012)
    On September 17, the Internal Revenue Service (IRS) proposed modifications to Circular 230. The proposed changes would eliminate the complex rules governing covered opinions in current section 10.35 by removing the requirement that practitioners fully describe relevant facts and use disclaimers in documents, including e-mails. The proposed changes would also expand the requirements for written advice under section 10.37, broaden the scope of the procedures to ensure compliance under section 10.36, and create a “general competence” standard in a new section 10.35. Learn more in this Journal of Accountancy article: IRS Proposes changes to Circular 230 rules governing written tax advice which provides a more in-depth analysis. Comments on the proposed changes are due to the IRS by November 16 and a hearing has been scheduled for December 7.

    ADVOCACY: AICPA Says Congress Must End Tax Uncertainty (September 2012)
    On September 13, Jeffrey A. Porter, vice chair of the AICPA’s Tax Executive Committee, told a House Congressional panel that Congress must reach agreement as soon as possible about expiring tax provisions because the current tax uncertainty is hindering business planning by small business owners and threatening smooth administration of tax laws. 

    “Our members are receiving inquiries from their clients, sometimes on a daily basis, on whether the ‘Bush Tax Cuts’ will be extended, what will happen with estate taxes, how the ‘Tax Cliff’ will affect their businesses and whether a particular tax incentive will be extended another year,” Porter testified to members of the House Small Business Subcommittee on Economic Growth, Tax and Capital Access at a hearing titled Adding to Uncertainty: Small Businesses’ Perspectives on the Tax Cliff.  “Any further delay will magnify the frustration of many small business owners.”

    Currently, small businesses, formed as corporations, pass-through entities, or sole proprietorships, face great uncertainty with regard to income taxes in a multitude of areas, including income tax rates, long-term capital gains rates, the rate for qualified dividends, and whether, and to what extent, certain deductions and exemptions will be available.  “Regardless of whether you support or oppose an increase in income taxes, it is important to understand the significance of what is at stake.” Porter said. 

    ADVOCACY: AICPA Calls for Changes in IRS’s ITIN Procedures (August 2012)
    In a comment letter to the IRS Commissioner, the AICPA called the Service’s new interim Individual Taxpayer Identification Number (ITIN) procedures burdensome for foreign persons filing ITIN applications. In general, foreign individuals who are not eligible for a Social Security number must have an ITIN to meet their U.S. tax filing obligations and claim refunds.

    The AICPA urged the IRS to:

    1. review its decision to not accept notarized copies of identification documents (such as passports) from ITIN applicants; and,
    2. issue guidance about how taxpayers who need ITINs can comply with their 2011 federal tax obligations, particularly with respect to the Oct. 15, 2012, extended due date for individual tax returns.

    The IRS’s new ITIN procedures pose difficulties for taxpayers by requiring taxpayers, as of June 22, 2012, to mail original documents to the IRS, such as their passports or other appropriate identification documents. The IRS says it could take up to 60 days to return them. Taxpayers may also submit a copy of a document that has been certified by the foreign issuing agency, but some foreign governments do not offer certified documents.

    It is impractical for most foreign persons in need of an ITIN to surrender their original identification documents to the IRS for 60 days. We have also heard from our members that some prospective ITIN applicants who are currently residing in the United States have been advised by their home country’s consulate that it does not issue certified copies of passports.

    The letter also stated that: “Notarized documents are an efficient method of transmitting required documentation to the IRS in the majority of cases.” The AICPA will keep you informed of any updates or revisions to the IRS’s new interim procedures.

    ADVOCACY: Erroneous IRS Letters to Taxpayers Filing Foreign Trust Form Widespread (August 2012)
    The AICPA alerted the IRS on August 28th that erroneous letters from the Service to taxpayers filing a foreign trust form is a “widespread problem affecting numerous taxpayers.”  The AICPA urged the IRS to investigate to determine the source of the processing problem so it could stop sending out the erroneous letters and to consider issuing an announcement that such erroneous letters do not require a response.

    “The letters are inconveniencing taxpayers and causing them to incur unnecessary professional fees when practitioners must respond to the IRS explaining why the IRS letters are incorrect and request an abatement of the penalties,” the AICPA said in its August 28th letter to the IRS. The letters with erroneous conclusions are being received by taxpayers who filed Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, for 2010 and earlier years. The AICPA letter described six specific errors the IRS letters claim taxpayers have made, including filing Form 3520 late when it was filed on time.

    ADVOCACY: Cost Basis Reporting Needs to be Delayed, AICPA Tells IRS (July 2012)
    New formats for reporting capital gains and losses during the past tax season caused a lot of headaches for tax practitioners and taxpayers alike. The AICPA recommended in a letter to the IRS that it review and revise Forms 8949 and 1099-B to provide greater clarity in the tax information that must be reported by taxpayers, calling for greater standardization of the format and the data detailed on Forms 1099-B and capital gain/loss statements sent by brokers to individual taxpayers.

    The AICPA also recommended that the IRS delay the matching of the cost basis information reported by brokers on Form 1099-B and what taxpayers report on Form 1040, Schedule D; otherwise, “it will result in a waste of time, money and resources for the IRS, taxpayers, and the tax preparer community. We believe that cost basis matching should be delayed until such time as there is more consistency and reliability in the process.”

    To familiarize yourself with the new cost basis reporting rules and planning opportunities, read the transcript on AICPA Insights from Michael Kitces and download the December 2011 issue of The Kitces Report. Note that PFP/PFS members save 10% on a monthly subscription to The Kitces Report by using discount code AICPAPFP.

    UPDATE: Podcast on the Impact of the President’s Budget Proposals on Planning for HNW Individuals (February 2012)
    Listen  to a podcast from Bob Keebler on how President Obama’s newly released fiscal year 2013 budget proposal may affect estate and financial planning for high net worth individuals.

