Above the Forms

Above the Forms: Preventing Tax-Related...

As part of our ongoing series detailing the IRS’ annual “Dirty Dozen” most common tax scams to avoid during tax season, next on the list is identity theft. Fighting identity theft ... [Read More…]

Now that e-File is open, we know the 2015 tax filing season is well underway for you tax pros. By now, many of your clients should have received their W-2 form. If not, it should arrive any day now, as the deadline for employers to send W-2 forms to employees approaches next week.

The IRS has made some changes to Form W-2 and reporting requirements, so I wanted to review one of the key differences you can expect to see this year: Returned Wage Reports from the Social Security Administration.

Returned Wage Reports from the Social Security Administration (SSA): Effective January 2015, the SSA will return Form W-2 electronic and paper wage reports under the following conditions:

Medicare wages and tips are less than the sum of social security wages and social security tips.

Social Security tax is greater than zero; Social Security wages and social security tips are equal to zero.

Medicare tax is greater than zero; Medicare wages are equal to zero.

Additionally, Forms W-2 and W-2c electronic and paper wage reports for household employers will be returned under the following conditions:

The sum of Social Security wages and Social Security tips is less than the minimum yearly earnings subject to Social Security and Medicare tax withholding for a household employee.

The Medicare wages and tips are less than the minimum yearly earnings subject to Social Security and Medicare tax withholding for a household employee.

If the above conditions occur in an electronic wage report or a paper wage report, the SSA will notify the submitter by email or postal mail to correct the report and resubmit it to the SSA.

Medicare waiver payments. Notice 2014-7 provides that certain Medicare waiver payments are excludable from income for federal income tax purposes.

Virtual Currency. Notice 2014-21 describes the treatment of virtual currency for federal tax purposes. Bitcoin is an example of a virtual currency. The fair market value of virtual currency, such as Bitcoin, paid as wages is subject to federal income tax withholding, Federal Insurance Contributions Act (FICA) tax and must be reported on Form W-2, Wage and Tax Statement.

The IRS continues educating taxpayers on the “Dirty Dozen” most common cons during tax season. Second on their list: “phishing” scams.

Typically, phishing scams lure potential victims by posing as legitimate websites and then asking for personal information. Advising your clients to watch out for fake emails or websites may save them from becoming victims of identity theft.

If your client receives an unsolicited email that appears to be from the IRS, they should forward the email [email protected], mark the email spam and delete it. It is important to keep in mind that the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

By Guest Author:  Mike D'Avolio

As a tax professional, you play an incredibly important role in helping your clients navigate all of the new Affordable Care Act (ACA) requirements and implications. There are several new source documents being introduced as part of ACA that require certain institutions to provide tax data to the taxpayer and IRS to assist in the tax prep process and to help track important information.

The following is a quick overview of each:

Starting Tax Year 2014: 

Form 1095-A: Health Insurance Marketplace Statement

The Marketplace sends a copy of Form 1095-A to anyone who enrolled in a health plan with a copy to the IRS. This form provides the following information that is necessary for the taxpayer to compute the premium tax credit (Form 8962) and to determine whether or not the taxpayer is subject to the shared responsibility payment (ACA penalty):

Monthly premium amounts

Monthly premium amounts of the second lowest cost silver plan (benchmark plan)

Monthly advance payments of the premium tax credit

Health coverage for the year

Starting Tax Year 2015 (optional for 2014):

Form 1095-B: Health Coverage Statement

Form 1095-B is issued by a 1) government-sponsored program, 2) eligible employer-sponsored plan, 3) individual market plan or 4) miscellaneous coverage plan. The document is sent to the insured individual and the IRS and provides information about whether the taxpayer, spouse and dependents had qualifying health coverage (minimum essential coverage) for some or all months during the year. Individuals with minimum essential coverage are not subject to individual shared responsibility payment.

