IRS Refunding $10 Million

Since the DC Court of Appeals upheld the district court ruling in Loving v. IRS – which determined that the IRS does not have the authority to require certification exams of tax preparers – the IRS will issue refunds to those who took the Registered Tax Return Preparer (RTRP) test. The IRS will mail a letter on May 28 followed by checks on June 2; they estimate $10,324,000 will be refunded.


The press release also notes that the Obama Administration’s 2016 budget grants the IRS authority to regulate tax preparation, which could lead to future certification tests being developed and implemented.

To read the full press release, click here.

Sources: Internal Revenue Service, District of Columbia Court of Appeals

Registered Tax Return Preparer Test Fee Refunds

The IRS is refunding the fees that return preparers paid for the Registered Tax Return Preparer test. Letters will be mailed to refund recipients on May 28 and checks will be mailed on June 2. Return preparers took the test between November 2011 and January 2013 and paid a fee of $116. About 89,000 tests were paid for and taken, with some preparers taking the test more than once.

The refunds are being made because the federal courts determined in Loving v. IRS that the IRS lacked authority to mandate testing.

The IRS remains committed to the principle that all persons who prepare federal tax returns for compensation should be required to pass a test of minimal competency and take annual continuing education training. Taxpayers deserve top-quality and ethical service from all tax professionals. As part of this commitment, the IRS launched an interim Annual Filing Season Program in 2014 to promote voluntary continuing education by non-credentialed tax return preparers.

The Administration's 2016 budget proposal would provide the IRS with authority to regulate all paid tax return preparers. Oversight of all paid preparers, coupled with diligent enforcement, would promote high-quality services from all tax professionals, improve voluntary compliance and foster confidence in the fairness of the U.S. tax system.

Frequently Asked Questions

Source: Internal Revenue Service 

Small Business Retirement Plan Penalty Relief Expires Soon

IRS Special Edition Tax Tip 2015-07, May 20, 2015

You still have time to file retirement plan tax returns for your small business. Under the IRS special penalty relief program, you can avoid stiff penalties for filing late. However, you must act soon. Here are some key points you should know about this program:

• Late Filing Penalties.  Plan administrators and sponsors who fail to file required forms can face penalties of up to $15,000 per return. The plan usually must file Form 5500-EZ each year.
  
  
• Penalty Relief Deadline.  A special program provides penalty relief for late filers. Those who are eligible can avoid these penalties by filing late returns by June 2, 2015.
  
  
• Relief to Certain Plans.  In general, this program is open to certain small business plans. These include owner-spouse plans, plans of business partnerships (together, “one-participant plans”) and certain foreign plans.
  
  
• Penalty Already Assessed.  If you have already been assessed a penalty for late filings you are not eligible for this program.
  
  
• One-Year Pilot.  The IRS launched this program on June 2, 2014, as a one-year pilot. It can help small businesses that may have been unaware of their plan’s filing requirements. So far, the IRS has received about 6,000 late returns under the program.
  
  
• Multiple Late Returns.  You may apply for relief for multiple late returns in a single submission under this program.
  
  
• No Fee Required.  The IRS does not charge a filing fee or require a payment to apply for this relief.
  

Additional IRS Resources:

• Revenue Procedure 2014-32
• Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan

IRS YouTube Video:

• Form 5500-EZ Pilot Penalty Relief Program – English

Source: Internal Revenue Service

2016 Tax Day Moves

The due date for tax filing season 2016 is Apirl 18, 2016. 

According to Revenue Ruling 2015-13, April 18 will be the filing deadline for most of the country in 2016. Since Emancipation Day – a legal holiday in D.C. – falls on a Saturday, it will be observed on the preceding Friday, which just so happens to be April 15. Tax Day is further delayed in Massachusetts and Maine, since they observe Patriot’s Day on April 18: meaning that most residents of those states have until April 19 to file income tax returns next year.


To read the entire ruling, click here.

Source: Internal Revenue Service

IRS Withholding Calculator

If you are an employee, the Withholding Calculator can help you determine whether you need to give your employer a new  Form W-4, Employee's Withholding Allowance Certificate to avoid having too much or too little Federal income tax withheld from your pay. You can use your results from the calculator to help fill out the form.

Who Can Benefit From The Withholding Calculator?

• Employees who would like to change their withholding to reduce their tax refund or their balance due;
• Employees whose situations are only approximated by the worksheets on the paper W-4 (e.g., anyone with concurrent jobs, or couples in which both are employed; those entitled to file as Head of Household; and those with several children eligible for the Child Tax Credit);
• Employees with non-wage income in excess of their adjustments and deductions, who would prefer to have tax on that income withheld from their paychecks rather than make periodic separate payments through the estimated tax procedures.

CAUTION:    If you will be subject to alternative minimum tax, self-employment tax, or other taxes; you will probably achieve more accurate withholding by following the instructions in Pub 505: Tax Withholding and Estimated Tax.

Ready to start? Make sure scripting is enabled before using this application. Continue to the Withholding Calculator

Tips For Using This Program

• Have your most recent pay stubs handy.
• Have your most recent income tax return handy.
• Estimate values if necessary, remembering that the results can only be as accurate as the input you provide.

To Change Your Withholding:

1. Use your results from this calculator to help you complete a new Form W-4, Employee's Withholding Allowance Certificate.
2. Submit the completed Form to your employer.

IRS Marks National Military Appreciation Month; Free Tax Guide Focuses on Tax Benefits for Members of the Military

May is National Military Appreciation Month, and the Internal Revenue Service wants members of the military and their families to know about the many tax benefits available to them.

Each year, the IRS publishes Publication 3, Armed Forces Tax Guide, a free booklet packed with valuable information and tips designed to help service members and their families take advantage of all tax benefits allowed by law. This year’s edition, geared to the 2014 return, is posted on IRS.gov. Available tax benefits include:

• Combat pay is partly or fully tax-free.

• Reservists whose reserve-related duties take them more than 100 miles from home can deduct their unreimbursed travel expenses on Form 2106 or Form 2106-EZ, even if they don’t itemize their deductions.

• Eligible unreimbursed moving expenses are deductible on Form 3903 .

• Low-and moderate-income service members often qualify for such family-friendly tax benefits as the Earned Income Tax Credit, and a special computation method is available for those who receive combat pay.

• Low-and moderate-income service members who contribute to an IRA or 401(k)-type retirement plan, such as the federal government’s Thrift Savings Plan, can often claim the saver's credit, also known as the retirement savings contributions credit, on Form 8880.

• Service members stationed abroad have extra time, until June 15, to file a federal income tax return. Those serving in a combat zone have even longer, typically until 180 days after they leave the combat zone.

• Service members may qualify to delay payment of income tax due before or during their period of service. See Publication 3 for details including how to request relief.

Service members who prepare their own return qualify to electronically file their federal return for free using IRS Free File. In addition, the IRS partners with the military through the Volunteer Income Tax Assistance program to provide free tax preparation to service members and their families at bases in the United States and around the world.

Source: Internal Revenue Service

TIGTA Takes IRS to School: Education Credits Wrongly Issued

The Treasury Inspector General for Tax Administration identified $5.6 billion in credits from 2012 that were wrongly issued to taxpayers who failed to file Form 1098-T, attended schools that weren’t eligible for the credit, and didn’t meet the criteria to be considered “half-time” students.


TIGTA believes this problem is due to the lack of a sufficient assessment apparatus, which could be improved by implementing processes suggested in previous audits. The report goes on to identify measures that could address and prevent this problem in the future.
 
To read the full article, click here.

Source: The Treasury Inspector General for Tax Administration