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IRS Expanding The Compliance Assurance Process For 2020, Accepting New Corporate Applicants

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The Internal Revenue Service announced today the opening of the application period for the 2020 Compliance Assurance Process program. For the first time since 2015, new corporate applicants who meet eligibility requirements can apply for CAP. The application period runs September 16 to October 31, 2019. The IRS will let applicants know if they’re accepted into the program around January 31, 2020.

Launched in 2005, CAP employs real-time issue resolution, through transparent and cooperative interaction between taxpayers and the IRS, to improve federal tax compliance by resolving issues prior to the filing of a tax return.

To be eligible to apply for CAP, new applicants must:

  • Have assets of $10 million or more,
  • Be a U.S. publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q, and 8-K, and
  • Not be under investigation by, or in litigation with, any government agency that would limit the IRS’s access to current tax records.

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How To Get A Copy Or Transcript Of Your U.S. Tax Return

How To Get A Copy Of US Tax Return

There are different ways to obtain tax return information. Most requests can be satisfied with a computer printout of your return information called a transcript. However, sometimes you need an exact copy of a previously filed and processed tax return with all attachments (including Form W-2). Copies are generally available for returns filed for the current and past six years. On jointly filed tax returns, either spouse may request a copy and only the signature from the requesting spouse is required on the Form 4506, Request for Copy of Tax Return (PDF). You should complete Form 4506 and mail it to the address listed in the instructions, along with a $50 fee for each tax return requested.

  • Make your check or money order payable to the United States Treasury
  • Enter your SSN, ITIN, or EIN and “Form 4506 request” on your check or money order
  • Allow 75 calendar days for us to process your request

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IRS Position On Qualified Business Income Deduction

Qualified Business Income Deduction

Many owners of sole proprietorships, partnerships, S corporations and some trusts and estates may be eligible for a qualified business income (QBI) deduction – also called Section 199A – for tax years beginning after December 31, 2017. The deduction allows eligible taxpayers to deduct up to 20 percent of their qualified business income (QBI), plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Income earned through a C corporation or by providing services as an employee is not eligible for the deduction. For more information on what qualifies as a trade or business, see Determining your qualified trades or businesses in Publication 535 (PDF).

The deduction is available, regardless of whether taxpayers itemize deductions on Schedule A or take the standard deduction.  Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file in 2019.

The deduction has two components.

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IRS Interest Rates On Overpayment And Underpayment

IRS Notice

The Internal Revenue Service announced that interest rates will remain the same for the calendar quarter beginning October 1, 2019, as they were in the prior quarter.

The rates will be:

  • five (5) percent for overpayments [four (4) percent in the case of a corporation];
  • two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • five (5) percent for underpayments; and
  • seven (7) percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

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Retirement Savings Contributions Credit (Saver’s Credit)

IRS On Retirement Credits

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. And, beginning in 2018, if you’re the designated beneficiary you may be eligible for a credit for contributions to your Achieving a Better Life Experience (ABLE) account.

Who Is Eligible For The Credit?

You’re eligible for the credit if you’re:

  1. Age 18 or older;
  2. Not a full-time student; and
  3. Not claimed as a dependent on another person’s return.

See the instructions for Form 8880, Credit for Qualified Retirement Savings Contributions, for the definition of a full-time student.

Amount Of The Credit

The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA or ABLE account contributions depending on your adjusted gross income (reported on your Form 1040 series return). The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). Use the chart below to calculate your credit.

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The IRS Large Business And International Division (LB&I) Announces The Approval Of Six Additional Compliance Campaigns

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To date, LB&I has announced a total of 59 campaigns.

The campaigns described below were identified through LB&I data analysis and suggestions from IRS employees. LB&I’s goal is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources. The new campaigns are:

S Corporations Built in Gains Tax

Practice Area: Pass Through Entities

Lead Executive: Holly Paz, Director of Pass Through Entities

C corporations that convert to S corporations are subjected to the Built-in Gains tax (BIG) if they have a net unrealized built-in gain and sell assets within 5 years after the conversion. This tax is assessed to the S corporation. LB&I has found that S corporations are not always paying this tax when they sell the C corporation assets after the conversion. LB&I has developed comprehensive technical content for this campaign that will aid revenue agents as they examine the issue. The goal of this campaign is to increase awareness and compliance with the law as supported by several court decisions. Treatment streams for this campaign will be issue-based examinations, soft letters, and outreach to practitioners.

