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Monday, September 29, 2014

CCH Weekly Report from Washington, D.C.,(Sep. 29, 2014)

CCH Weekly Report from Washington, D.C.,(Sep. 29, 2014)

The Chairman of the White House Council of Economic Advisers noted that the U.S. business tax system does a poor job when measured against the ideal of a neutral tax system. Meanwhile, senate lawmakers announced a pro-family, pro-growth tax reform plan. Meanwhile, the Treasury and IRS announced a proposal on corporate inversions. The Treasury Inspector General for Tax Administration (TIGTA) urged the IRS to improve its oversight of the Voluntary Classification Settlement Program (VCSP). In a separate report, TIGTA reviewed the Service’s recognition of taxpayer rights to designate a representative to act on their behalf. IRS Commissioner John Koskinen highlighted the Service’s work to curb identity theft and the Service warned financial institutions about Foreign Account Tax Compliance Act (FATCA) (P.L. 111-147)-related fraud.


Sens. Marco Rubio, R-Fla., and Mike Lee, R-Utah, are proposing a federal tax reform plan that they say will remove obstacles to investment, innovation, growth and opportunity (TAXDAY, 2014/09/25, C.2). In a Wall Street Journal opinion piece published on September 23, the lawmakers said their reforms seek to simplify the structure and lower rates by consolidating the many existing income tax brackets into two simple brackets—15 percent and 35 percent—and eliminating or reforming deductions, especially those that disproportionately benefit the wealthy. The plan would eliminate the "marriage penalty" and augment the current child tax credit of $1,000 with an additional $2,500 credit, applicable against income taxes and payroll taxes.

Senate Finance Committee (SFC) member Charles E. Grassley, R-Iowa, on September 23, warned that the Obama administration’s limited action on inversions might take the pressure off for tax reform (TAXDAY, 2014/09/25, C.1). The former SFC chairman said that Obama’s approach might give the president a short-term gain but it is "bad" for the country in the long term. Grassley acknowledged that, while it is important for the president to "use his bully pulpit" to work with Congress on tax reform and help build a consensus on the right approach, he faulted Obama for failing to do so.


VCSP. TIGTA on September 24 encouraged the IRS to beef-up its oversight of the Voluntary Classification Settlement Program (VCSP) (Ref. No. 2014-40-065; TAXDAY, 2014/09/25, T.1). According to TIGTA, the Service fails to obtain the information it needs to ensure that employers are eligible for and comply with the VCSP. TIGTA reported that the IRS accepted 86 percent of applicants into the VCSP as of April 25, 2014. The Service approved 1,303 applicants out of a total applicant pool of 1,508. More than 25,000 workers were reclassified, TIGTA added.

Taxpayer Representatives. TIGTA gave the IRS generally good marks for ensuring that taxpayers have the right to designate a representative to act on their behalf with the Service (Ref. No. 2014-30-079; TAXDAY, 2014/09/24, T.1). TIGTA found that IRS examiners are in compliance with requirements to consult with taxpayer representatives in cases where a taxpayer has designated a representative. Identification of a taxpayer’s representative is critical during an examination, TIGTA emphasized.


Corporate Inversions. The Treasury Department and the IRS announced that they will be taking targeted action against corporate inversions (Notice 2014-52, TDNR JL-2645, TDNR JL-2647; TAXDAY, 2014/09/23, I.1). The Treasury Department issued a Fact Sheet and the IRS released a Notice.

Identity Theft. The IRS is diligently working to stop fraud perpetrated by persons who buy or steal Social Security numbers, Koskinen said on September 21 (TAXDAY, 2014/09/25, I.2). Tax identity theft is a growing problem that affects millions of Americans, Koskinen said. Contributing to the problem is the use of prepaid debt cards.


The IRS must take "bold and innovative" action to combat more than $5 billion in fraudulent identity theft (IDT) tax refunds, according to a new report by the Government Accountability Office (GAO) (TAXDAY, 2014/09/23, M.1). The report, requested by leaders on the Senate Finance and Aging Committees, and the House Ways and Means Committee, said the IRS should take additional steps to strengthen its pre-refund and antifraud efforts to effectively stop tax refund fraud before it starts. The "IRS estimates it issued at least $5.2 billion in fraudulent IDT refunds in filing season 2013," according to the report. The GAO recommended that Congress provide the Treasury Secretary with the regulatory authority to lower the threshold for electronic filing of Forms W-2 from 250 returns annually to between five to 10 returns, as appropriate.

