The Scoop December 14, 2016 · 12/11/2016 1 Center for Agricultural Law & Taxation The Scoop...

12/11/2016

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Center for Agricultural Law & Taxation

The Scoop

December 14, 2016


Agenda

• New IRS Online Tool

• EFTPS Improvements Delayed

• Notice 1036 percentage wage tables

• IRS Advice to Those with Expiring ITINs

• Employers & Health Coverage Providers: You Have More Time in 2017 to Provide Information Forms to Covered Individuals

• Congress Moves to Exempt Qualified Small Employer Health Reimbursements from Onerous ACA Penalty

• Series of Yes-or-No Questions help you Determine Eligibility for the Premium Tax Credit

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Agenda

• Bit-Coin Summons

• FINCEN Due Date

• IRS Transcripts

• State Identity Theft Issues

• Private Debt Collection

• W-2 Codes – Validation Code

• Employer Penalties for ACA to be Issued

• H.R. 5015 Combat-Injured Veterans Tax Fairness Act of 2016 – Passes House

• Pending Legislation 3

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IRS Launches New Online Tool

• Basic Account Information

• This new and secure tool, available on IRS.gov allows taxpayers to view their IRS account balance, which will include the amount they owe for tax, penalties and interest

• Taxpayers may also continue to take advantage of the various online payment options available by accessing any of the payment features including: direct pay, pay by card and Online Payment Agreement

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IRS Launches New Online Tool

• As part of the IRS vision for the future taxpayer experience, the IRS anticipates that other capabilities will continue to be added to this platform as they are developed and tested

• https://www.irs.gov/payments

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EFTPS Improvements Delayed

• EFTPS early alert system delayed until 2019

• The alert system will flag late employment tax deposits within 72 hours and alert taxpayers

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Notice 1036

• The wage amounts shown in the Percentage Method Tables for Income Tax Withholding are net wages after the deduction for total withholding allowances

• The withholding allowance amounts by payroll period have changed

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2017 Changes

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Withholding Adjustment forNonresident Aliens• Nonresident alien students from India and business

apprentices from India aren't subject to the following procedure

• Step 1. Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in this chart for the applicable payroll period

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Withholding Adjustment forNonresident Aliens• Step 2. Use the amount figured in Step 1 and the

number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding

• Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount in the table

• Reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to determine the wages subject to income tax withholding

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Withholding Adjustment forNonresident Aliens

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• Figure the income tax withholding using the Percentage Method Tables for Income Tax Withholding

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Tables - Weekly

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Tables – Bi-Weekly

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Tables – Semi-Monthly

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Tables - Monthly

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IRS Advice to Those with Expiring ITINs: Apply Now to Avoid Refund Delays; Agency Offers Tips on Avoiding Common Errors

• Individuals with an expiring Individual Taxpayer Identification Number (ITIN) and a need to file a return in the upcoming filing season needs to file a renewal application in the next few weeks to avoid refund and processing delays

• In addition, the IRS encouraged people to check their renewal application, Form W-7, carefully before filing and offered tips for avoiding common errors being seen

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• ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number

• Under a recent law change by Congress, any ITIN not used on a tax return at least once in the past three years will expire on Jan. 1, 2017

• In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) will also expire on that date

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• This means that anyone with an expiring ITIN should act now to make sure they have a renewed ITIN in time to file a return during the upcoming tax season

• Failure to do so will result in refund delays and possible loss of eligibility for some tax benefits

• The IRS said that an ITIN renewal application filed now before the end of the year will be processed before one submitted in January or February at the height of tax season

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• Currently, a complete and accurate renewal application can be processed in as little as seven weeks

• But this timeframe is expected to lengthen to 11 weeks during tax season

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Common Errors – Slowing Down Processing• The IRS reports several common errors being

seen in recent weeks that are currently slowing down and holding up some ITIN renewal applications

• The mistakes generally center on missing information, and/or insufficient supporting documentation

• The tax agency stressed that ITIN renewal applicants should be sure to use the latest version of Form W-7, revised September 2016

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Common Errors – Slowing Down Processing• At the top of the form, be sure to check the box that

says, “Renew an existing ITIN”

