IRS announces 2021 PTIN fees for tax return preparers

IR-2020-159, July 15, 2020

WASHINGTON — The Internal Revenue Service announced today the annual fee for 2021 that tax return preparers must pay to apply for or renew their Preparer Tax Identification Number (PTIN).

In final regulations issued today, the IRS set a $21 fee per PTIN application or renewal (plus a $14.95 fee payable to a contractor).

Anyone who prepares or substantially helps prepare any federal tax return or claim for refund for compensation must have a valid PTIN from the IRS. The PTIN must be used as the identifying number on returns prepared. Failure to have and use a valid PTIN may result in penalties. The IRS estimates that more than 800,000 tax return preparers will apply for or renew a PTIN this year.

The annual renewal of PTINs ensures the IRS has up-to-date identifying information about each return preparer, which is essential for timely communication of important information. The program helps protect both return preparers and taxpayers and prevent the unauthorized use of PTINs.

The IRS is required (PDF) to conduct a biennial review of the PTIN user fee. The agency determined that the full cost to administer the PTIN program going forward is $21 per application or renewal. This amount includes costs relating to PTIN misuse and maintaining the integrity of PTINs. The third-party contractor fee, $14.95, pays for several functions including processing applications, renewals and operating a call center.

PTINs expire on December 31 of the year for which they are issued. PTINs generally can be renewed beginning in mid-October and are valid for the following calendar year. A tax return preparer can renew online at www.irs.gov/ptin by logging into the preparer’s PTIN account or by submitting a paper Form W-12 with the “Renewal” box checked.

Zip Refund is open for yet another tax season and as of today, the IRS announced when they will be, too.

The Internal Revenue Service confirmed that the nation’s tax season will start for individual tax return filers on Monday, January 27, 2020, when the tax agency will begin accepting and processing 2019 tax year returns.

The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

“As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS stands ready to help,” said IRS Commissioner Chuck Rettig. “We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov. The IRS and the nation’s tax community are committed to making this another smooth filing season.”

The IRS set the January 27 opening date to ensure the security and readiness of key tax processing systems and to address the potential impact of recent tax legislation on 2019 tax returns.

We are looking forward to another successful year as continue to prepare for opening day. HUB tetsting will be here before you know it,  so we are more than ready. 

Guess the first time they tried this, they did not succeed and it did not go so well so they are trying again.  Last year a postcard- this year…

The IRS revealed that the 1040 will have several changes for the coming tax season. First, the 1040 is being enlarged to allow more information to be entered vs. being entered on a supporting schedule. The 1040 will be approximately 25% larger. Also, three of the six schedules have been eliminated by combining certain items or moving them back to the 1040.

The first page of the 1040 will now have space for the taxpayer to enter a foreign address, as opposed to it being located on Schedule 6. Certain income items have been relocated to the first page of the 1040, including a line to report Capital gain or (loss). The signature lines for the Primary Filer, Spouse and Paid Preparer are now located at the bottom of the second page of the 1040. Also, Third Party Designee information has been added back to the second page of the 1040.

The layout of the new 1040 and the three remaining schedules are different than last year’s forms. The Standard Deduction section has been expanded, making it easier to identify when a taxpayer is eligible for the additional standard deduction due age or blindness. There is now a spot the taxpayers E‐mail address and phone number in the signature section. The remaining schedules have appropriately been re‐numbered, beginning with 1. Previously, the numbering was confusing and despite their intent, was of little help.

(Schedule 1) ‐ Additional Income and Adjustments to Income have been renumbered but basically remains the same. The only real difference is, alimony now requires the taxpayer to enter the date of the divorce.

(Schedule 2) Is now Additional Taxes. It combines last year’s Schedule 2 – Tax and Schedule 4 – Other Taxes into a single schedule.

(Schedule 3) Is now called Additional Credits and Payments. Schedule 3 now combines— Nonrefundable Credits and Schedule 5—Other Payments and Refundable Credits.

The latest version of the re‐designed Form 1040 and Schedules 1‐3 are posted in the draft forms section on IRS.gov.

Odds are you’re paying too high a tax bill today. The good news, though, is that means you could see a notably higher refund next year.

A research note from Morgan Stanley estimates 2019 refunds will top this year’s by 26%, working out to an extra $62 billion given back by the Internal Revenue Service.

Payroll taxes are where people have been overpaying, says the investment firm, as most haven’t changed their withholding. Combine that with the GOP’s tax bill, which was passed last December and it increases the odds of a nice refund.

The bulk of the refunds,says Morgan Stanley, will be sent in February. And that could have some positive effects for the economy.

“We expect this boost in tax refunds to result in a sharply higher savings rate and elevated sales of big-ticket items in February and March 2019,” the firm wrote.

The bulk of people getting refunds—some 65%—tucked them into savings this year, according to a Morgan Stanley survey.Meanwhile, 35% paid down debt and 12% splurged on a vacation, while 8% made a major purchase, such as a car or TV, with the refund.

The average refund as ofthe end of April 2018, according to the IRS, was $2,771, which was just 0.2% bigger than the 2017 totals. (The good news was they were sent out to people quicker this year.)