By Jeff Carlson and George Yaksick, Jr., CCH News Staff

Thursday, September 25, 2014

Tips on Health Care, Tax Returns

IRS YouTube channel - New videos provide Tips on Health Care, Tax Returns

New videos featuring IRS Commissioner, John Koskinen, discusses the premium tax credit and the individual shared responsibility provision. These provisions will affect 2014 tax returns. Read more.
The Individual Shared Responsibility Payment
For tax year 2014, the individual shared responsibility provision of the Affordable Care Act requires individuals to:
  • Make an individual shared responsibility payment when filing their federal income tax returns.

Be prepared to advise your clients on the myriad of compliance issues under this complex law by attending the upcoming ACA webinar.
Affordable Care Act: Understanding the Individual and Employer Mandates
Friday, Sept. 26 at 1 p.m. Eastern

To view and to register for the webinar,click here.

Accounting Today's
Top 100

Accounting Today has released the Top 100 most influential people in Accounting - andJason Marx, Wolters Kluwer, Small Firm Services President, was selected. 
View article

CCH Weekly Report from Washington, D.C.,(Sep. 22, 2014)

CCH Weekly Report from Washington, D.C.,(Sep. 22, 2014)

In a flurry of activity as lawmakers ready for the midterm elections, the House and Senate passed a continuing resolution that will keep the government funded until December 11. The House also passed legislation curbing the IRS’s authority over taxpayers, as well as a measure that combined a number of previously passed bills that ultimate died in the Senate. The IRS released new final and proposed regulations regarding applicable defined benefit plans, as well as cafeteria plan and look-back method guidance.

White House

The Obama administration announced on September 15 that it will cut off tax subsidies under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) to about 360,000 people if they do not offer proof of their income within the next two weeks (TAXDAY, 2014/09/16, W.1). The Centers for Medicare & Medicaid Services (CMS) said consumers will be getting letters during the week of September 15 asking for information. Those who do not confirm their income could lose their tax credit and face higher premiums and higher deductibles, and it could affect their tax bill or refund during filing season. The Federal Health Insurance Marketplace (Federal Marketplace) said it has begun sending notices to consumers who have an income-related data-matching issue. Individuals who do not respond to numerous attempts to contact them by September 30, 2014, may see the costs of their coverage change, said the CMS. This is the first action by the White House to resolve the politically charged issue of issuing subsidies to those who have not had their income verified.


House. A bill to make dozens of noncontroversial technical correction to recently passed tax laws and strip so-called deadwood provisions from the tax code was introduced by House Ways and Means Committee Chairman Dave Camp, R-Mich., and ranking member Sander Levin, D-Mich., on September 18 (TAXDAY, 2014/09/19, C.2). The Tax Technical Corrections Bill of 2014 (HR 5528) is similar to the Tax Technical Corrections Bill of 2014 (Sen 2261), which was approved in early April by the Senate Finance Committee.

By a vote of 253 to 163, the House passed the Jobs for America Bill of 2014 (HR 4) on September 18 (TAXDAY, 2014/09/19, C.1). The measure included a group of bills that had already passed the House earlier in 2014, but died in the Senate. It includes the American Research and Competitiveness Bill (HR 4438), the America's Small Business Tax Relief Bill (HR 4457), the S Corporation Permanent Tax Relief Bill (HR 4453), and a bill to make permanent bonus depreciation (HR 4718). The legislation also included the Hire More Heroes Bill (HR 3474) and a repeal of the medical device tax, which previously passed the House as part of HJRes 59.

The House on September 16 approved legislation designed to limit the Service's authority over taxpayers (TAXDAY, 2014/09/17, C.1). It also passed a bill to allow taxpayers to learn the status of federal investigations into leaks of their personal taxpayer information (HR 5420). The other House-passed measures include HR 5418, a bill to prevent IRS employees from using personal email accounts to conduct official business and HR 5419, a bill that would allow administrative appeals relating to adverse determinations of tax-exempt status of certain organizations. Also approved were the Senior Executive Service (SES) Accountability Bill (HR 5169), which would give agencies greater authority to take action against SES members who are underperforming, and the Federal Records Accountability Bill (HR 5170), a bill to create an expedited process to fire employees who intentionally destroy federal records.

