On January 8, 2010, the IRS released Issue 2010-01 of eNews for Tax Professionals, which addressed the following subjects:
1. IRS Releases Tax Return Preparer Study
2. IRS Releases Fact Sheets for the 2010 Tax Filing Season
3. Expanded 120-Day Time Window Applies to Disclosure Authorizations; IRS Requests Comments on Rule Change
4. IRS Announces 2010 Air Transportation Tax Rates
5. IRS Issues Proposed Regulations Adjusting Use of Some Taxpayer Information
6. Phone Forum Update
7. Tax Centers on IRS.gov can help clarify specific tax issues
8. New IRS e-file Security and Privacy Standards for Online Providers
9. Technical Guidance
1. IRS Releases Tax Return Preparer Study
The Internal Revenue Service kicked off the 2010 tax filing season with the results of a landmark six-month study that proposes new registration, testing and continuing education of tax return preparers; the higher standards for the tax preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.
2. IRS Releases Fact Sheets for the 2010 Tax Filing Season
The IRS has released the following fact sheets:
- Tax Law Changes Provide Saving Opportunities for Nearly Everyone
- How to Choose a Tax Return Preparer and Avoid Preparer Fraud
- Taxpayers Can Now Use Refunds to Buy Savings Bonds; New Direct Deposit Option
- Tax Credits for Home Buyers
- Most Workers Need to File New Schedule M; Making Work Pay Credit Offers Tax Savings Up to $800
- E-file, Free File and Other Electronic Options for 2010
- Online Scams that Impersonate the IRS
- Free Tax Help Available from the IRS
- Reporting Bank and Financial Accounts
3. Expanded 120-Day Time Window Applies to Disclosure Authorizations; IRS Requests Comments on Rule Change
A new rule has expanded to 120 days the time period during which the Internal Revenue Service may share a taxpayer's tax-return information with third parties, based on a taxpayer's written disclosure authorization. The newly-expanded time window is retroactive to Oct. 19, 2009. Consequently, any disclosure authorization signed and dated by a taxpayer on or after Oct. 19 qualifies for the new 120-day window.
Forms affected by this change include:
• Form 4506, Request for Copy of Tax Return
• Form 4506-T, Request for Transcript of Tax Return
• Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript
• Form 8821, Tax Information Authorization
4. IRS Announces 2010 Air Transportation Tax Rates
The Internal Revenue Service has announced the 2010 inflation adjustments to the excise taxes on air transportation.
5. IRS Issues Proposed Regulations Adjusting Use of Some Taxpayer Information
The Internal Revenue Service has announced the issuance of proposed and temporary regulations and related revenue rulings addressing the use or disclosure of tax return information by tax return preparers. The regulations and related revenue rulings under section 7216 enable tax return preparers to more effectively provide a range of services that taxpayers would ordinarily expect from tax return preparers. Generally, these services benefit taxpayers, increase voluntary compliance and improve tax administration.
6. Phone Forum Update
The IRS will host a Phone Forum on Funding-Based Benefit Restrictions - January 26, 2010 (Free)
Single-employer defined benefit plan sponsors and their advisors face many challenges from the funding-based benefit restrictions imposed under section 436 of the Internal Revenue Code. The forum will discuss the new rules and what to be aware of when administering these plans, as well as some of the key changes in the funding regulations that may affect your decisions. To register, click here.
7. Tax Centers on IRS.gov can help clarify specific tax issues
IRS.gov now has several Tax Centers designed to provide relevant tax related information for specific industries and professions. Tax Centers are available for the Agricultural Industry to the Trucking Industry. A full listing is available on the Industries/Professions page.
8. New IRS e-file Security and Privacy Standards for Online Providers
The IRS has mandated six new security, privacy, and business standards to better serve taxpayers and protect their information collected, processed and stored by online providers of individual income tax returns. Although these standards become mandatory on Jan. 1, 2010, there will be an enforcement grace period until Dec. 31, 2010.
9. Technical Guidance
Announcement 2010-03 provides for plan years beginning on or after January 1, 2009, automatic approval for certain changes in funding method with respect to single-employer defined benefit plans that result either from a change in the valuation software used to determine the liabilities for such plans or from a change in the enrolled actuary and the business organization providing actuarial services to the plan.
Notice 2010-06 permits taxpayers to correct certain failures of a nonqualified deferred compensation plan to comply with the plan document requirements of § 409A, or in certain circumstances to limit the amount includible in income and additional taxes under § 409A as a result of a plan document failure. Notice 2010-6 also clarifies certain aspects of Notice 2008-113, which addresses failures of nonqualified deferred compensation plans to comply with § 409A in operation.
