Tax Talk

The Loving case is not so loving. Competent income tax preparers are disappointed. The taxpaying public will be the losers.

Starting in 2011, the IRS began its return preparer oversight initiative. The purpose of this initiative was to help insure that income tax preparers who charge for their services were competent to perform these services.

In the first phase, the IRS required all paid tax preparers to obtain a preparer tax identification number (PTIN), subject to some exceptions. This was to be renewed annually. The next phase was to require all paid preparers who prepare individual income tax returns to complete a IRS tax filing review and successfully pass the registered tax return preparer (RTRP) competency exam. RTRPs also must obtain 15 hours of continuing education annually from IRS-provided providers.

After the IRS launched this initiative, the Institute for Justice, a public interest group, representing three unenrolled return preparers, challenged the new rules in federal court.

Court’s Opinion:
The U.S. District Court for the District of Columbia ruled in favor of the unenrolled return preparers (Loving v. Internal Revenue Service, D. D.C., 2013-1 USTC ¶50,156). It has stopped the IRS from moving forward with its return preparer oversight initiative.

IRS Responded:
After the decision, the IRS stated that “[i]n accordance with [the injunction], tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education.”

Others Comment:
According to a report from CCH, “The National Society of Accountants (NSA) is disappointed,” said John Ams, executive vice president. “NSA has long supported the registration of paid preparers and continuing education requirements so that preparers have the up-to-date knowledge needed to prepare complete and accurate tax returns for their clients.”

The CPAs and staff of Conover & Conover, CPAs, PSC, agree with the NSA. We believe that taxpayers deserve to know that those who charge to prepare an income tax return are competent to prepare the return. Taxation is part of the uniform CPA exam that all CPAs have passed and CPAs in Kentucky are required to have 40 hours of continuing education per year.

[Some of the information presented here was provided by CCH in its Practical Tax Bulletin, 2013, #4]

In 2019, Kentucky Unemployment is paid only on the first $10,500 earned by each worker in the calendar year. The $10,500 is known as the taxable wage base.

Every employer is assigned a rate based on each individual employer’s experience [payments into and claims against the employer’s unemployment account].

The Kentucky Unemployment taxable wage base differs from the Federal Unemployment (FUTA) taxable wage base which remains at $7000.

If you need assistance with your unemployment tax computation, please contact us.

Having worked in the aftermath of various natural disasters as a part of the FEMA/IRS Emergency Response Team and having served as chairman on the local health board, I know the importance of protecting your records in the event of emergency. The Small Business Administration offers monthly webinars to help small businesses be ready in the event of disaster.

Here’s a link to these webinars: http://www.preparemybusiness.org/education

Imagine how your business would run if you suddenly lost all your records.

This is your chance to let us know. If we’ve done something well, please post. If you feel our website need attention, let us know where. If you think we need to address a systemic issue, say so. [But, please do not put personal information here. We will be glad to respond to personal issue, click on the Contact Us link].

A client recently made me aware that there was no place in Tax Talk to ask questions. So here you are. ~

!! Disclaimer: To comply with IRS requirements, please be advised that any tax advice contained in these answers is not intended or written to be used, and cannot be used, by the reader to avoid any federal tax penalty that may be imposed. The reader should seek advice on his specific tax circumstances directly from a competent CPA or other tax preparer. !!

We will be glad to arrange a meeting to discuss your particular circumstances.

This is just a friendly reminder that your Kentucky personal property tax return is due 5/15 of each year and your Kentucky Secretary of State annual filing must be completed by 6/30 of each year.

Need an EXTENSION. Click “Contact”.

March 15

Corporations need form 7004. Go to www.irs.gov/pub/irs-pdf/f7004.pdf.

April 15

Individuals need form 4868. Go to www.irs.gov/pub/irs-pdf/f4868.pdf. Partneships need form 7004. Go to www.irs.gov/pub/irs-pdf/f7004.pdf.

OR call us. We’ll be glad to assist you.

Some of our employees started or stopped contributing to our SIMPLE IRA plan in the middle of the year. Are we required to make our 3% match based on the employees’ compensation for the entire calendar year or only the compensation earned during the period they actually contributed to the plan?

You must base your SIMPLE IRA plan employer matching contribution on an employee’s entire calendar-year compensation, regardless of when the employee starts or stops contributing during the year.