IRS Commissioner John Koskinen told House Oversight and Government Reform Subcommittee on Economic Growth, Job Creation and Regulatory Affairs members on September 17 that the Service is working to restore lost public confidence in its ability and commitment to administer the tax code in a nonpolitical manner (TAXDAY, 2014/09/18, C.4). During a hearing called to discuss the improper criteria used in processing applications for tax-exempt status under Code Sec. 501(c)(4), Koskinen testified that the IRS had met all the corrections called for by the Treasury Inspector General for Tax Administration. Koskinen told lawmakers that the IRS has already produced 67,000 emails from former IRS official Lerner, including those gathered from other employees between January 2009 and April 2011 that may have been lost when Lerner’s computer hard drive crashed.

Senate. The Senate on September 18 approved the Continuing Appropriations Resolution, 2015 (HJRes 124) to fund the federal government until December 11 following several Republican attempts to offer amendments (TAXDAY, 2014/09/19, C.2). The measure, which passed by a vote of 78 to 22, will prevent a government shutdown at the end of the fiscal year on September 30 and will fund the Treasury Department, the IRS and other government agencies at the current annual rate of $1.012 trillion. The House approved the measure on September 17 by a vote of 319 to 108 (TAXDAY, 2014/09/18, C.2).

Senate Finance Committee Chairman Ron Wyden, D-Ore., on September 15 called on lawmakers to renew expired tax provisions for two years in order to give certainty to workers and businesses (TAXDAY, 2014/09/16, C.1). He stressed that Congress’s failure to renew expired tax provisions is forcing companies to make "no interest loans" to the federal government through higher taxes, he said. According to Wyden, extending the expiring or expired tax break "is a real issue that is impacting those at the heart of our country’s economic growth."

On September 17, Wyden said a key component to advancing energy production and clean energy is pursuing tax reform that takes the costs and benefits of energy sources into account (TAXDAY, 2014/09/18, C.3). His comments preceded a committee hearing addressing the need to reform an outdated energy tax code. Wyden said the list of factors must include considerations such as energy efficiency, affordability, pollution and sustainability.

Sen. Cory Booker, D-N.J., on September 16 introduced legislation that would end the tax-exempt status for professional sport leagues, including the National Football League (NFL) (TAXDAY, 2014/09/18, C.5). The measure would raise $100 million over 10 years and the funds would go toward domestic violence prevention programs. Under the Securing Assistance for Victim Empowerment (SAVE) Bill, the money would be administered by the Department of Health and Human Services to help fund shelters, counseling and support for children who witness domestic violence, and prevention efforts through various state programs. Ten professional sports leagues—including the NFL, National Hockey League, Professional Golf Association and U.S. Tennis Association—currently enjoy tax-exempt status under Code Sec. 501(c)(6). While individual sports teams pay taxes, the dues each team pays to support the leagues’ front offices are not taxed. Some leagues have been using the exemption for over 50 years.


Proposed Regulations/Rollover Guidance. The IRS has provided guidance and proposed regulations on the allocation of pre-tax and after-tax amounts when a distribution from a qualified retirement plan is sent to multiple destinations (Notice 2014-54; NPRM REG-105739-11; TAXDAY, 2014/09/19, I.1). The new guidance and proposed regulations provide that all disbursements of benefits from a plan to the recipient that are scheduled to be made at the same time are treated as a single distribution without regard to whether the recipient has directed that the disbursements be made to a single destination or multiple destinations.

Final Regulations/Hybrid Plans. The IRS has issued new final and proposed regulations regarding applicable defined benefit plans (T.D. 9693, NPRM REG-111839-13; TAXDAY, 2014/09/19, I.2). Applicable plans are defined benefit plans that use a lump sum-based benefit formula, including cash balance plans and pension equity plans, as well as other hybrid retirement plans that have a similar effect.

MACRS GAA Guidance. The IRS has issued a revenue procedure providing automatic accounting method changes to comply with final MACRS regulations dealing with general asset accounts (Reg. §1.168(i)-1), item and multiple asset accounts (Reg. §1.168(i)-7), and dispositions (Reg. §1.168(i)-8), including the late partial disposition election for retirements that occurred in pre-2012 tax years (Rev. Proc. 2014-54; TAXDAY, 2014/09/19, I.4). The final regulations apply to tax years beginning on or after January 1, 2014 but may be applied to tax years beginning on or after January 1, 2012.

