September 7, 2012 Tax E-Alert: Tax Relief for Individuals and Businesses Affected By Hurricane Isaac, Changes in IRS' ITIN Procedures, Form 3520 Reporting, Section 754 Elections, New Compliance Procedures, Health Care Reform (Blog) and more 


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      AICPA
    Sept. 7, 2012
    Tax Section News
     
      Exclusive access to Tax Section member communications  
     
    In This Issue
        TOP NEWS  
    IRS Provides Tax Relief for Individuals and Businesses Affected By Hurricane Isaac
    AICPA Calls for Changes in IRS’ ITIN Procedures
    New Streamlined Compliance Procedures for U.S. Citizens Residing Overseas Went Into Effect Sept. 1
    AICPA Requests Resolution with Incorrect Letters on Form 3520 Reporting
    Advice for Dealing with Section 754 Elections for 2010 Estates Electing Carryover Basis
    How Do You Tackle Health Care Reform? One Bite at a Time! (Blog)
    Tax News from the Journal of Accountancy
      TOOLS & RESOURCES
    Tax Legislation and Its Impact on Busy Season (Video)
    Recent Developments in Estate Planning: Part I (Article)
      WEBINARS
    September’s Tax Power Hour focuses on Hiring for Success
    Break into Personal Financial Planning: Your Questions Answered (Free)
      SUMMER TAX QUIZ - Answers
      UPCOMING EVENTS
    Tax Section-Sponsored Webinars
    Next Tax Power Hour
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    Upcoming Events
       

    The Nuts & Bolts of a Partnership's Section 754 Election - Rebroadcast

    Sept. 12, 2012
    1pm – 2:30pm ET
    1.5 hours CPE


    Surviving in Times of Uncertainty – Guiding
    Clients into the Next Year


    Sept. 27, 2012
    1pm – 2:30pm ET
    1.5 hours CPE

    (Free, without CPE option available)

    Next Tax Power Hour:

    Hiring for Success
    Sept. 20, 2012
    1pm – 2pm ET


    Free/No CPE Available
    What is old is new again! Firms are once again citing the problem of finding and retaining top talent as one of their top challenges. September typically marks the beginning of recruiting season. So, this month we'll talk about strategies to make this a more successful hiring cycle. We'll explore tactics and strategies that firms can employ to better identify then hire the candidate that is the perfect fit for their firm.

    For a Full List of Upcoming Tax Section webinars, go to the Tax CPE & Events page on the AICPA’s Tax website.

     
     
      TOP NEWS
     
    IRS Provides Tax Relief for Individuals and Businesses Affected By Hurricane Isaac

    The Federal Emergency Management Agency and the IRS announced that affected taxpayers in Louisiana and Mississippi will receive tax relief, and other locations may be added in coming days based on additional damage assessments by FEMA.

    The tax relief postpones various tax filing and payment deadlines that occurred on or after Aug 26. As a result, affected individuals and businesses will have until Jan 11, 2013 to file these returns and pay any taxes due. Specifically, this applies to corporations, businesses and individuals that previously obtained extensions to file until Sept 17, 2012, and Oct 15, 2012, respectively. It also applies to estimated tax payments for the third quarter of 2012, normally due Sept. 17. The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. In addition, the IRS is waiving failure-to-deposit penalties for federal employment and excise tax deposits normally due on or after Aug 26 and before Sept 10, if the deposits are made by Sept 10, 2012. Details on available relief, including information on how to claim a disaster loss by amending a prior-year tax return, can be found on the disaster relief page on IRS.gov. The tax relief is part of a coordinated federal response to the damage caused by the hurricane and is based on local damage assessments by FEMA. For information on disaster recovery, individuals should visit disasterassistance.gov. So far, IRS filing and payment relief applies to the following localities:

    • In Louisiana: Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany parishes;
    • In Mississippi: Hancock, Harrison, Jackson and Pearl counties.

     

    AICPA Calls for Changes in IRS’s ITIN Procedures

    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.

