September 21, 2012 Tax E-Alert: Form 5500 Relief for Taxpayers Affected by Hurricane Isaac, AICPA Urges Congress to Quickly Fix Tax Cliff, Concerns Continue About Private PTIN Directories and more.. 

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Sept. 24, 2012
1pm – 3pm ET
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Surviving in Times of Uncertainty – Guiding Clients into the Next Year

Sept. 27, 2012
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Year-End Planning
Oct. 25, 2012
1pm – 2pm ET
Free/No CPE Available

In this time of uncertainty, with so many question looming: What will Congress do about the 2011 expired provisions and 2012 expiring provisions? Will Congress do anything during the lame duck session? One thing we know for sure: we still need to do year-end planning with clients. Year-end planning is an annual process; some clients may even call it a ritual. What makes this year different is that we have more questions than answers about what will actually be in effect next year. So, our focus this month will be on strategies for planning in uncertain times. We will explore both sides of the issue – planning ideas that make sense given what we know now and strategies to get your clients to come in, sit down and plan.

For a full list of upcoming Tax Section webinars, go to the Tax CPE & Events page on the AICPA’s Tax website.

The Internal Revenue Service (IRS) has granted relief of certain Form 5500 filers in Louisiana and Mississippi who were affected by Hurricane Isaac. The tax relief is based on local damage assessments by the Federal Emergency Management Agency (FEMA). For a complete listing of localities granted relief, see IRS Notice IR-2012-70 dated Sept. 5.

Form 5500 is filed with the Department of Labor (DOL); however, the information contained in the form is also used by the IRS and Pension Benefit Guaranty Corporation (PBGC). When the IRS grants disaster relief, the DOL and PBGC automatically follow suit as dictated by Revenue Procedure 2007- 56.

As part of the relief efforts, the due date for filing Forms 5500 is extended to Jan 11, 2013 for returns with an original filing due date on or after Aug 26.

Currently, small businesses 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.

“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,” Jeffrey Porter, vice chair of the AICPA’s Tax Executive Committee, recently told a congressional subcommittee. “Any further delay will magnify the frustration of many small business owners.”

“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. “For example, it is nearly impossible to estimate the true cost of a purchase of new equipment when income tax rates are uncertain. Although income taxes are not the only factor in making business decisions, prudent business owners want to understand the tax consequences of a transaction.” Porter gave his testimony at a hearing titled Adding to Uncertainty: Small Businesses’ Perspectives on the Tax Cliff held by the House Small Business Subcommittee on Economic Growth, Tax and Capital Access.

“I also strongly urge you to not underestimate the effect that the ‘Tax Cliff’ has on tax administration itself,” Porter stated. “If Congress waits until late in the year or even into next year to enact tax law changes, the IRS and commercial software vendors must scramble to revise or issue new tax forms and update software.” Last-minute changes are also very problematic for CPAs. Our members, a vast majority of whom are small businesses themselves, would face an increasingly compressed and perhaps hectic busy season. They would need to educate clients on the changes in the rules, advise owners on the tax consequences of business transactions, assist small businesses and individuals with tax and cash-flow planning, and prepare income tax returns – all in a relatively short period of time.

Many AICPA members have received emails from companies that are publishing and promoting a list of persons who have registered with the IRS for a preparer tax identification number (PTIN). These companies have purchased the Service’s PTIN list, which is permitted under the Freedom of Information Act (FOIA). Last year, the AICPA had numerous conversations with IRS staff questioning the appropriateness of the specific data items that the IRS released, such as mailing addresses, email addresses, and phone numbers. We also suggested that the IRS: (1) provide an opportunity for preparers to “opt out” of the release of some or all of the personal and business information; and (2) adequately communicate with PTIN registrants about the disclosure of their information.

The Service did re-visit its FOIA releases and made some changes to partially restrict some of the data being collected from PTIN holders to protect their privacy. First, the IRS now permits tax return preparers to list either a physical address or a P.O. Box as the “business address” when registering or renewing their PTIN. Second, any valid email address can be provided to the IRS as long as the PTIN holder regularly checks the email address for PTIN communications. These changes provide the PTIN holder with the ability to stop the release (under FOIA) of a tax return preparer’s home address or of an email address that the preparer does not want made public.

The current directories of PTIN holders are private, commercially oriented ventures and are not endorsed by the IRS. The Service does have plans on setting up some type of “look-up” data base of PTIN holders tentatively scheduled for opening sometime after the close of the upcoming tax season in spring 2013.