• Under, “Reason you’re submitting Form W-7,” every applicant must check one of the eight boxes. If more than one applies, be sure to check the option that best describes the tax purpose for filing the application

• Do not write, “ITIN renewal,” in this section of the form, as it is not a valid reason

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Common Errors – Slowing Down Processing• On Line 3, an applicant living outside the United

States should enter their foreign address, if different from the mailing address on Line 2

• If now living in the U.S., be sure to enter the foreign country of last residence

• Include original supporting and required identification documentation, or certified copies from the issuing agency to prove foreign status and identity

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Stand-alone - Passport

• ITIN renewal applicants are also reminded that only a passport with a U.S. entry date is now acceptable as a stand-alone identification document for dependents

• This is a change from past policy

• This means that dependent ITIN applicants who use a passport without a date of entry must provide additional documentation, along with the passport, to prove U.S. residency

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Acceptable documents include:

• If under age 6, a U.S. medical record

• If under age 18, a U.S. school record

• If at least age 18, a U.S. school record for anyone who is a student

• Otherwise, anyone 18 and over can provide a rental or bank statement or a utility bill listing the applicant’s name and U.S. address

• Dependents from Canada, Mexico, or dependents of U.S. military personnel stationed overseas are exempt from these additional requirements

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IRS Extends Due Dates for PPACA Forms and Penalty Relief• Because a substantial number of employers, insurers, and other

providers of health coverage need more time to gather and analyze the information they need to prepare certain health care information returns required to be filed under the Patient Protection and Affordable Care Act

• IRS announced extended due dates for those forms (Notice 2016-70)

• The due date to send individuals the 2016 Form 1095-B, Health Coverage, and the 2016 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, is extended to March 2, 2017, from Jan. 31, 2017

• There is no need for an extension of time for filing those forms with the IRS the returns must be filed with the IRS by Feb. 28, 2017, if not filing electronically, and by March 31, 2017, if filing electronically

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Employers & Health Coverage Providers: You Have More Time in 2017 to Provide Information Forms to Covered Individuals

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• If you file 250 or more Forms 1095-B or Forms 1095-C, you must electronically file them with the IRS

• Electronically filing ACA information returns requires an application process separate from other electronic filing systems

• Additional information about electronic filing of ACA Information Returns is on the Affordable Care Act Information Reporting (AIR) Program page on IRS.gov and in Publications 5164 and 5165

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• Applicable large employers that provide employer-sponsored self-insured health coverage to non-employees may use either Forms 1095-B or Form 1095-C to report coverage for those individuals and other family members

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Congress Moves to Exempt Qualified Small Employer Health Reimbursements from Onerous ACA Penalty

• The bipartisan provision (which was sponsored by Iowa Senator Charles Grassley) effectively nullifies the impact of IRS Notice 2013-54 on qualified health reimbursement arrangements (QSEHRA) offered by small employers

• It removes from the definition of “group health plan” reimbursement arrangements that follow certain requirements

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• Removing such plans from the definition of “group health plan” means exempting them from the requirements of Affordable Care Act's market reforms, including the “no annual dollar limits” and “no cost sharing for preventive health services”

• Violation of these market reforms currently subjects employers to excise taxes in an amount up to $100 per day per employee (or $36,500 per employee per year)

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• The provision, which would generally apply after December 31, 2016, is fairly straightforward

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Requirements

• To qualify as a QSEHRA, the plan must meet the following requirements:

• The arrangement is offered by an eligible employer, defined as one (1) with fewer than 50 full-time equivalent employees that (2) does not provide group health care coverage to its employees

• The arrangement is “provided on the same terms to all eligible employees” of the eligible employee

• The following employees may be excluded from the definition of “eligible employees":

• ◦employees who have not completed 90 days of service

• ◦employees who have not attained age 25

• ◦part-time (< 30 hours / week) or seasonal employees

• ◦some collective bargaining employees

• ◦nonresident aliens with no U.S. sourced income 33

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Requirements

• The arrangement must be funded solely by an eligible employer

• No salary reduction contributions may be made under such arrangement

• The arrangement may provide for the reimbursement for or payment of expenses for medical care incurred by the eligible employee or the eligible employee’s family members only after the employee provides proof of coverage