     

    New Streamlined Compliance Procedures for U.S. Citizens Residing Overseas Went Into Effect Sept. 1

    The new streamlined filing compliance procedures recently developed by the IRS to assist U.S. citizens residing abroad become current on their filing obligations took effect on Sept. 1. Taxpayers who represent a low compliance risk are eligible to use the streamlined procedures to become current on their filing obligations, including their U.S. federal income tax returns and Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts.

    In conjunction with the effective date, the IRS released a questionnaire along with instructions to help taxpayers use the new procedures. A completed questionnaire must be submitted to the IRS by taxpayers using the streamlined procedures process.

    It is important to note that these streamlined procedures are different from the Offshore Voluntary Disclosure Program (OVDP) and once a taxpayer chooses to use the streamlined program they will become ineligible for the OVDP. The streamlined procedures program does not protect taxpayers from criminal prosecution. Taxpayers concerned about criminal prosecution should talk to their tax practitioner about the OVDP program.

    AICPA Requests Resolution With Incorrect Letters on Form 3520 Reporting

    The AICPA Foreign Trust Task Force has become aware of a widespread problem affecting numerous taxpayers across the country (including taxpayers in California, Florida, Maryland, Massachusetts, New York and Washington) as well as taxpayers in Canada. Taxpayers are receiving incorrect letters from the IRS regarding the completion and filing of Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, for 2010 and earlier years. The letters provide several different erroneous messages - some say penalties will be assessed for not providing information that is irrelevant and inappropriate. The letters are inconveniencing taxpayers as they must respond to the IRS, explain why the IRS letters are incorrect and request an abatement of the penalties.

    The AICPA submitted a comment letter to the IRS on Aug. 28, requesting that the IRS address these systemic IRS incorrect letters. The AICPA asked that the IRS check into the source of these concerns and correct this systemic problem with respect to the processing of Form 3520, and consider ceasing the issuance of these incorrect letters. In addition, the AICPA requested that the IRS consider providing an announcement that such erroneous letters do not require a response. Such action would allow taxpayers to avoid incurring considerable time and expense in having their tax preparers respond to these incorrect letters. We will keep you informed of any response from the IRS.

    Advice for Dealing With Section 754 Elections for 2010 Estates Electing Carryover Basis

    The AICPA continues to hear from members interested in the section 754 election and section 743 adjustment issues with regard to the carryover basis election . Last September, the AICPA requested guidance on whether the basis adjustment under section 743 is available upon the death of a partner if the estate of the partner elects out of the estate tax and applies the carryover basis rules to the assets of the estate. The Trust, Estate and Gift Tax Technical Resource Panel (TRP) also raised this issue with government officials last fall and the response was that no more carryover basis guidance was forthcoming.

    Members of the TRP got the impression that an adjustment was appropriate if a section 754 election was in place and that a new one could be made with a 2010 death; however, the government officials would not provide anything definitive. As the AICPA stated in the letter, it is reasonable to conclude that the section 743 adjustment would be allowed using the basis amount as determined under section 1022 for the inside adjustment to the basis of partnership assets because the interest was transferred “on the death of a partner.”

    Based on last year’s discussions, if a death occurred, the section 743 basis adjustment should be available as the basis adjustment is the result of death and not impacted by carryover basis in any way, other than having to use a different starting point. Therefore, it appears that if a partnership has a section 754 election in place when the partner died, and there is any basis increase allocated to the deceased partner's partnership interest, the partnership can allocate the basis increase to the assets inside the partnership (the inside basis). This seems appropriate under section 743.

    We are aware that some practitioners dealt with the issue with 2010 returns, and it continues to be an issue for 2011 as partnerships sell or depreciate assets that were affected by a 2010 section 754 election; for example, if a section 754 election increased the inside basis of stock in 2010, but the stock wasn’t sold until 2011. Therefore, we wanted to more broadly share this information we learned although no official guidance has been issued. For more information and resources on carryover basis, visit the AICPA 2010 Deaths and Carryover Basis Resources page. Also, taxpayers may submit a private letter ruling request if a definitive answer is needed.