    UPDATE: Obama Administration’s 2013 Budget Proposals (February 2012)
    President Barack Obama unveiled his proposed budget for fiscal year 2013 on Monday, February 13. Included in its 256 pages are several tax reform proposals, including plans to eliminate the alternative minimum tax (AMT), to repeal LIFO, and to tax dividends of high-income taxpayers at ordinary income rates.

    Read more about President Obama’s budget proposal in the Journal of Accountancy.
    Read the General Explanations of the Administrations Fiscal Year 2013 Budget Proposals released on Monday. 

    No one can predict whether any of these proposals will become law. However, it is important to be able to have an intelligent conversation with your clients and to proactively plan for what could come down the pike. Bob Keebler shares, “Most of [the estate proposals] were old news that we have seen before, including minority discounts, GRATs, GST limitations, etc.  However, the proposal includes a provision to end the IDGT [Intentionally Defective Grantor Trust] planning strategy. A grandfather provision does exist for trusts created before the bill. (Read more about the provision affecting grantor trusts in this Forbes article).

    On the income tax side, the proposals look to increased taxes on higher earners including the elimination of:

    1. Carried interests tax benefits,
    2. Qualified dividends for those in the 36% and 39.6% rates

    The proposal also increases the capital gains rate for upper income earners to 20% and reduces the benefit of certain itemized deductions.  Finally, the Bush era rates will be increased to 36% and 39.6% rates for higher income taxpayers.”

    The PFP Division will keep you in the loop on developments as they arise.

    UPDATE: Two New Interpretations of Statement on Standards for Tax Services No. 1, Tax Return Positions became effective January 31, 2012 (January 2012) The AICPA’s Statements on Standards for Tax Services (SSTSs) are enforceable tax practice standards for members of the AICPA.  The SSTSs apply to all members regardless of the jurisdictions in which they practice and the types of taxes with respect to which they are providing services.  The SSTSs and interpretations delineate members' responsibilities to taxpayers, the public, the government and the profession.  They are intended to be part of an ongoing process of articulating standards of tax practice for members, and may require changes to and interpretations of the standards to keep up with the accelerating rate of change in tax laws. 

    Interpretation No. 1-1, “Reporting and Disclosure Standards” provides that a member should not recommend a tax return position or take a position on a tax return that the member prepares unless that position satisfies applicable reporting and disclosure standards.  The tax laws of various taxing jurisdictions contain similar limitations on the ability to recommend or take certain tax return positions.

    Interpretation No. 1-2, “Tax Planning” has its origins in the AICPA's desire to provide adequate guidance to its members who provide tax planning.  Its goal is to clarify existing standards, recognizing the compelling need for a comprehensive interpretation of a member's responsibilities in connection with tax planning, and to clarify how those standards would apply across the spectrum of tax planning.

    UPDATE: Temporary and Proposed Regulations Issued for Reporting Specified Foreign Financial Assets (January 2012) 
    Temporary regulations, effective December 19, 2011, have been issued regarding the reporting of specified foreign financial assets under IRC Section 6038D. The temporary regulations affect Form 1040 filers and certain individuals required to file Form 1040-NR for tax year 2011. Form 8938, Statement of Specified Foreign Financial Assets, and instructions for use for 2011 tax year have also been released.

    Proposed regulations that expand this informational reporting to include reporting by specified domestic entities for tax years beginning after December 31, 2011 were also issued.

    For more information regarding IRC Section 6038D, please see the AICPA’s FBAR and FATCA Resources page. (Some content is locked to Tax Section members).

    Also note that the IRS added a new fact sheet on its website on December 7, 2011 to summarize and highlight some of the existing rules dual citizens need to be aware of. Note that there is no new program or new rules that were announced with the issuance of the fact sheet.

    UPDATE: IRS Preparer Compliance Initiative (November 2011)
    As an integral part of the IRS' ongoing efforts to enhance oversight of the tax return preparer community and provide educational outreach to tax preparers, the IRS is continuing its "IRS Letters and Visits" program. For the 2012 filing season campaign, the IRS sent approximately 21,000 letters to tax practitioners and they are planning to conduct approximately 2,100 compliance visits (compared to 2,500 visits out of 10,000 letters last year).  The AICPA had referred to this as the IRS "10,000 Letters" program but is now using the term "IRS Preparer Compliance Initiative" to more accurately reflect the IRS' change in scope, scale and approach.

    Recipients of the 21,000 letters (Letter 4809) for the current initiative were selected from a pool of tax return preparers who prepared a large number of 2010 individual income tax returns with Schedules A, C or E. The letters were sent to preparers during the middle of November.  Visits are expected to start shortly and will continue through April 15, 2012. However, following complaints from the AICPA that practitioners were getting visits during tax season, visits to CPAs are expected to conclude in early January. If you received one of these letters, the AICPA offers some suggestions, including preparation tips if the IRS contacts you for a visit.

    The AICPA continues to monitor this issue closely and work with IRS officials to address members' concerns. Learn more about this program and the AICPA’s efforts.

    UPDATE: Patent Reform Bill Signed by President Obama  (September 2011)
    The Senate passed the America Invents Act on September 8th by a vote of 89-9 and sent the bill to the president, who signed it into law on Friday, September 16th. The Senate’s version of the bill was identical to the one passed by the House in June. The bill includes a provision that stops the patenting of tax strategies, a legislative fix the AICPA has been advocating for the past five years. In a statement on September 8th, AICPA President and CEO Barry Melancon praised the passage of this bill, stating that “no one should have a monopoly on a particular form of tax compliance.” Read more from the Journal of Accountancy.