Form 1095-C: Employer Provided Health Insurance Offer and Coverage Statement

Employers with 50 or more full-time employees are required to file Form 1095-C with the employee and IRS. The document includes information about whether the employer provided qualifying health coverage to the employee, spouse and dependents for some or all months during the year. Form 1095-C is used to determine the following elements of ACA:

Whether the individual shared responsibility payment applies

Eligibility of employees for premium tax credit

Whether the employer shared responsibility provision applies (beginning in 2015)

Good News for Tax Year 2014

Every year, the IRS releases its list of the most common tax scams, commonly known as the “Dirty Dozen.” These cons attempt to collect personal information from taxpayers that can be used to steal their identities. In 2012, alone, there were 12.6 million victims, or 1 victim every 3 seconds, according to Javelin Strategy & Research. With identity theft on the rise, these frauds peak during tax season. Helping your clients protect themselves is critical.

A persistent and pervasive problem for many taxpayers is phone scams. Scammers impersonate IRS employees and frighten the most vulnerable people by demanding urgent callbacks, immediate payment and threatening law enforcement involvement

“These criminals try to scare and shock you into providing personal financial information on the spot while you are off guard,” Koskinen said. “Don’t be taken in and don’t engage these people over the phone.”

Help your clients protect themselves by warning them of these scams and reminding them that the IRS will never:

Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.

Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

Require you to use a specific payment method for your taxes, such as a prepaid debit card.

Ask for credit or debit card numbers over the phone.

Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

By Guest Author:  David Williams

Did you know that tax season 2014 is going to be one of the roughest in recent memory? Those are the warnings from National Taxpayer Advocate Nina Olson who says it could be “awful.”

But, don’t just take her word for it. IRS Commissioner John Koskinen predicts the worst phone service the IRS has delivered in more than two decades, and warns of possible shutdowns. The twin culprits, according to Olson and Koskinen, are budget cuts and the Affordable Care Act (ACA). Put them together, and you’ve got a recipe for a very difficult filing season.

On the other hand, the picture may not be as gloomy after all. For starters, we aren’t dealing with major, late-breaking tax legislation. The IRS opened as usual on January 20, and while the ACA involves some of the biggest and most complicated tax law changes in history, most Americans have health insurance and will simply need to check a box on their returns saying so.

So, what does all of this mean for the tax professional girding for the rest of busy season? Simply put, in addition to the usual preparations – CPE and boning up on forms changes, for example – you’ll need to understand how the ACA affects the tax return and help your clients understand what they need to do. I would’ve thought this would be relatively easy. Tax pros, after all, have seen this kind of movie before.

Unfortunately, this may be where things have the best chance of going off track. First, the IRS and Health and Human Services (HHS) took much longer than expected to finalize the rules under which everyone has to operate … and those rules are complicated. Moreover, in the first year of any implementation, everyone’s learning about how things are going to work. That includes taxpayers and there will be bumps.

For example, how many people do you suppose know what Form 1095 is and what they’re to do with it? I put this question to an audience of about 100 people late last year and only four knew the answer – and this was an audience of practitioners. These folks were tops in the field and I have no question about their capabilities, but healthcare is new territory to them.

In the past, the biggest question for most clients was whether their medical expenses were big enough to qualify for a deduction from income. Now, there are new forms and new terms: the second lowest cost silver plan and does it apply? What is MAGI and how does it differ from AGI? What is a household for purposes of determining coverage requirements? The list goes on and on.

There are also the natural issues that come with a new program. Your clients may have gotten Form 1095 in the mail, but will they even recognize it or know what to do with it? They may not have gotten insurance because they thought the penalty was only $95 instead of 1% of income. Or, they may have underestimated their incomes when computing the premium tax credit and may find they’ll need to repay it – at the expense of a smaller refund.

Two years from now, healthcare will be another feature of the tax process, albeit a complicated one. The rules will be clearer and taxpayers will understand their responsibilities much better than they do today. By that time, the IRS and HHS will have learned how to administer the program’s complexities. In short, we’re in transition.

To help you talk to your clients about these topics, Intuit has created the following resources:

Intuit’s® ACA Resources – a comprehensive listing of practitioner and client guides, checklists, and information for tax professionals, individual clients and more.

ACA interview guide for tax professionals using Lacerte®, ProSeries® and Intuit Tax Online.