Proposed Look-Back Method Guidance. The IRS has proposed an approach to applying the look-back measurement method to determine if an employee is a full-time employee for purposes of the Code Sec. 4980H employer health insurance mandate, also known as the shared responsibility payment (Notice 2014-49; TAXDAY, 2014/09/19, I.5). These rules supplement the final regulations that were published on February 12, 2014 (T.D. 9655, I.R.B. 2014-9, 541).

Cafeteria Plan Guidance. Effective September 18, 2014, the IRS is allowing employers to expand the application of the permitted change rules for health coverage to accommodate certain situations arising from the Affordable Care Act (Notice 2014-55; TAXDAY, 2014/09/19, I.6). The guidance will remain in effect until the IRS changes its cafeteria plan regulations to conform to the new guidance.

Adjusted Applicable Dollar Amount for PCORI Fee. The IRS has provided the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of the fee imposed by Code Secs. 4375 and 4376 on the issuer of a specified health insurance policy for policy years and plan years that end on or after October 1, 2014, and before October 1, 2015 (Notice 2014-56; TAXDAY, 2014/09/19, I.7). The fee helps to fund the Patient-Centered Outcomes Research Institute (PCORI).

Final Regulations/Remuneration From Insurers. The IRS has released final regulations on the application of the $500,000 deduction limitation for remuneration provided by certain health insurance providers under Code Sec. 162(m)(6) (T.D. 9694; TAXDAY, 2014/09/19, I.8). The final regulations adopt, as amended, proposed regulations issued in 2013 (NPRM REG-106796-12), in light of comments received by the IRS.

PPACA Draft Forms. The IRS released drafts of Instructions for 2014 Form 8962, Premium Tax Credit (PTC) and Instructions for 2014 Form 8965, Health Coverage Exemptions (and instructions for figuring your shared responsibility payment) (TAXDAY, 2014/09/19, I.10).

AFRs for October 2014. The IRS has issued various prescribed rates for federal income tax purposes for October 2014 (Rev. Proc. 2014-26; TAXDAY, 2014/09/18, I.1).

OPR Director on Circular 230 Rules. Final regulations under Circular 230, Practice before the IRS, remove the previous rules for covered opinions, Karen L. Hawkins, director, IRS Office of Professional Responsibility (OPR), reiterated on September 17 (TAXDAY, 2014/09/18, I.2). Hawkins spoke during a webcast sponsored by the American Institute of Certified Public Accountants (AICPA).

Drug Manufacturers/Capitalization of Legal Fees. Legal fees incurred by a drug manufacturer to defend against a patent infringement suit were required to be capitalized under Code Sec. 263(a) and Reg. §1.263(a)-4 (AM-2014-006; TAXDAY, 2014/09/17, I.1). The application fees incurred in pursuit of Food and Drug Administration (FDA) approval for an Abbreviated New Drug Application (ANDA) must be capitalized as part of the acquisition costs for the approval to market and sell a generic drug.

By Jeff Carlson, Stephen K. Cooper and Jennifer Cordaro, CCH News Staff

CCH Weekly Report from Washington, D.C.,(Sep. 15, 2014)

CCH Weekly Report from Washington, D.C.,(Sep. 15, 2014)

Congress returned to work on September 8 with inversion transactions, the extension of expired tax incentives, retirement security and internet access taxes all awaiting action, but little time to accomplish everything prior to the November 4 midterm elections. Congress may be in session for as little as two weeks before recessing for election campaigns, returning in early December for a very short lame-duck session. Lawmakers in both chambers introduced legislation to address corporate inversions. The IRS has provided guidance on the changes to the funding stabilization rules for single-employer pension plans under the Tax Code and the Employee Retirement Income Security Act of 1974 (ERISA) that were made by the Highway and Transportation Funding Act of 2014 (HATFA) (P.L. 113-159.


IRS Reminds Taxpayers of Online ‘Direct Pay’ Service. The IRS has issued a reminder that IRS Direct Pay is now open to individual taxpayers who owe tax for prior tax years or wish to pay current year estimated tax (IR-2014-89; TAXDAY, 2014/09/11, I.1). The online service, available since late spring 2014 at, has already received more than one million tax payments totaling over $1.7 billion, said the IRS in a recent news release.

Monday, September 22, 2014

GA. FL, SC, LA and other state acks delayed

9-22-2014 We have about 1,900 other outstanding state acks. The largest number of outstanding acks are from FL, GA, SC, and LA but there are other states as well.