    UPDATE: First Hearing of “Super Committee” (September 2011)
    The Joint Committee on Deficit Reduction met on September 8th for an organizational meeting and again on September 13th for its first hearing. The committee of 12 members is tasked with trimming at least $1.2 trillion in federal spending to avoid triggering automatic cuts starting in 2013.

    Democratic members of the “super committee” released a memo of their revenue raising proposals on Thursday. Their proposal included the following brief summary on changes to the estate tax exemption and rates: “REVERT TO 2009 ESTATE TAX PARAMETERS FOR 2012. Estate tax parameters are scheduled to revert to 2009 levels in 2013. Revenue could be raised against a current-law baseline by reverting to 2009 levels one year early (in 2012).” It is important to note that in 2013, the estate tax exemption is scheduled to drop to $1 million (whereas in 2009, the exemption was $3.5 million) and the estate tax rate is scheduled to rise to 55% (whereas in 2009, the rate was 45%). Note that this proposal does not make clear whether the gift tax exemption would drop from its current level of $5 million to $3.5 million or $1 million (the 2009 exemption amount).

    UPDATE: IRS Announces Hurricane Irene Tax Deadline Relief (September 2011)
    The IRS announced postponed due dates for tax filings and payments for individuals and businesses affected by Hurricane Irene in parts of North Carolina, New York, New Jersey, Vermont, Connecticut, Massachusetts and Puerto Rico. Postponed deadlines include the September 15th due date for certain business return extensions and the October 17th due date for individual extensions, which, for affected taxpayers, are now due October 31st. Additionally, the IRS announced that businesses (no matter where they are located) whose return preparers are in an area affected by Irene are getting a one-week extension of the September 15th due date for certain extended returns. The AICPA sent a letter to the IRS requesting an extension for affected taxpayers on August 30th.  Read more about this postponement from the Journal of Accountancy and how the IRS expands Hurricane Irene relief. For more information about types of relief available, go to the IRS website.

    UPDATE: Revised Circular 230 Now Available (August 2011)
    Circular 230, revised to reflect the new return preparer oversight program and other changes, is now available on Read an article from the August edition of the Tax Adviser which summarizes the final Circular 230 regulations implementing the preparer registration rules.

    UPDATE: Congress Approves Debt Limit Increase (August 2011)
    On August 2nd, the Senate approved a bill by a vote of 74-26 to raise the debt ceiling (the House passed the bill on Monday by a 269-161 margin). President Obama quickly signed the bill into law. In addition to raising the debt limit by $2.1 trillion, the debt ceiling agreement creates a joint committee to identify additional deficit reduction measures by November. Despite the deal, the federal government could possibly face a credit downgrade if lawmakers fail to enact debt reduction measures and the economy weakens. We will keep you apprised via PFP News and of any developments and joint committee recommendations impacting your clients.

    UPDATE: IRS Addresses Tax Treatment of Tax-Free Exchanges of Annuities (June 2011)
    In Revenue Procedure 2011-38, the IRS has given taxpayers guidance on the tax treatment of exchanges of annuity contracts under Sections 72 and 1035. Under Sec. 1035(a)(3), taxpayers generally recognize no gain or loss when they exchange one annuity contract for another annuity contract. Revenue Procedure 2008-24 describes the tax treatment of the direct exchange by an insurance company of a portion of an existing annuity contract with an unrelated insurance company for a new annuity contract (a partial exchange).

    In response to taxpayer feedback regarding several issues that make Rev. Proc. 2008-24 less effective, the IRS issued Rev. Proc. 2011-38, amending Rev. Proc. 2008-24. Specifically, Rev. Proc. 2011-38 provides that the direct transfer of a portion of the cash surrender value of an existing annuity contract for a second annuity contract will be treated as a tax-free exchange under section 1035 if no amount, other than an amount received as an annuity for a period of 10 years or more or during one or more lives, is received during the 180 days beginning on the date of the transfer.  A subsequent direct transfer is not taken into account.  Other transactions will be characterized consistent with their substance.  The new rules are effective for exchanges that are completed on or after October 24, 2011.

    Read more from The Tax Adviser.

    UPDATE: House Passes Bill with Tax Patent Provision, Sends Back to Senate (June 2011)
    On Thursday, by a vote of 304–117, the House of Representatives passed the America Invents Act (H.R. 1249), which includes a provision intended to stop the granting of patents for tax strategies. The bill would deem any “strategy for reducing, avoiding, or deferring tax liability” to be prior art, and therefore not patentable. The House approved several amendments to the bill, and because it differs from the version passed by the Senate on March 8, it now must go back to the Senate for reconsideration. The AICPA has for several years opposed the issuance of patents for tax strategies and sent letters to Congress and the IRS expressing its concerns. Read more from the Journal of Accountancy.

    UPDATE: IRS Finalizes Automatic Five-Month Extension for Partnership, Trust and Estate Returns (June 2011)
    Final regulations set the time for automatic extensions of partnership, trust and estate income tax returns at five months (TD 9531). Under this rule, the extended returns and Schedules K-1 for partners and beneficiaries will generally be due September 15th.

    In 2008, the IRS issued temporary and proposed regulations (TD 9407 and REG-1115457-08) that reduced the automatic six-month extension of time to file for certain pass-through entities—most partnerships and estates and certain trusts. This was done to ensure that taxpayers received Schedules K-1 from these entities by September 15th, giving those taxpayers time to file their own income tax returns by the extended October 15th date for individual and corporate returns. The AICPA subsequently testified and submitted written comments asking that the trust extension be returned to a six-month period.  The IRS considered but rejected those comments.