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The IRS is officially started accepting e-Filed and paper tax returns on January 20, kicking off the 2015 filing season. E-File is the most accurate way to file a tax return and the fastest way to get a refund.

In fact, most tax return preparers are required to use e-File if they expect to prepare and file 11 or more Forms 1040, 1040A, 1040EZ and 1041 during a calendar year (unless the preparer or a particular return is administratively exempt from the e-File requirement or the return is filed by a preparer with an approved hardship waiver). The IRS provides more details on these requirements, as well as information on how to explain paper returns to clients and how to request a hardship waiver. And if you are filing paper returns, the IRS shared that with recent budget cuts they have a smaller staff to process paper returns and there may be delays.

The decision for the IRS to open as scheduled on Jan. 20, 2015, follows Congress passing the Tax Increase Prevention Act of 2014 (TIPA), renewing a number of “tax extenders” that expired at the end of 2013. With President Obama signing the bill into law, these tax breaks have been renewed through the end of 2014.

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As you know, the 2015 tax season opens tomorrow, January 20. Last week, the IRS issued a release announcing new resources to help consumers navigate the Affordable Care Act, as well as a few changes that tax pros and consumers alike can expect to see.

Most notably, as a result of recent budget cuts, the IRS announced that they anticipate longer wait times and are encouraging the use of their self-help tools on IRS.gov, rather than calling the IRS directly. As a result, we have ramped up our support staff so that we will be available to help you.

The IRS also announced that the budget cuts have resulted in a smaller staff to process paper returns, so those taxpayers who file paper returns can expect to wait a little longer to get their refund. Despite the requirements for preparer e-file, it’s unlikely that you file many paper returns for your clients. For those that do, we recommend that you set expectations with them around the timing delays.

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There are 147 million taxpayers who need Affordable Care Act (ACA) tax compliance guidance. That’s a big undertaking, even for the most ambitious of us.

Over the past few months, we’ve talked with many of our customers about what’s top of mind as we head into tax season. Resoundingly, tax pros are voicing that the ACA – more commonly known as Obamacare – is the biggest challenge they face this tax season. Helping clients understand its implications and avoid costly penalties is crucial.

One hundred percent of tax professionals are required to understand the intricacies, deadlines, penalties and implications of the ACA, yet only about 7% of you feel “very prepared” for the new tax requirements and changes. This is unsurprising when you account for the additional 2,400 pages of new tax code.

As you help your clients this tax season, we want you to be in the 7% of tax pros who feel prepared for the ACA. In fact, we want that number to grow. That is why we partnered with tax pros like yourself to create Understanding the Affordable Care Act, a website with checklists and resources for yourself and your clients, as well as “How the Affordable Care Act Impacts Your Taxes,” a guide you can download as a PDF to help inform you of potential changes and ensure that you understand how the ACA might impact your clients’ tax situation this year.

As you get into the thick of tax season, we hope you will let us know if there is anything we can do to make this guide more robust and valuable to you.

Tax professionals are a special people. You are thorough, patient and caring, and also a reliable and trusted source of information and advice for your clients. But, we know that your experiences outside of work – your families, friends, hobbies and passions – have as much to do in shaping how you connect, interact and feel about your clients as the work you actually do for them.

This fall, the more than 700 employees who make up Intuit’s® Professional Tax Group set out on a mission to get to know our customers – tax professionals like yourself – on a deeper and more personal level. We wanted to better understand what challenges you and what inspires you, so that we can help you do the same for your clients. Through a series of events we called UNITE, we visited hundreds of our customers to see what it was like to walk in their shoes, and see where they live and work. It was an insightful, inspirational and emotional experience for everyone on our team, including our customers.

It’s one of the experiences that inspired me to create this blog as a place to rise Above the Forms and connect, engage and learn from one another. We’ll talk about the issues and opportunities we face collectively in the regulatory, technology and economy, sharing tips, timely updates and insights that impact tax pros and the work you do. In addition, we’ll also talk about our lives outside of the office so that we can continue to create stronger connections.