    How Do You Tackle Health Care Reform? One Bite at a Time! (Blog)
    taxpowerhour

    As a CPA, you know that clients and organizations will need help with implementing provisions of the Affordable Care Act. But where to start? It’s so big. Don’t put it off, says AICPA Tax Manager Kris Esposito in the latest AICPA Insights blog, just take it one bite at a time.

    Tax News from the Journal of Accountancy

     

     

    AICPATOOLS & RESOURCES
     
    Tax Legislation and Its Impact on Busy Season (Video)

    In this short video, Melissa Labant, JD, CPA, PFS, CFP®, discusses the so-called “fiscal cliff” and the potential for a very hectic and compressed busy season.

    Recent Developments in Estate Planning: Part I (Article)

    This article is the first of a two-part series by The Tax Adviser that examines developments in estate tax planning and compliance from June 2011 through May 2012. Part I discusses developments regarding gift tax and trusts, an outlook on estate tax reform, and annual inflation adjustments for 2012 relevant to estate, gift, and generation-skipping transfer (GST) tax. Part II, in the October issue, will cover developments in estate tax.

    WEBINARS
     
    September’s Tax Power Hour Focuses on Hiring for Success
    taxpowerhour

    This month on the Tax Power Hour, what is old is new again! Firms are once again citing the problem of finding and retaining top talent as one of their top challenges. September typically marks the beginning of recruiting season. So, this month we'll talk about strategies to make this a more successful hiring cycle. We'll explore tactics and strategies that firms can employ to better identify, then hire the candidate that is the perfect fit for their firm. Spend an hour with us! Grab some lunch, then sit back, log in and join the conversation.

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

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

    Break Into Personal Financial Planning: Your Questions Answered (FREE)

    CPAs are quite possibly the single most important decision makers for individuals and businesses, and it is time to realize that we do more than just taxes. There is an entire profession of CPA financial planners dedicated to advising clients on the financial decisions that will impact every facet of their lives. If you enjoy interacting with people, are good with numbers, have an interest in providing value-added and profitable services to your clients and like to have a positive impact on others, a career as a CPA financial planner or CPA/Personal Financial Specialist (PFS) may be right for you.

    On Sept. 20 from 1 - 2:45 pm ET, a panel of experienced practitioners will answer your questions in this interactive Q&A-style session. This webinar is ideal for both emerging CPAs trying to break into this niche career path and seasoned CPAs who want to expand their existing practices with this value-added service.

    SUMMER TAX QUIZ - Answers

    In our Aug. 10 e-alert, we took a break from the heat for a little tax fun. So, how did you do? Here are the questions, this time with answers!

    1. Which famous singer pled guilty to tax evasion in June?

    Answer: Lauryn Hill is the singer who pled guilty to tax evasion in June.

    2. A report by the Treasury Inspector General for Tax Administration (TIGTA) suggested that there were as many as _______ potentially identity-theft-related fraudulent tax returns for the 2011 filing season in addition to the ones detected by the IRS.
    a) 1.5 million
    b) 2.0 million
    c) 1.8 million
    d) 2.2 million

    Answer: B.
    A report by TIGTA suggested that there were as many as 1.5 million potentially identity-theft-related fraudulent tax returns for the 2011 filing season

    3. True or False: The 3.8% Medicare surtax that takes effect next year will apply to single taxpayers with modified AGI in excess of $100,000.

    Answer: False
    It only affects single taxpayers with MAGI over $200,000.

    4. True or False: Sen. Marco Rubio has introduced a bill that would exempt all Olympic prize money that is awarded to U.S. Olympic medal winners from income tax.

    Answer: True.
    S 3471 would exempt from gross income the value of any prize or award won by the taxpayer in athletic competition in the Olympic Games.

     
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