    The AICPA had advocated for a September 15th partnership extension due date for several years, and wrote to the IRS in January 2008, suggesting the IRS open a regulation project to address the difficulties taxpayers face when receiving Schedules K-1 on or near their return due date. The AICPA called for a September 15th extension due date as a “regulatory change that would quickly assist a significant percentage of taxpayers presently burdened by the late receipt of Schedules K-1.”

    As a follow-up, in October 2010, the AICPA sent statutory recommendations to the chairmen and ranking members of the Senate Finance Committee and House Ways and Means Committee that would further solve this problem for corporate and trust investors in partnerships, something that the regulatory change does not solve or address, and, in some cases, makes worse. This letter resulted in the introduction by Senator Michael Enzi, R-Wyo., of the Tax Return Simplification and Modernization Act of 2011 (S. 845).

    Read more from the Journal of Accountancy.

    UPDATE: Tax Return Due Dates Bill Introduced in Senate (April 2011)
    On April 14th, Senator Mike Enzi (R-WY) and co-sponsor Senator Olympia Snowe (R-ME) introduced The Tax Return Due Date Simplification and Modernization Act of 2011 (S. 845), which would “provide for the logical flow of return information between partnerships, corporations, trusts, estates, and individuals to better enable each party to submit timely, accurate returns and reduce the need for extended and amended returns, to provide for modified due dates by regulation, and to conform the automatic corporate extension period to longstanding regulatory rule.” The AICPA recommended a change to tax return due dates in an October 2010 letter to Congress and the IRS, in order to alleviate much of the September 15th workload burden and to provide for return due dates to match the needs of various flow-through entities. We will keep you apprised of any developments.

    ADVOCACY:  Tax Strategy Patent Ban Advances to House, AICPA Sends Letter of Support (April 2011)
    On March 8th, the Senate passed the America Invents Act (formerly known as the Patent Reform Act), which sent the bill to the House Judiciary Committee. Following an April 13th letter from the AICPA calling for the passage of this bill, the committee acted and passed it 32-3 on April 14th. The bill now heads to the full House. President Obama supports the bill, which includes a provision intended to stop the granting of patents for tax strategies. Read more from Journal of Accountancy.

    ADVOCACY: AICPA Tells Congress, “Americans and their Families Need Simpler Tax Laws” (April 2011)
    On April 13th, AICPA Individual Income Taxation Technical Resource Panel chair, Annette Nellen, testified at a House Ways and Means Committee hearing focused on the special burdens placed by the tax code on individual taxpayers and families and the need for comprehensive reform to address the problems. Nellen stated that individual tax payers and their families need simple tax laws so that they can understand the rules and follow them in a cost-efficient manner. Nellen cited the need for simplification of education tax incentives, the Earned Income Tax Credit, mileage rates, phase-outs, due dates on reporting requirements for foreign accounts, and the alternative minimum tax, and more. The compliance burden on taxpayers could be reduced by *changing the filing due dates for partnership and trust returns because many individuals who are partners and other pass-through owners and beneficiaries must wait for a Schedule K-1 in order to file their personal income tax return.  Finally, avoiding temporary provisions would reduce complexity in the tax law, Nellen said. Access the AICPA tax reform simplification materials cited in the testimony. Read more from Journal of Accountancy. *Note that a bill was introduced on movement of tax deadlines by Senator Enzi on April 14th.

    UPDATE: President Signs Repeal of Expanded 1099 Requirements (April 2011)
    On April 14th, President Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4, 1099 Act), which repeals both the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation and also the 1099 reporting requirements imposed on taxpayers who receive rental income enacted as part of last year’s Small Business Jobs Act (PL 111-240). The Senate approved the bill on April 5th, and the House voted in favor of it on March 3rd. The AICPA had advocated strongly for repeal of both provisions and as one of the only organizations advocating against the rental property requirement was a driving force in its repeal. When the Senate passed the bill on April 5 and sent it to President Obama for his signature, AICPA President and CEO Barry Melancon described the repeal as “a victory for taxpayers.” As a result of the repeal, the 1099 reporting rules continue unchanged; however, the 1099 Act did not repeal the increase in the information reporting penalties that were mandated by the Small Business Jobs Act, which went into effect on January 1, 2011. Read more from Journal of Accountancy.

    UPDATE: Patent Reform Takes Major Step Forward (April 2011)
    On March 30th, House Judiciary Committee Chairman Lamar Smith (R-Texas) introduced the America Invents Act, which will modernize and reform the patent system. The bill is similar to legislation that passed the Senate earlier this year and, most importantly, includes a provision intended to stop the granting of patents for tax strategies. This provision would deem any "strategy for reducing, avoiding, or deferring tax liability" to be prior art and so is non-patentable. The AICPA has for several years opposed the issuance of patents for tax strategies.

    UPDATE: Senate Approves 1099 Repeal, Sends Bill to President (April 2011)
    On March 5th, the Senate passed legislation to repeal both the expanded Form 1099 information-reporting requirements mandated by last year’s health care legislation and also new 1099 reporting requirements imposed on taxpayers who receive rental income. The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4) was approved by the Senate by a vote of 87–12. The House of Representatives passed the bill on March 3, and since the House and Senate have approved the same version it now goes to President Barack Obama for his signature.

    The AICPA supported repeal of both 1099 provisions. In February 14th letters to the chairmen and ranking members of the Senate Finance Committee and the House Ways and Means Committee, the chair of the AICPA’s Tax Executive Committee, Patricia Thompson, urged the repeal of both provisions and expressed the AICPA’s concerns about the significant compliance burdens that businesses and rental property owners would face if the expanded 1099 reporting provisions were not repealed.

    Read more from the Journal of Accountancy
    Read a statement from AICPA President and CEO Barry Melancon applauding the repeal.