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Requirements

• The amount of payments and reimbursements made by the employer for any year do not exceed $4,950 for the employee or $10,000 for family coverage

• This amount will be adjusted for inflation, and it is prorated for the number of months during which the arrangement is offered

• The provision provides that an arrangement will not fail to qualify as “providing the same terms to all eligible employees” if the benefit varies only

• (1) because of the age of the eligible employee or family member or

• (2) because of the number of family members of the eligible employee

This variation is permitted only with respect to the same insurance policy

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Excluded from Employee’s Taxable Income if Requirements Met• Employees covered by a QSEHRA must also

have Minimum Essential Coverage or else reimbursements from the QSEHRA will be fully taxable to the employee

• If the employee is covered by minimum essential coverage (equivalent to a marketplace Bronze plan), the reimbursement amount under the QSEHRA will qualify for exclusion from income under IRC § 106

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Impact on Premium Tax Credit

• Employees covered by a QSEHRA will be ineligible for a premium tax credit if the QSEHRA is deemed to be affordable employer coverage

• Specifically, a premium tax credit will be denied if the cost to the employee to purchase the second lowest cost silver plan for self-only coverage on the Marketplace MINUS the amount of the QSEHRA reimbursement does not exceed 9.69 percent of the employee’s household income (for 2017)

• Note that the affordability is calculated only with respect to the cost of the self-only coverage

• The cost of the family coverage may be much more expensive, but the employee will still be ineligible for the premium tax credit if the cost of the self-only coverage (after factoring in the reimbursement ) does not exceed 9.69 percent of the employee’s household income

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Notice Requirements

• Employers offering QSEHRAs to their employees must provide all eligible employees with notice within 90 days of the plan year stating:

• The amount of an eligible employee’s permitted benefit under the arrangement for the year

• That the eligible employee should provide the information described to any health insurance exchange to which the employee applies for advance payment of the premium assistance tax credit

• That if the employee is not covered under minimum essential coverage for any month the employee may be subject to tax for such month and reimbursements under the arrangement may be includible in gross income

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Other Provisions

• The provision extends the transition relief provided through Notice 2015–17 to any plan year beginning on or before December 31, 2016

• The provision specifically excludes QSEHRAs from ERISA and COBRA requirements

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What Does This Mean Long-Term?

• This provision is put in place as legislators begin debate on perhaps repealing and replacing the Affordable Care Act beginning next term

• There will no doubt be much discussion on the Affordable Care Act in the months to come

• In the meantime, small businesses that wish to reimburse the cost of their employee’s health coverage should be able to do so without fear of penalty (if President Obama signs the bill into law), as long as all requirements are met

• We’ll keep you posted as we continue to evaluate the impact of this provision

• And, we'll let you know when it's officially signed by the President

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Series of Yes-or-No Questions help you Determine Eligibility for the Premium Tax Credit

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Bitcoin

• IRS has requested permission to issue a John Doe summons to “CoinBase”

• Looking for bitcoin transactions and unreported income

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FINCEN Due Date

• Form 114

• Due Date April 15, 2017

• Saturday

• Remember Form 114 is not an IRS Form therefore Saturday, Sunday or holiday filing date exception do not apply

• If the due date falls on a weekend it is still due on that exact date

• In your case, the due date is going to be April 15th and not April 17th

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Another Delay in Form 1098-T Changes• This announcement provides notice that the IRS

is extending relief from penalties under §§ 6721 and 6722, to 2017 Forms 1098-T, Tuition Statement

• The IRS previously announce a similar delay for the tax year 2016

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IRS Transcripts

• Order “Record of Account Transcript”

• Has the tax return transcript and the payments and other information

• Information is more complete

• No transcripts are available for ID Theft victums

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State Identity Theft Issues

• More states this year will ask for a Driver’s License number to confirm identity

• Get a copy of the Drivers License

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Private Debt Collection

• Taxpayer accounts that IRS will not assign to Private Debt Collection

• Deceased

• Under age 18

• Combat zone deployment

• ID Theft

• Under examination, litigation, criminal investigation or levy

• Offer in Compromise

• Installment Agreement

• Right to Appeal

• Innocent spouse cases

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W-2 Codes

• W-2 Verification Code (VC) pilot program expanding

• IRS plans to increase the scope of the W-2 pilot program in the 2017 filing season by expanding on the number of W-2s in the program to 50 million