Better news? Your chances of an IRS tax audit in 2018 are the lowest in 15 years, as the branch has lost close to one-third of its enforcement staff since 2010. That’s not expected to change next year.

From: fortune.com

10 tips for tax pros to avoid phishing scams

By Jeff Stimpson

Published September 17 2017, 5∶09pm EDT

The inbox seems to have become tax preparers’ worst enemy in this age of phishing e-mails designed to trick preparers into volunteering critical information. Crooks convert stolen data into phony refunds faster than ever, and it’s easy to think that time-tested protections aren’t enough anymore.

The IRS shared its top 10 tips and practical examples for tax pros to protect themselves – and their clients – from taking the bait. (A slideshow version of this article is available.)

1. Spear itself. Nine out of 10 cyber-attacks and data leaks begin with spear phishing e-mail, often tailored to individual practitioners. Spear-phishing crooks pose as familiar entities, and have usually done extensive research to target a specific audience – tax pros are favorites – to gain passwords or install malware.

Red flags: The supposedly familiar source of the e-mail; conversational but ungrammatical and oddly constructed language; calls to action urging opening of a link (often a “tiny” URL to mask the true destination).

2. Hostile takeovers. In these mushrooming schemes, a thief manages to steal or guess the username and password of a tax pro, resulting in the imaginable and horrific havoc with EFINs, prep software accounts and more. Again, these hardworking thieves do their homework to pose as a familiar organization, potential client, another tax pro, a bank or a cloud-based storage provider. Links or attachments may also load malware on computers to capture keystrokes.

Red flags: Urgent and threatening calls to action; pages that looks like the login pages for IRS e-Services or a prep-software providers.

3. Day at the breach. In the first five months of this year, about 107,000 taxpayers reported being victims of ID theft — a total actually down from previous years — but the IRS also saw an jump in ID theft involving business-related tax returns, including 1120s and 1120Ss, 1041s and Schedule K-1 filings. The IRS will soon ask tax pros to gather more information on their business clients to help authenticate returns, including Social Security numbers, payment history and parent company information.

Red flag: Potential business clients claiming they don’t currently have an EIN.

4. Ransom devil. Ransomware attacks are on the rise worldwide, locking computer systems and holding sensitive data hostage until users pay crooks to release the data (though often scammers won’t provide the decryption key even after a ransom is paid). Users generally are unaware that malware has infected their systems until they receive the ransom request.

Red flag: Phishing e-mails.

5. Remote control. A tax pro’s entire digital network could be at risk for remote takeover by cybercriminals who exploit security weaknesses to access the devices to access client returns, complete and e-file those returns, and then secretly direct refunds to their own accounts. Especially vulnerable are wireless networks, including mobile phones, modems and router devices, printers (clients’ returns might still in the device’s memory), fax machines and televisions that retain their factory issued password settings.

Red flags: Phishing e-mails with attachments.

6. BEC to the wall. A burgeoning W-2 scam — a.k.a., a business email compromise, or “BEC”– is one of the most dangerous phishing e-mail schemes trending nationwide. A cybercriminal impersonates a company or organization exec’s e-mail address to target a payroll, financial or HR employee with a request for a transfer or funds or a request a list of all employees and their W-2s. This allows crooks to file fraudulent returns that mirror the employees’ actual income, making the fraud harder to detect.

Red flags: Slight variations in familiar URLs (for example, legitimate abc_company.com e-mail domain reads as “abccompany. com”); “reply” e-mail address is different from the “from” e-mail address.

7. EFIN headache. Criminal syndicates routinely attempt to steal tax pros’ usernames and passwords to access e-Services to obtain the EFIN. Savvy cybercriminals even swipe CAF numbers and may know how to file fraudulent power-of-attorney documents. (Password thefts are one reason the IRS moved to a two-factor authentication process for online tools.)

Red flags: Spear-phishing e-mails impersonating IRS e-services.

8. Protect clients. Tax pros must take proactive responsibility for safeguarding client data. Proper plans assess risks to taxpayer information in offices, list locations where taxpayer information is kept, and formally document how to safeguard information.

Red flags: Service providers lacking an adequate level of information protection.

Click below to Read more

First Time Abate: The ‘Get Out of Tax Penalties Free’ Card

A while ago, we wrote about Form 8275, Disclosure Memo, as a safety tool to avoid penalties by disclosing a position on a tax return for which the preparer and taxpayer believe they have reasonable basis, but are nonetheless not quite sure (see IRS Penalties: Speak Softly and Carry Form 8275). We were, and continue to be, astonished by the lack of use of this most valuable resource. First Time Abate is another penalty tool that we are surprised hasn’t yet become mainstream in tax practice.

In 2001, the Internal Revenue Service began granting penalty relief under an administrative waiver known as First Time Penalty Abate. It’s not in the Internal Revenue Code; it comes under the “Reasonable Cause Assistant” (RCA) of the IRS and it’s in the Internal Revenue Manual (IRM 20.1.1.3.6.1). Like many provisions of the Internal Revenue Manual (repetitive examination procedures, for example), First Time Penalty Abate availability is not well publicized by the IRS.