    ADVOCACY: AICPA Tells IRS Electronic Data Safeguards Are Needed During IRS Audits (March 2011)
    In a letter to the IRS’s Small Business/Self-Employed Division, the AICPA called on the IRS to investigate ways that small businesses can safeguard their electronic data when the IRS requests it during an examination. The IRS has been requesting taxpayers' accounting software data, and the letter, from AICPA Tax Executive Committee chair Patricia Thompson, CPA, expresses concern that taxpayers are divulging data not necessarily relevant to the IRS examination or facing increased costs to ensure only relevant data is provided. Read the AICPA’s press release and a Journal of Accountancy article for more on this issue.

    UPDATE: Senate Passes Patent Reform Bill Including Tax Strategy Provision (March 2011)
    On March 8th, the Senate passed the America Invents Act (formerly known as the Patent Reform Act) by a vote of 95 to 5. One of the provisions in the bill deems any strategy for reducing tax liability to be "prior art" and therefore not patentable. The bill moves to the House of Representatives for consideration; it is not known when the House will take it up. The AICPA has long opposed patents for tax strategies and believes such patents are harmful to taxpayers. Read more from Journal of Accountancy.  Read the AICPA’s press release.

    UPDATE: House Lawmakers Seek to Finalize 1099 Repeal (March 2011)
    House members are urging their Senate counterparts to complete work on a measure to repeal the 1099 reporting requirements in the health care law. There is still a dispute over how the $22 billion cost would be paid for, and the Obama administration does not like the pay-for measure proposed in the House version. AICPA President and CEO Barry C. Melancon, CPA, released a statement last week applauding the bill's passage in the House.

    UPDATE: Pass-Throughs Dominate Tax Reform Conversation (March 2011)
    At a March 3rd hearing on tax reform and small business held by the House Ways and Means Subcommittee on Select Revenue Measures, witnesses reacted to Treasury Secretary Timothy Geithner's suggestion that Congress consider whether pass-through entities should lose their pass-through status. A number of witnesses, including Patricia Thompson, chair of the AICPA's Tax Executive Committee, testified that losing pass-through status would hurt small businesses. She also addressed broader tax policy and reform issues, particularly the impact of uncertainty on small businesses. Read more from Journal of Accountancy

    ADVOCACY:  AICPA Sends Letter Urging Repeal of 1099 Provisions; Bills Pass Senate and House Committee (February 2011)
    The House Ways and Means Committee voted on February 17th to send to the House floor a bill that would repeal both the expanded information reporting requirements (enacted as part of last year’s health reform legislation) and the requirement that taxpayers who receive income from rental property issue 1099s to service providers for payments of $600 or more for the year (enacted as a part of the Small Business Jobs Act). The vote came after an AICPA letter to the chairman and ranking member of the committee, urging repeal of both provisions. Also on February 17th, the Senate approved repeal of the health care law's provision on expanded 1099 reporting.

    The AICPA has been supporting repeal of both 1099 provisions since shortly after their enactment. “We are concerned that the (1) recordkeeping to keep track of expenses by provider, (2) obtaining of tax identification numbers and other information from providers of property and services, and (3) providing the Forms 1099-MISC during January, a month when taxpayers would not normally be focused on tax issues, would be extremely burdensome,” the AICPA said. “Additionally, the AICPA questions the need for sending information forms to certain providers of services, such as utility companies.”  Read the full press release and the AICPA’s letter. Read more from the Journal of Accountancy.

    UPDATE: Tax Changes in Obama Budget Proposal (February 2011)
    President Obama released his proposed budget for fiscal 2012 on Monday, February 14th. The House and Senate Budget committees will review the spending proposals; the tax proposals will be considered by the Senate Finance and House Ways and Means committees. Simultaneous with the release of the proposed budget, the Treasury Department issued general explanations of its revenue provisions (the Green Book).

    The President’s proposal would extend some of the Bush-era tax cuts, limit itemized deductions such as mortgage interest for wealthy taxpayers, make unused portions of estate and gift tax exclusions permanently portable for spouses of decedents, and provide three more years of AMT relief, among other provisions.   Read the Journal of Accountancy for a more comprehensive summary of the major provisions.

    ADVOCACY: Coalition Urges Senate Judiciary Committee to Keep Tax Strategy Patent Provision in Patent Reform Act of 2011 (February 2011)
    A coalition of 15 national organizations, including the AICPA, urged the Senate Judiciary Committee to keep a provision in the Patent Reform Act of 2011 that would stop tax strategy patents. The coalition emphasized their position that “this pro-taxpayer measure is a critical component of any comprehensive patent reform effort.  The ongoing, serious concerns associated with tax strategy patents pose a significant threat to American taxpayers and businesses, and we believe that Congress must prioritize fixing this problem as soon as possible.”  The coalition said tax strategy patents “may limit the ability of taxpayers to utilize fully interpretations of tax law intended by Congress – effectively creating a monopoly for the patent holders to determine who can and cannot utilize parts of the tax code.” Read the Coalition’s comment letter.

    UPDATE: Senate Votes to Repeal 1099 Reporting Requirement (February 2011)
    On February 2nd, the Senate approved a measure that would repeal the expanded Form 1099 reporting requirements that were part of last year's health care law. The move has broad support because the Form 1099 rules, which are set to require businesses to report any purchases of more than $600 of goods and services from vendors in a year to the IRS, are expected to increase accounting costs for small businesses. The AICPA supports repeal of the expanded requirements; however, it has asked the Treasury Department for guidance on several pressing issues if the rules are not repealed. Read the AICPA's comment letter on expanded Form 1099 reporting requirements.

    ADVOCACY: AICPA Submits Compendium of Simplification and Technical Tax Legislative Proposals (February 2011)
    The AICPA has submitted the second annual Compendium of Legislative Proposals to the leaders of the congressional tax-writing committee.  The Compendium is a compilation of non-controversial, simplification and technical proposals designed to correct perceived technical problems in the Internal Revenue Code or to promote simplicity and fairness. The thirteen proposals in the Compendium relate to a wide range of issues affecting individuals, pass-through entities, corporations, and estates.