• It also plans to include smaller sized issuers and lf the VC is a match, it will accept the W-2 data submitted with Form 1040 to be valid

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Validation Code

• The 16-digit code will appear in with alphanumeric characters in the following format:

• XXXX-XXXX-XXXX-XXXX

• If this field is populated, enter this code when it is requested by the tax return preparation software

• It is possible that the software or preparer will not request the code

• The code is not entered on paper-filed returns

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ADP

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Ceridian

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PayChex

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Intuit

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Employer Penalties for ACA to be Issued - Soon• Non-Compliance penalties = $21 billion

(estimate) – Failure to offer health coverage

• Unintentional non-compliance = $10 billion (estimate) – Offered compliance health coverage yet failed to meet the IRS reporting requirements needed to demonstrate compliance under the law

• Study by : Accenture

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Employer Penalties

• Part A – MEC to 95% of employees and dependents under 26 years of age

• Part B – Failed to meet minimum value or affordability requirements

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SBSE-05-1016-1610New ACA Subsection; Levy Information; Procedures for Filing Notice of Federal Tax Lien

• Large employers may be assessed an employer shared responsibility payment (ESRP) under IRC 4980H(a) if they do not offer health insurance with minimum essential coverage (MEC) to full-time employees (and their dependents) and at least one full-time employee receives a premium tax credit (PTC) under IRC 36B

• The ESRP may also be assessed under IRC 4980H(b) if the employer offers MEC to it's full-time employees (and their dependents), but a least one full-time employee receives a PTC because the employer's insurance MEC was not affordable or did not provide minimum value

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SBSE-05-1016-1610New ACA Subsection; Levy Information; Procedures for Filing Notice of Federal Tax Lien

• Unlike the individual SRP assessments in which no enforced collection action is taken, the ESRP assessments may be included when issuing a levy or filing a Notice of Federal Tax Lien when an employer fails to pay the ESRP imposed by IRC 4980H

• The ESRP assessments are processed on the BMF (Business Master File)

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Notice 2016-75

• Provides guidance on § 45R small employers that cannot qualify for SHOP because of location (SHOP not offered as an option)

• Guidance for other states not yet issued

• Applies to the Small Business Health Insurance Credit

• Notice only applicable to Wisconsin counties

• Pierce

• Polk and

• St. Croix

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Pending Legislation

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Bills Introduced

• H.R. 6359 - Extension of credit for biodiesel and renewable diesel fuel thru 2018

• H.R. 6361- Extension of credit for energy efficient commercial buildings thru 2018

• H.R. – 6360 - Extension of credit for energy efficient commercial buildings thru 2017

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Bills Introduced

• H.R. 6350 - Extension of credit for energy efficient homes thru 2018

• H.R. 6355 - Extension of credit for energy efficient homes thru 2017

• H.R. 6352 – Extension of Tuition and Fees thru 2017

• H.R. 6354 - Extension of Tuition and Fees thru 2018

• H.R. 6357 – Extension of the credit for Alternative fuel vehicle refueling property thru 2018

• H.R. 6358 - Extension of the credit for Alternative fuel vehicle refueling property thru 2017

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H.R. 5015 Combat-Injured Veterans Tax Fairness Act of 2016 – Passes House

• This bill directs the Department of Defense (DOD) to identify:

• Certain severance payments to veterans with combat-related injuries paid after January 17, 1991, from which DOD withheld amounts for tax purposes, and the individuals to whom such severance payments were made

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H.R. 5015 Combat-Injured Veterans Tax Fairness Act of 2016 – Passes House

• DOD shall provide each such veteran with:• Notice of the amount of improperly withheld severance payments,

and instructions for filing amended tax returns to recover such amount

• The period for filing a related claim with the Internal Revenue Service for a credit or refund is extended beyond the three-year limitation to the date that is one year after DOD provides the veteran with the information required by this Act