Examples:

Bob’s annual salary is $50,000 and he starts contributing to his employer’s SIMPLE IRA plan on September 1. He contributes $1,536 through December 31. Bob’s employer must match Bob’s contributions up to 3% of Bob’s calendar-year compensation, or $1,500 (3% of $50,000). It doesn’t
matter that Bob only contributed to the plan during the last 4 months of the calendar year.
John, age 56, earns $60,000 a year. He made the maximum salary reduction contribution for 2011 of $14,000 ($11,500 plus $2,500 catch-up contributions) to his employer’s SIMPLE IRA plan from January 1 to September 30. John’s employer is required to match John’s contribution up to
3% of his entire calendar-year compensation or $1,800 (3% of $60,000), even though John stopped contributing to the plan on September 30.
Joe’s annual salary is $70,000 and he contributed 1% of his compensation, or $700, to his employer’s SIMPLE IRA plan. Joe’s employer must make a matching contribution of $700 because the employer is only required to match the amount Joe actually contributes during the year up to
a maximum of 3% of his calendar-year compensation.

An employer can make matching contributions to an employee’s SIMPLE IRA:

on a per-pay-period basis, or
by the due date of the employer’s tax return (including extensions).

from: Retirement New for Employers, IRS, Winter 2012

CIRCULAR 230 DISCLOSURE: To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein. Likewise, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS.

Here’s a free app from the IRS for all you Millennials, Generation Xers, and even a few of us Boomers, IRS2Go. Like doing your own research? Feel free. And when you’re in information overload, give us a call, e-mail us, or even text. Here’s what the IRS has to say about its social media products:

Federal Tax Information Aplenty through Social Media

Using the latest technologies, the IRS offers multiple avenues for you to get tax information. If you have a smartphone, we have an app! If you like to watch videos from your phone or computer, we have dozens of helpful YouTube videos…and, of course, follow us on Twitter.

Check out how the IRS delivers the latest tax information, initiatives, products and services through social media.

1. IRS2Go The IRS recently launched a smartphone application that allows you interact with the IRS using your mobile device. Our app can help you get your refund status and tax updates. IRS2Go is available for the iPhone or iTouch and the Android.

[To Download the free IRS2Go App, for Apple iPhone or iTouch visit the iTunes app store. For an Android device, visit the Android Marketplace.]

2. YouTube The IRS offers short, informative videos on an assortment of tax-related topics through our YouTube Video channel. The videos are offered in English, American Sign Language and a variety of foreign languages.

3. Twitter IRS tweets include tax-related announcements, news for tax professionals and updates for job seekers. Follow us @IRSnews.

4. Audio files for podcasts These short audio recordings provide useful information on one tax-related topic per podcast. They are available on iTunes or through the Multimedia Center on IRS.gov (along with their transcripts).

5. Widgets These tools, which can be placed on websites, blogs or social media networks, direct others to IRS.gov for information. The widgets feature the latest tax initiatives and programs and can be found on Marketing Express, the marketing site that allows IRS partners and tax preparers to customize their IRS communications products.

6. RSS Really Simple Syndication, or RSS, is an easy way to gather a wide variety of content in one place on your computer. The IRS now offers RSS feeds. RSS, is an easy way to get the news you want whenever it is updated, even if you are not on our website.

Keep in mind that the IRS uses these tools to share information with you. Do not post any confidential information on new or social media sites, especially your Social Security number. The IRS will not be able to answer personal tax or account questions through any of these services.

To find links to all of IRS’s social media tools, visit www.irs.gov and click on “Social Media.”

posted: 1-21-2012

CAUTION to small business: You might be subjected to needless audits if you don’t note this. Please read on:

Beginning with the 2011 tax year, the IRS requires businesses to exclude from Form 1099-MISC any payments they made by credit card, debit card, gift card, or third-party payment network such as PayPal. (These payments are being reported by the card issuers and third-party payment networks on Form 1099-K.) However, this requirement is not well known and many small businesses could issue 1099-MISC with errors.

Therefore, if you are a small business and you RECEIVE a 1099-MISC from another business which includes payments made to YOU with a credit card, debit card, gift card, or third-party payment network such as PayPal, these payments will be have been reported to the IRS twice. THEREFORE, the IRS will expect you to report the payments in income twice. You will be subjected to an audit and will have to provide evidence that you only received the payment once.

An IRS audit can be costly in terms of accounting fees, clerical costs and lost man hours. TO PREVENT THIS LOSS, check every 1099-MISC that your business receives to insure that it does not include payments made to your company by credit card, debit card, etc. In other words, generally, only payments made by check or cash should be included on the 1099-MISC.

Please contact us if you have questions about this or you believe this might affect you.

CIRCULAR 230 DISCLOSURE: To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under
the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein. Likewise, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS.

The Loving case is not so loving. The taxpaying public will be the losers.

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