    UPDATE: Tax-Strategy Patent Bills are Introduced in the Senate (January 2011)
    On January 25th, Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, introduced legislation intended to stop the granting of patents for tax strategies. The Equal Access to Tax Planning Act of 2011 (S 139) would provide that “any strategy for reducing, avoiding, or deferring tax liability” is deemed to be “prior art” under patent law, and therefore not patentable. The proposed legislation would apply to any attempt to patent a strategy to reduce tax liability under federal, state, local or foreign law. Similar language is included in the Patent Reform Act of 2011 (S 23), also introduced on the 25th. The AICPA has for several years opposed the issuance of patents for tax strategies. The AICPA expressed its strong support for the legislation in a letter to the chairs and ranking members of Senate Finance and Judiciary committees. Read more at Journal of Accountancy.

    UPDATE: IRS Gives PTIN Relief for Some Tax-Return Preparers (January 2011)
    Responding to problems tax practitioners have experienced in obtaining a preparer tax identification number, the IRS provided relief to preparers who have made a good-faith effort to obtain a PTIN. Preparers who meet the criteria in Notice 2011-11 will be allowed to use a previous PTIN or their Social Security number until they obtain a new PTIN. Learn more at Journal of Accountancy.

    UPDATE: Nonsigning Preparers Supervised by CPAs Exempted from Parts of IRS Preparer Registration Plan (January 2011)
    The IRS recently released Notice 2011-6 which provides additional guidance on the preparer tax identification number (PTIN) registration process, including addressing the non-signing preparers of CPA firm and other professional firms.

    In general, Notice 2011-6 does not change the requirement that all individuals who prepare “all or substantially all” of a tax return must register for a PTIN.  Thus, for example, a non-CPA intern who works for a CPA firm and prepares “all or substantially all” of a tax return that his supervising CPA signs will still be required to register for a PTIN.  However, Notice 2011-6 exempts such a non-signing preparer of a CPA firm (and certain other professional firms) from the IRS’s examination and continuing education (CE) requirements if:  (1) the individual is supervised by a CPA or other Circular 230 practitioner; and (2) meets certain other requirements as detailed in the notice.

    The notice also states that the preparation of certain specified forms does not trigger the requirement to register for a PTIN, such as (among others) Form SS-4, Application for Employer Identification Number; Form W-2; Form 1098 series; and Form 1099 series.  Notice 2011-6 also provides for interim rules involving provisional PTIN holders.

    Read this Journal of Accountancy article for more information. The AICPA is providing members a PowerPoint titled "Internal Revenue Service's Tax Return Preparer Registration Program" for use in firm seminars. The PowerPoint is designed as a practice aid for use during an approximately one-hour conference presentation discussing the background and issues surrounding the new requirement that paid tax-return preparers obtain a preparer tax identification number.

    UPDATE: Guidance on In-Plan Roth Rollovers (December 2010)
    Notice 2010-84 provides guidance under § 402A(c)(4) of the Internal Revenue Code, relating to rollovers from § 401(k) plans to designated Roth accounts in the same plan (“in-plan Roth rollovers”). On Nov. 26, the IRS issued guidance on how plan participants can make rollovers from a 401(k) or 403(b) plan to a designated Roth account in the same plan (Notice 2010-84). Such in-plan Roth rollovers are now permitted under IRC § 402A(c)(4), as amended by the Small Business Jobs Act of 2010, effective for distributions made after Sept. 27, 2010. Read more. For more details on this provision in the Small Business Act, read an article written by Bob Keebler in Steve Leimberg's Employee Benefits and Retirement Planning Newsletter "Conversion of 401(k), 403(b) and 457(b) Plans to Roth Accounts: Tax Free Benefits with ERISA Protection"

    UPDATE: Modification to the Relief and Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to Comply with § 409A(a) (December 2010)
    Notice 2010-80 provides additional relief for nonqualified deferred compensation plans covered under § 409A.  Notice 2010-80 expands the types of plans eligible for relief under Notice 2010-6, provides an additional method of correction and transition relief under Notice 2010-6 for certain plan document failures relating to payments at separation from service, and modifies the correction reporting requirements in Notice 2008-113 and Notice 2010-6. Read more.

    ADVOCACY: AICPA Urges Repeal of Expanded 1099 Reporting Requirements (November 2010)
    In letters to the U.S. House of Representatives and the Senate, the AICPA raised concerns about the recently expanded Form 1099 reporting requirements for businesses and taxpayers who receive income from rental property. The AICPA is concerned with the "overwhelming compliance burden" the requirements will impose on taxpayers, and in its letters it urges Congress to repeal the provisions. Read more from Journal of Accountancy.

    UPDATE: Foreign PTIN Guidance (October 2010)
    In Revenue Procedure 2010-41, effective October 26th, the IRS implemented a process for foreign return preparers and U.S. citizens who do not have a Social Security number because of a conscientious religious objection to obtain a preparer tax identification numbers under a two-step process. The IRS also announced transition relief for such preparers to give them time to comply with the procedures. Read more from Journal of Accountancy.

    ADVOCACY: AICPA Recommends Changes to Return Due Dates (October 2010)
    In an effort to alleviate much of the September 15th  workload burden that has increased exponentially in recent years, and in order to provide for return due dates that match the needs of owners of various flow-through entities, the AICPA has submitted a letter to Congress and the IRS, recommending changing the due dates of Forms 1065, 1120S, 1120 and 1041, among others.