Because much of the PTIN list and data is publicly available under FOIA, legal action by the IRS or others is unlikely. Nevertheless, we have raised questions with the Service about the possible misuse of, or confusion about, the use of the PTIN data. The IRS is reviewing the matter and is considering appropriate action.

We will keep the AICPA membership informed about any further discussions we have with the IRS, as well as any follow-up actions the Service decides to take in reaction to these private PTIN directories.

The AICPA has announced the creation of the National Commission on Diversity to serve as champions of diversity within the accounting profession. The formation of the Commission reflects a renewed focus on diversity within the profession to reflect the changing marketplace and shifting demographics. Chaired by Ken Bouyer, America’s director of Inclusiveness Recruiting at Ernst and Young, the Commission is charged with developing strategies to increase the retention and advancement of underrepresented minorities in the accounting profession, and engaging members and the profession in this dialogue. To learn more about this strategic initiative, read the press release.

Result from this year’s survey by the Journal of Accountancy and The Tax Adviser, are now available online. More than 6,000 CPAs assessed the software they used to prepare 2011 tax returns, revealing what they liked and disliked about their software. Overall, respondents were pleased with their software: On average, the products rated 4.3 out of 5. Ease of use, comprehensiveness, and accuracy were the most-liked features. Read more.

On Sept. 14, AICPA submitted comments to IRS on the proposed regulations regarding portability of the deceased spousal unused exclusion (DSUE) amount. AICPA appreciated the guidance and said it was hopeful that Congress will permanently extend the portability rules to allow taxpayers and practitioners to rely on the rules in spousal estate planning. Read more.

Various resources regarding portability are available on the AICPA Portability Resource Page, including a sample client letter that is available to send to surviving spouses and family with 2011 and 2012 deaths.

• Corporate equity reduction transaction guidance issued (9/17/12)
• IRS proposes changes to Circular 230 rules governing written tax advice (9/14/12)
• Publicly traded property defined for determining issue price of debt instruments (9/12/12)
• Use of wrong delivery service results in dismissal of Tax Court petition (9/11/12)
• Guidance issued on employee expense reimbursement arrangements (9/10/12)
• Employee health insurance safe harbors expanded (9/07/12)

Visit the Tax Practitioner’s Toolkit for the latest website and client newsletter blurbs to stay top of mind with clients and prospective clients year round. Topics cover like-kind exchanges, wills, a reminder that it isn’t too late to lower your 2012 taxes and a tax credit opportunity when hiring a qualified veteran. Use them to remind your clients about your value, expertise and services, and give them a reason to call you.

CPA Success is a blog run by our friends at the Maryland Association of CPAs. In this post, Bill Sheridan shares some resources for voters who may still be undecided, to help them learn more about the tax plans of each presidential candidate.

Are you certain that you and your firm are adequately prepared to offer your clients the intricate, viable solutions and strategies they deserve? Do you have what it takes to help your individual and business clients maintain income, profitability and compliance while conforming to the demands of new ground breaking legislation? Don't miss this dynamic webinar, Monday, Sept. 24, from 1pm – 3 pm, as moderator and advanced tax expert Dominique Molina delves deeply into the granular advanced aspects of tax planning as it relates to healthcare reform and other major changes that will affect millions of tax filings across the United States. Register today!

The AICPA National Tax Conference, Election Day +1, will be held Nov. 7-8, 2012, in Washington, DC with post-conference workshops on Nov. 9, 2012. The first tax conference of its kind to occur post-election, it will address the election results and what they mean to you and your tax clients. Prominent national tax professionals and government leaders offer sessions that will provide information on expiring and likely legislation, the deficits, international competitiveness of U.S. firms and the increasingly large tax gap. Key IRS executives from all IRS operating divisions will give you the latest information, giving you direct access to key IRS policy makers and leadership.

Register by Sept. 23 and save $75. Tax Section members save an additional $100.

In this time of uncertainty, with so many question looming: What will Congress do about the 2011 expired provisions and 2012 expiring provisions? How sweeping will tax reform actually be? Will they do anything during the lame duck session? One thing we know for sure: we still need to do year-end planning with clients. Year-end planning is an annual process; some clients may even call it a ritual. What makes this year different is that we have more questions than answers about what will actually be in effect next year. So, our focus this month will be strategies for planning in uncertain times. We will explore both sides of the issue – planning ideas that make sense given what we know now and strategies to get your clients to come in, sit down and plan.

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.