• DOD shall ensure that amounts are not withheld for tax purposes from DOD severance payments to individuals when such payments are not considered gross income

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Lame Duck Session

• Prospects are shrinking for year-end action on tax extenders legislation

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Understanding Equity and Patronage

• December 20, 2016

• Noon – 1:00 pm Central time - FREE

• This webinar is designed for both practitioners and producers

• Teaching this webinar is Dr. Keri Jacobs, an assistant professor and cooperatives extension economist in the Department of Economics at Iowa State University

• To register: https://attendee.gotowebinar.com/register/486649722254547203

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Register for this Upcoming Seminar –Iowa Department of Revenue

• Electronic Submission of W-2s & 1099s – December 14, 2016 Noon – 1:00

• http://www.iasourcelink.com/resources/business-webinars/iowa-tax-webinars

• Beginning in 2017 for tax year 2016:

• Withholding agents with 50 or more employees must electronically file W-2 forms with the Department by the last day of January following the tax year

• Withholding agents with less than 50 employees may, but are not required to, electronically file W-2 forms with the Department by January 31, 2017

• Withholding agents may, but are not required to, electronically file W-2G and 1099 forms with the Department by January 31, 2017

• Beginning in 2018 for tax year 2017:

• All are required to electronically file W-2, W-2G, and 1099 forms with the Department by the last day of January following the tax year.

• Verified Summary of Payments Report (VSP)

• All withholding agents are required to submit a completed VSP by January 31.

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Form 8867 Due Diligence Seminar

• Form 8867 Due Diligence Webinar December 14, 2016• What information must you have in your files• What questions do you need to ask and what explanations or information do

you need to share with your client • Tax Season 2017 will require “Due Diligence” for not only the Earned

Income Tax Credit, but also the Child Tax Credit and the American Opportunity Tax Credit

• Be prepared to address the new requirements this coming tax season to be in compliance with the due diligence requirements and avoid a $505.00 penalty for each return

• We will also review: • Form 8867• Provide tips for the “interview”• Review the Child Tax Credit, American Opportunity Credit and the Tie

breaker rules which you are now required to explain to your clients in certain circumstances


Winter Ethics Classes

• Monthly Ethics Classes• Part 1 - 11:30 AM to 12:30 PM (CST) • This webinar will provide an understanding of the requirements of Circular 230 (first part of

key elements)• Topics include: what is ethics, ethical decision making, representation before the IRS,

why is circular 230 important, how to keep clients information safe (having a security plan), what are your ethical obligations, return preparation, supervised employees (Notice 2011-6), due diligence and prompt disposition pending matters

• Publication Cir 230 will need to be download for this class • Approved for 1 hour of Ethics CPE (Program # Y7WRM-E-00130-16-O)• Approved for 1 hour of Ethics CLE

• Part 2 - 1:00 PM to 2:00 PM (CST) -• This webinar will continue to review the requirements of Circular 230. Topics include:

conduct standards, contingent fees, return of client records, conflicts of interest, negotiation of checks, competence, procedures to ensure compliance, requirements of written advice and sanctions for violation of the regulations. Publication Cir 230 will need to be download for this class.

• Approved for 1 hour of Ethics CPE (Program # Y7WRM-E-00131-16-O)• Approved for 1 hour of Ethics CLE


Winter Ethics Classes

• These ethics webinars will be offered on the following dates:

• December 16

• December 19

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The CALT Staff

John D. Lawrence Interim DirectorAssociate Dean, College of Agriculture & Life Sciences Extension Programs and OutreachDirector, Agriculture & Natural Resources Extension132 Curtiss HallIowa State UniversityAmes, Iowa 50011-1050

Kristine A. TidgrenAssistant DirectorE-mail: [email protected]: (515) 294-6365Fax: (515) 294-0700


The CALT Staff

Kristy S. MaitreTax SpecialistE-mail: [email protected]: (515) 296-3810Fax: (515) 294-0700

Tiffany L. KayserProgram AdministratorE-mail: [email protected]: (515) 294-5217Fax: (515) 294-0700

The Scoop December 14, 2016 · 12/11/2016 1 Center for Agricultural Law & Taxation The Scoop...

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