    Update: Watch the February 2011 Washington Update with AICPA Vice President of Taxation, Ed Karl, to familiarize yourself with the AICPA’s proposed recommendations to change tax return due dates.  This advocacy effort was initiated in order to alleviate much of the September 15th workload burden and to provide for return due dates to match the needs of owners of various flow-through entities.

    UPDATE: IRS Issues Final Regulations on New Basis Reporting Requirement (October 2010)
    The IRS issued final regulations under a law change that will require reporting of basis and other information by stock brokers and mutual fund companies for most stock purchased in 2011 and all stock purchased in 2012 and later years.  The reporting will be to investors and the IRS. This additional reporting will be optional for stock purchased prior to these dates. The relief is described in Notice 2010-67. For more information, visit

    ADVOCACY: AICPA Comments on IRS Proposed Regulations Related to Professional Tax Practice and Regulation (October 2010)
    The AICPA has provided comments to the IRS on proposed amendments to Circular 230 about issues related to professional tax practice and regulation of tax return preparers. The AICPA reiterated previous comments urging the IRS to exempt non-signing preparers from proposed testing and continuing education requirements and again urged the IRS to delay implementation of an exam.  The AICPA encouraged the IRS to adopt a more flexible approach for approval of tax continuing education programs as opposed to the proposed regime that would generally require approval by the IRS of all continuing education programs and providers.

    UPDATE: Small Business Relief Web Page Just Launched on (October 2010)
    The Small Business Jobs Act of 2010 offers a number of key benefits to businesses of all sizes and includes some revenue raisers as well. To help you learn more about this important legislation, the AICPA has created a special web page. We’ll continue to post new content, so check back often. Be sure to familiarize yourself with the Act’s provisions and deadlines in order to take full advantage of these opportunities.

    UPDATE: IRS Activates New PTIN System (October 2010)
    The IRS launched its new preparer tax identification number (PTIN) regime last Tuesday, a major step in its planned system of registration, qualification and oversight of all paid tax return preparers. Under the new PTIN system, all paid tax return preparers who “prepare all or substantially all of a tax return” are required to obtain a PTIN by January 1, 2011 to be able to prepare returns after that date. Even if you currently possess a PTIN, you still must apply under the new system. A $64.25 fee to obtain a PTIN is due upon application and the PTINs are valid for one year. Obtain a PTIN online or via Form W-12 , IRS Paid Preparer Tax Identification Number Application.

    The AICPA worked tirelessly to ensure that CPAs’ commitment to professional practice standards was taken into account in the tax preparer registration regulation process, specifically CPAs’ superior education, regulation and ethical standards. As a result of the AICPA’s advocacy, CPAs are not required to meet the IRS examination and CPE requirements associated with the new regulations.

    Last week’s announcement from the IRS stated that it has “under serious consideration” additional guidance that may extend similar treatment to non-signing preparers who serve under a qualifying individual in certain professional firms, such as a CPA firm. We will keep you informed of any future developments. Read more information from AICPA and FAQs from the IRS on the PTIN system.

    UPDATE: President Obama Signs Small Business Jobs Act of 2010 (September 2010)
    On Monday, President Obama signed  the Small Business Jobs Act of 2010 (HR 5297). The bill, which passed the Senate last week and the House on Thursday, expands loan programs through the Small Business Administration (SBA), strengthens small business preference programs for federal government projects, provides incentives for exporters, offers a variety of small business tax breaks and includes some revenue raisers. The provision in the House’s original bill that would have required grantor retained annuity trusts (GRATs) to last for a term of not less than 10 years was dropped in the Senate bill. The bill also allows rollovers from elective deferral plans to Roth-designated accounts. If a section 401(k) plan, section 403(b) plan or governmental section 457(b) plan has a qualified designated Roth contribution program, a distribution to an employee (or a surviving spouse) from an account under the plan that is not a designated Roth account is permitted to be rolled over into a designated Roth account under the plan for the individual. This provision is effective for distributions made after the date of enactment. Read more about the tax items affecting small businesses and some revenue raisers in the bill.

    UPDATE: Client Article - 2011 Tax Changes At-a-Glance (September 2010)
    Download and personalize a brief 2 page consumer article from Forefield Advisor to distribute to your clients. This article covers expiring tax provisions and major tax changes scheduled for 2011.

    UPDATE: Proposed Regulations Released Related to Circular 230 (August 2010)
    On August 19, 2010, the IRS released proposed regulations that would amend Treasury Circular 230, the rules governing practice before the IRS. The proposed regulations generally would extend current regulations that apply to attorneys, CPAs and other specified tax professionals to all tax return preparers, including currently un-enrolled tax return preparers.

    The proposed regulations (REG-138637-07) would clarify the definition of practice, establish a new registered tax return preparer designation and the eligibility requirements for becoming a registered tax return preparer, re-propose standards with respect to the preparation of tax returns, revise rules regarding continuing education providers, and amend multiple other sections of Circular 230.

    Tax professionals and other interested parties have until October 7th, 2010, to submit comments regarding the proposed regulations.  The AICPA Tax Division will review the proposed revisions in depth in the coming weeks in anticipation of submitting detailed comments on the proposed revisions to Circular 230.

    ADVOCACY: AICPA Submits Comments on PTIN Requirements (August 2010)
    The AICPA submitted comments this week on REG-134235, the IRS proposed regulations which require tax return preparers, including non-signing preparers to: (1) to apply for or renew a preparer tax identification number (PTIN); and (2) exclusively use that PTIN when signing tax returns generally filed after December 31, 2010. The submitted comments reiterate the AICPA’s prior recommendation for assigning one unique identifying number to each tax return preparer, coupled with making all preparers subject to the professional ethics standards of Circular 230 and the Code’s civil preparer penalty regime.