Here’s how it works. The IRM basically states that First Time Abate applies to penalties for late income tax filings (including partnerships and S corporations) and late income tax payments (including late deposits of tax). Such abatement may be granted as long as the taxpayer has a clean history (no penalty assessments) for the previous three years. The purpose behind First Time Abate relief is to reward past compliance and promote future compliance by utilization of this “get out of penalty free card.”

A clean history means a clean history, but some areas of the Internal Revenue Manual or other research are worthy of note. For example, the criteria includes “if current taxes are paid, or arranged to pay.” Well, “arranged to pay” means the IRS will consider the taxpayer current if an installment agreement is in existence, as long as the payment plan is in good standing. Thus, an installment agreement in good standing does not negate the possibility of relief under the First Time Penalty Abate administrative waiver. In addition, if there was a prior penalty in the previous three years, but it was removed due to reasonable cause, that activity should not count as a “prior penalty.” Thus the opportunity to be awarded this first time abatement is still applicable in that situation.

Our office simply requests this waiver by responding to the address on the penalty assessment letter, stating the taxpayer’s “good three year history” and a request that the “penalty be waived under First Time Penalty Abate Administrative Waiver.” Frankly, we try it with a whole variety of penalties, not just late filing and late payment of income tax returns, since First Time Abate is not quite “the law” and clearly discretionary. In addition, if one of the prior three years had an insignificant penalty, there is language in the IRM that suggests consideration, so we’d try in that case too, especially if we lack reasonable cause. Try.

In 2012, the Treasury Inspector General for Tax Administration pointed out that the IRS failed to inform about 1.45 million taxpayers that they qualified for this relief, resulting in $181 million in waivable penalties. TIGTA recommended the IRS ensure taxpayers are aware of this potential waiver. However, from what we see, this has not been the case. Most practitioners, as well as the vast majority of taxpayers, are not familiar with this most welcome opportunity.

Paul Mancinone is a CPA and attorney at law, and represents businesses and individuals before the IRS. Alison Walsh is an accountant and manager at his firm, Paul Mancinone Company, P.C., in Springfield, Mass.

2016 Changes to EITC, Child Tax and Education Credits, and 2017 Filing Season Refund Delays for Returns with EITC

As the main part of the 2016 filing season comes to a close, it is time to emphasize the coming important changes to the preparer due diligence requirements, refundable credits, and refunds for the 2017 filing season.

The December 2015 extender bill did more than just extend the expiring tax provisions. In the Protecting Americans from Tax Hikes (PATH) Act of 2015, Congress included a “program integrity” section that dealt with the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and American Opportunity Education Tax Credit (AOTC).

Below is a summary of what these changes are:

Refunds for Federal Returns that Claim EITC will not be Released Until February 15 Beginning with the 2017 Filing Season
The integrity provision of the PATH Act that will have the greatest impact on taxpayers that claim EITC is the one that requires the IRS to not release refunds for returns that claim EITC or the Additional Child Tax Credit until February 15 beginning with the 2017 filing season. Therefore, any return claiming the EITC or CTC credits that is prepared in the early part of the filing season will not be released for up to 4 weeks (depending on when the return is filed) instead of the standard 21 days or less timeframe.

Expansion of Preparer Due Diligence Requirements
The PATH Act expands the EITC due diligence requirements under Code Section 6695 (including the $500 penalty) to now include the Child Tax Credit and the American Opportunity Education Credit beginning with 2016 individual federal returns.

This means that the IRS will be making changes to Form 8867 (Paid Preparer’s Earned Income Tax Credit Checklist). The form will be renamed and additional due diligence related questions will be added for these two additional credits.

The IRS is in the process of modifying the due diligence regulations for the addition of the Child Tax Credit and the American Opportunity Education Credit. When the IRS releases these regulations, we will give you more details on what they contain and what changes will be made to the Tax Year 2016 Form 8867.

Earned Income Tax Credit (EITC) Changes
The PATH Act made the following changes that will affect individuals who claim EITC on their returns beginning with Tax Year 2016 tax returns:

• Individuals cannot file an amended return to claim EITC for prior years that a qualifying child did not have a Social Security Number. This provision went into effect on the date the PATH Act became law on December 18, 2015.
• The IRS can bar an individual from claiming EITC for 10 years if the IRS finds they have fraudulently claimed the credit.
• The EITC is now subject to the penalty for erroneous claim for refunds and credits.
• Incorrectly claimed refundable credits will now be taken into account when determining the underpayment penalty.

Changes for Child Tax Credit and the American Opportunity Education Credit
The PATH Act made the following changes for returns that claim the child tax credit or the American Opportunity credit beginning with Tax Year 2016 tax returns:

• If the IRS determines that an individual has intentionally disregarded the rules for claiming the Child Tax Credit and/or the American Opportunity Education Credit they can bar them for two years from claiming either or both of these credits.
• Individuals cannot file an amended return to claim the Child Tax Credit or the American Opportunity Education Credit for prior years that a qualifying child did not have an ITIN or SSN.
• The EIN of the educational institution will be required to be reported on Form 8863. If it is missing the IRS will reject the return.