Notice 2010-11, Under IRC section 163(e)(5)(F)(iii), the notice extends the suspension of the applicability of § 163(e)(5) for certain applicable high yield discount obligations ("AHYDOs") to December 31, 2010. Under § 163(e)(5), a corporate issuer's interest deduction for original issue discount on an AHYDO is deferred or disallowed.
Notice 2010-12 extends the application of future regulations under section 956, as described in Notice 2008-91, 2008-2 C.B. 1001, to an additional tax year beginning before January 1, 2011. Notice 2010-12 also extends the application of Rev. Proc. 2008-26, 2008-1 C.B. 1014, which applies to section 956(c)(2)(J), to calendar year 2010.
Notice 2010-13 updating the procedures for requesting a waiver of the requirement to electronically file returns when required by regulations and IRS publications. This notice affects corporations and tax-exempt organizations that file Form 1120, U.S. Corporation Income Tax Return; Form 1120-F, U.S. Income Tax Return of a Foreign Corporation; Form 1120S, U.S. Income Tax Return for an S Corporation; Form 990, Return of Organization Exempt From Income Tax; Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as a Private Foundation, and returns, amended returns and superseding returns in the Form 1120 and 990 family of returns that are required to be electronically filed. The notice also reduces the perfection period for rejected e-file returns from 20 to 10 days.
Revenue Procedure 2010-12 extends, by two years, the period for temporary guidance regarding certain stock distributions by publicly traded corporations that are regulated investment companies (RICs) or real estate investment trusts (REITs). For stock dividends declared on or after January 1, 2008 and before December 31, 2011, the Service will treat a stock distribution by a publicly traded RIC or REIT pursuant to a stock-in-lieu-of-money election (under the terms defined in the revenue procedure) as a distribution of property to which section 301 applies by reason of section 305(b), and the amount of such distribution of stock will be considered to equal the amount of the money which could have been received instead. In addition, the distribution will not be a preferential dividend under section 562(c).
Revenue Procedure 2010-13 requires taxpayers to report to the Internal Revenue Service their groupings and regroupings of activities and the addition of specific activities within their existing groupings of activities for purposes of section 469. Internal Revenue Code Section 469 generally provides that income, losses, and credits from an activity will be passive unless the taxpayer materially participates in the activity. Treasury Regulation Section 1.469-4 allows taxpayers to group activities provided they make up an appropriate economic unit to enable taxpayers to meet the material participation standards.
Revenue Ruling 2010-04 provides guidance on whether a tax return preparer is liable for criminal and civil penalties under Internal Revenue Code sections 7216 and 6713 when the tax return preparer uses tax return information to contact taxpayers to inform them of changes in tax law that could affect the taxpayers' income tax liability reported in tax returns previously prepared or processed by the tax return preparer; uses tax return information to determine which taxpayers' future income tax return filing obligations may be affected by a prospective change in tax rule or regulation and to contact such taxpayers to notify them of the changed rule or regulation, explain how the change may affect them, and advise them with regard to actions they may take in response to the change; or discloses tax return information contained in the list permitted to be maintained by the tax return preparer under section 301.7216-2(n) to a third-party service provider that creates, publishes, or distributes, by mail or e-mail, tax information and general business and economic information or analysis for educational purposes or for purposes of soliciting additional tax return preparation services for the tax return preparer, for the purpose of obtaining the 'newsletter' creation, publication, and or distribution services offered by the third-party service provider.
Revenue Ruling 2010-05 provides guidance on whether a tax return preparer is liable for criminal and civil penalties under Internal Revenue Code sections 7216 and 6713 when the tax return preparer discloses (1) to a professional liability insurance carrier tax return information required by the insurance carrier to obtain or maintain professional liability insurance coverage; (2) to a professional liability insurance carrier tax return information required by the insurance carrier to promptly and accurately report a claim or a potential claim against the tax return preparer, or to aid in the investigation of a claim or potential claim against the tax return preparer; (3) to a professional liability insurance carrier tax return information to the preparer's professional liability insurance carrier in order to obtain legal representation under the terms of the insurance policy; or (4) tax return information to an unrelated attorney for the purpose of evaluating a claim or potential claim against the tax return preparer.
Posted by Joshua Hock, Associate Editor, The Wealth Strategies Journal
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