    We continue to recommend that the Service exempt all non-signing employees of a CPA firm from any requirement to apply for a PTIN. The AICPA’s other recommendations include: (a) the use of an appropriate title for persons receiving a PTIN; (b) imposition of only “reasonable user fees; (c) development of procedures to address foreign preparers; and (d) the need for the IRS to accept and consider comments from state CPA societies after the April 26, 2010 comment deadline. The IRS has scheduled a public hearing on the proposed PTIN regulations where the AICPA will testify.

    ADVOCACY: AICPA Supports Repeal of Burdensome Tax Information Reporting Measure (August 2010)
    The AICPA told members of Congress recently they should repeal the section of the new health care law that requires businesses to report to the Internal Revenue Service any purchase from a vendor of goods or services worth $600 or more during the calendar year.

    The AICPA said it will be burdensome and costly for small businesses to compile the data and prepare the Form 1099-MISC information return.  Furthermore, the AICPA said the information collected on the 1099 forms will not be very helpful to the IRS in collecting any unpaid taxes that should have been paid by the vendor because it will be difficult to reconcile payments reported on the forms and income reported by the vendor.

    The reporting requirement is included in the Patient Protection and Affordable Care Act and is effective for purchases made in 2012 that will be reported on 1099 forms filed in 2013.

    Read the AICPA’s letter to members of the U.S. Senate.  An identical letter was sent to members of the U.S. House of Representatives.

    UPDATE: Tax Strategy Patents (June 2010)
    On June 28, 2010, the Supreme Court issued its decision on Bilski v. Kappos. While the case addresses a specific business methods patent case, it does not stop the U.S. Patent and Trademark Office from continuing to issue tax strategy patents.  Tax strategy patents remain a serious and growing problem for taxpayers and their advisers.  The Patent Office has issued 107 tax strategy patents and 145 patent applications are pending.  Taxpayers should not have to face the threat of royalties or lawsuits from holders of tax strategy patents.

    The AICPA will continue to work with Congress to make tax strategies ineligible for patents.  H.R. 2584, introduced by Rep. Boucher, would eliminate tax strategy patents and now has 45 cosponsors.  AICPA and ABA will cosponsor a teleconference on this topic on July 21, 2010, at1:00 PM, Eastern. For more information on the teleconference, see the Save the Date below for registration information. For additional information also see the AICPA’s Tax Division’s tax strategy patents resources page. We will continue to keep you informed.

    UPDATE: Further Analysis of Tax Extenders Bill (June 2010)
    On May 28, 2010, HR 4213, The American Jobs and Closing Tax Loopholes Act, passed the House.   This legislation extends a large number of expired tax provisions through 2010, and Title IV of the bill details certain revenue offsets.  On June 8, 2010, Senate Finance Committee Chair Max Baucus (D-MT) introduced a substitute amendment to HR 4213, or SA 4301.  The Senate amendment, which has not yet been voted on, contains a majority of the same provisions under HR 4213, with a few modifications.  Both bills include two revenue offset proposals of particular interest to financial planners given that they impact the tax liability of partners and shareholders of closely held entities. Read further analysis of the revenue offset provisions of interest to financial planners.

    ADVOCACY: AICPA Proposal to Modify Return Due Dates (February 2010)
    The AICPA has developed a legislative proposal to promote the timely receipt of Schedule K-1 information by owners of pass-through entities. This effort attempts to further the purpose of the recent regulation project that changed the extended due dates of calendar year partnership and trust tax returns to September 15. Requiring returns for virtually all business entities to be due on September 15 has caused an unacceptable burden on business return preparers, even though it significantly assisted individuals waiting for Schedules K-1. The simultaneous due date also failed to factor in that business and trust entities, not just individuals, hold interests in partnerships. The AICPA, including the PFP Executive Committee, has approved recommending the following revised original and extended due dates:

    • Form 1065 – proposed due dates March 15 and September 15
    • Form 1120S – proposed due dates March 31 and September 30
    • Form 1041 – proposed due dates April 15 and September 30
    • Forms 1040 and 1120 – proposed due dates April 15 and October 15

    The AICPA requested member feedback in February before submitting a recommendation to Congress and the Administration. Comments were solicited from the PFP Section in our weekly PFP Community News. Click here to read the AICPA’s draft letter.

    UPDATE: AICPA Practice Guide on New Section 7216 Guidance from the Tax Division (December 2009)
    The AICPA Tax Division has completed a practice guide involving the guidance the IRS released in late December 2009 on Internal Revenue Code section 7216. On December 29 and 30, 2009, the IRS released new guidance designed to clarify a number of questions about the regulations under section 7216, involving the disclosure or use of tax return information by tax return preparers. Over the last several years, the AICPA has been focused on educating Congressional and Administration officials regarding the difficulties that certain interpretations of section 7216 and the regulations thereunder have on the traditional office practices and procedures of CPAs. In response to the input of the AICPA and other stakeholders, the new guidance released by the Service includes final and temporary regulations (TD 9478), and Revenue Rulings (Rev. Rul.) 2010-4 and 2010-5.

    The Practice Guide provides a summary of major issues addressed by the new IRS guidance, such as: (1) the types of professional services considered “legal or accounting services” under Treas. reg. Section 301.7216-2(h)(1)(i); (2) the distribution of firm newsletters; (3) contacts with professional liability insurance carriers; and (4) disclosures of tax return information for purposes of conflict reviews. In addition, the section 7216 practice guide provides guidance on how to handle a client request to send a tax return to a third party such as a local bank or lender.
    The AICPA has a developed a specific practice guide to assist members with compliance with the Regulations under Section 7216 of the Internal Revenue Code. This guide includes specific examples of appropriate consent forms that can be presented to a client. This guidance is based on the regulations as issued on January 1, 2009.

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