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Internal Revenue Service Transfer Pricing Examination Process

IRS Transfer Pricing Examination Process

The Transfer Pricing Examination Process (TPEP) provides a guide to best practices and processes to assist with the planning, execution, and resolution of transfer pricing examinations consistent with the Large Business & International (LB&I) Examination Process (LEP), Publication 5125. This guide will be shared with taxpayers at the start of a transfer pricing examination, so they understand the process and can work effectively with the examination team.

Transfer pricing examinations are factually intensive and require a thorough analysis of functions performed, assets employed, and risks assumed along with an accurate understanding of relevant financial information. They are resource intensive for both the IRS and taxpayers. To ensure resources are applied effectively, LB&I is
using data analytics to identify issues for examination that have the most significant risk for non-compliance. In addition, teams should continually assess the merits of issues during an examination.

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How To Spot Signs Of Tax Client Data Theft

IRS _ How To Spot Client Data Theft

The Internal Revenue Service and its Security Summit partners  urged tax professionals to learn the tell-tale signs that their office may have experienced a data theft that resulted in fraudulent tax returns being filed in their clients’ names.

The IRS, state tax agencies and the private-sector tax industry, working together as the Security Summit, warned practitioners that global criminal syndicates remain active, and they are well financed, high skilled and tax savvy in their attempts to gain sensitive tax data.

The reminder came as the IRS and the Summit partners encouraged tax professionals to take time this summer to review their data security protection. To help the tax community, the Summit partners offered a new “Taxes-Security-Together” Checklist as a starting point.

“Learning the signs of identity theft is critical for anyone handling taxpayer data,” said IRS Commissioner Chuck Rettig. “It can be as subtle as an unusually slow computer system or as obvious as multiple clients unexpectedly receiving the same IRS notice. Paying attention to these details is critical, and fast action alerting the IRS and calling in a security expert can help protect taxpayers and your business.”

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Business Owners May Be Able To Benefit From The Home Office Deduction

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Taxpayers who use their home for business may be eligible to claim a home office deduction. It allows qualifying taxpayers to deduct certain home expenses on their tax return. This can reduce the amount of the taxpayer’s taxable income.

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

  • The home office deduction is available to both homeowners and renters.
  • There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
  • Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.

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Taxpayers Who Itemize Deductions May Be Doing Things Now That Will Affect The Tax Returns They File Next Year

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According to the IRS Announcement on Tax Reform Tips 2019, Summer is a season when people have fun, yet get things done. From buying a new house to cleaning their old one, taxpayers who itemize their deductions may be doing things this summer that will affect the tax returns they file next year.

The higher standard deduction means fewer taxpayers are itemizing their deductions. However, taxpayers who still plan to itemize next year should keep these tips in mind:

  • Deducting state and local income, sales and property taxes. The deduction that taxpayers can claim for state and local income, sales and property taxes is limited. This deduction is limited to a combined, total deduction of $10,000. It is $5,000 if married filing separately. Any state and local taxes paid above this amount can’t be deducted.
  • Refinancing a home. The deduction for mortgage interest is also limited. It’s limited to interest paid on a loan secured by the taxpayer’s main home or second home. For homeowners who choose to refinance, they must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described in the next bullet under “buying a home.”
  • Buying a home. People who buy a new home this year can only deduct mortgage interest they pay on a total of $750,000 in qualifying debt for a first and second home. It’s $375,000 if married filing separately. For existing mortgages, if the loan originated on or before Dec. 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

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IRS Has Begun Sending Letters To Virtual Currency Owners Advising Them To Pay Back Taxes, File Amended Returns

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The Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.

“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” said IRS Commissioner Chuck Rettig. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”

The IRS started sending the educational letters to taxpayers last week. By the end of August, more than 10,000 taxpayers will receive these letters. The names of these taxpayers were obtained through various ongoing IRS compliance efforts.

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Tax Security 2.0 – Taxes-Security-Together Checklist – Step 1

IRS On Security

Using a new “Taxes-Security-Together” Checklist, the Internal Revenue Service and the Security Summit partners urged tax professionals to review critical security steps to ensure they are fully protecting their computers and email as well as safeguarding sensitive taxpayer data.

The Security Summit partners – the IRS, states and tax industry – urge tax professionals to take time this summer to give their data safeguards a thorough review. To help the tax community, the Summit created a “Taxes-Security-Together” Checklist as a starting point for analyzing office data security.

In the first of a five-part weekly series, the initial step on the checklist involves the “Security Six” protections. These steps fall into several major security categories.

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