Best Practice: Log in to the support site and use the Return Query tool. If you can see the federal and state return in that tool, then we have it and no action is needed.  You will see the date and time the efiles were sent to the agencies and the current status. You can also rehang acknowledgements from inside that tool.

blogged 9-18-2014 Georgia Dept of Revenue has notified software vendors that acks are delayed
Specifically, corporate and partnership return acks are mentioned as delayed

Friday, September 19, 2014

AL business reject AL65-124 corrected with AL ver 11

We released an update to the Alabama business module yesterday (Sept 19) to fix the issue causing efile reject AL65-124

Download this module update, create a new efile, and send. If you received this reject or any other business return reject Sept 15th, you have a 10 day period to correct and resend any rejects for the return to be considered timely filed.

Business Alabama v11 release notes:

   a) No changes.

   a) No changes
   a) Corrected 2D Barcode that was incorrectly outputting the zipcode for Form AL BPT-IN
       in the C Corp, S Corp & Partnership Packages

    a) Corrected calculation that was causing reject code AL65-124

Friday, September 12, 2014

Upcoming e-file deadlines and Important e-Filing Tips

Upcoming e-File Deadlines
September 15
E-file deadline for returns with Forms 1120, 1120S, 1041 orForm 1065
 You have a 10 day perfection period to retransmit rejected timely filed business returns. 

October 15
E-file deadline for 1040 returns on extension

October 20
Last day to re-transmit timely filed rejected returns

View the e-File Calendar
NOTE: Be sure to track your e-filed returns and see the exact field causing the IRS reject. Click here for instructions
Important e-Filing Tips
Run diagnostics to view diagnostic errors AND validation errors. Diagnostic and validation errors are two separate notifications that must be cleared to create the e-file. Learn more about these errors

Pick up your e-File acknowledgements (acks). Be sure to check for acks after critical deadlines. This will allow you to view and fix any rejects within the allotted time frame. 

You can also schedule automatic ack retrieval through your TaxWise program. The Schedule Ack Retrieval feature allows TaxWise to automatically connect to the Electronic Filing Center and pick up any available acknowledgements. To learn more about this option, access Help in the TaxWise program.

Consider unlinking state returns from federal returns before transmitting the e-file. Linked state returns (with a separate e-file created) cannot be submitted until the federal return is accepted by the IRS, but unlinked state returns can be submitted at any time. The federal return is not required to be accepted before the state return is submitted for processing. For state MeF returns, TaxWise will default to linked. However, you may elect to send the state as unlinked by making a selection on the state form
Extended and Late Returns
Remember to keep TaxWise up-to-date as you prepare and e-file extended and late returns. You can easily check for updates using Get Program Updatesand Get Module Updates on the Communications menu. Or download updates from theTaxWise Solution Center.

Monday, September 8, 2014

CCH Weekly Report from Washington, D.C.,(Sep. 8, 2014)

CCH Weekly Report from Washington, D.C.,(Sep. 8, 2014)

When the House returns to Washington on September 8, they are expected to vote on an omnibus jobs package to the Senate that includes all the legislation previously passed by the House. The package is not expected to pass the Senate, however. The Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations on September 5 released a 224-page report summarizing the subcommittee’s bipartisan investigation into problems with how the IRS has processed applications for tax-exempt status under Code Sec. 501(c)(4). The IRS announced that the interest rates for the calendar quarter beginning October 1, 2014, will remain at 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments and 5 percent for large corporate underpayments.


The House returns to Washington on September 8 with a busy legislative agenda set by House Majority Leader Kevin McCarthy, R-Calif., but little chance that any of the GOP priorities will make it past Senate Democrats, reach President Obama’s desk and be signed into law (TAXDAY, 2014/09/08, C.1). One measure that is likely to win approval, however, is a continuing resolution to fund government operations into the new fiscal year. According to a scheduling memo from McCarthy released on September 4, the GOP plans to send an omnibus jobs package to the Senate that includes all the legislation previously passed by the House. The jobs legislation includes the American Research and Competitiveness Bill (HR 4438), the America's Small Business Tax Relief Bill (HR 4457), the S Corporation Permanent Tax Relief Bill (HR 4453), and the permanent bonus depreciation bill (HR 4718). Senate Majority Leader Harry Reid, D-Nev., has blocked consideration of those bills, in part, because the revenue costs of the legislation are not offset.

The Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations on September 5 released a 224-page report summarizing the subcommittee’s bipartisan investigation into problems with how the IRS has processed applications for tax-exempt status under Code Sec. 501(c)(4) (TAXDAY, 2014/09/08, C.2). The subcommittee also released over 1,700 pages of documents from the IRS and Treasury Inspector General for Tax Administration (TIGTA), including emails, correspondence, memoranda, charts, handwritten notes, reports, and analyses.

Senate Finance Committee ranking member Orrin G. Hatch, R-Utah, and Sen. Lamar Alexander, R-Tenn., who oversee health policy, released a joint report on September 3 that they say dispels eight major claims from the Obama administration (TAXDAY, 2014/09/04, C.2). The joint report from the Senate Health, Education, Labor, and Pensions Committee and Senate Finance Committee claims that, in promoting the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), the Obama administration made numerous claims about how the legislation would change the health insurance marketplace for the better and improve affordability. The report states that, instead of increasing access to affordable insurance, many enrollees are coping with higher premiums and out-of-pocket expenses. Moreover, instead of allowing policyholders to keep their doctors, provisions in the law have led insurance companies to craft narrower networks that sometimes exclude key hospitals and providers. The authors also said that, instead of boosting the economy and helping to create jobs, the law’s taxes and mandates have been a deterrent to businesses expanding or hiring new employees, further hindering a fragile economic recovery.

The Senate Finance Committee plans to examine the tax code in relation to pension and retirement rules, Committee Chairman Ron Wyden, D-Ore., said in a memo to reporters on September 2 (TAXDAY, 2014/09/04, C.1). A hearing on the subject is expected later in September. As the Finance Committee continues to work on comprehensive tax reform this fall, Wyden said it would take a close look at pension and retirement rules in the tax code to make improvements wherever they are needed. The committee will hold hearings on retirement security towards the end of September, according to Wyden. He also noted that, exactly 40 years ago, President Ford signed the Employee Retirement Income Security Act (ERISA) into law.


Return Preparer Complaint Process. The Treasury Inspector General for Tax Administration (TIGTA) has reported that the IRS’s tax return preparer complaint process was not timely, accurately or consistently processed (Ref. No.: 2014-40-056; TAXDAY, 2014/09/05, T.1). TIGTA’s audit report identified a number of complaints that were not entered into inventory until 34 to 64 days after their receipt.

Treasury Secretary on Loopholes. In celebration of the Treasury Department’s 225th anniversary, Secretary Jack Lew on September 4 restated the mission of the department to provide economic security for working-class Americans (TAXDAY, 2014/09/05, T.2). He said in particular that the Treasury would continue its work to close wasteful tax loopholes that reward American companies for shipping jobs overseas.


Action on Decision. The IRS has announced that it will not acquiesce to the Tax Court’s decision in J.R. Dixon, 141 TC —No. 3, Dec. 59,628 (TAXDAY, 2014/09/05, I.1). The Tax Court concluded that the taxpayers could make payments to their corporation to cover employment taxes owed by the corporation, and that the corporation could designate the amounts toward the taxpayers’ withheld income taxes and their individual income tax liabilities.

Domestic Investment Yields. The IRS has provided domestic asset/liability percentages and domestic investment yields needed by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under Code Sec. 842(b) for tax years beginning after December 31, 2012 (Rev. Proc. 2014-53; TAXDAY, 2014/09/05, I.2).

IRS Officials Discuss Retirement Plan Corrections. During a September 4 IRS webinar, IRS officials reviewed current retirement plan correction programs within the IRS Employee Plans Compliance Resolution System, including procedures and principles (TAXDAY, 2014/09/05, I.4). Topics covered included Rev. Proc. 2013-12, plan documentation tips, and submission of applications to the Voluntary Correction Program.

Over- and Underpayment Interest Rates. The IRS has announced that the interest rates for the calendar quarter beginning October 1, 2014, will remain at 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments and 5 percent for large corporate underpayments (IR-2014-86, Rev. Rul. 2014-23; TAXDAY, 2014/09/04, I.1).

SOI Summer Bulletin. The Statistics of Income (SOI) Bulletin for summer 2014 is now available and features the most recent data available from various tax and information returns filed by U.S. taxpayers (IR-2014-85; TAXDAY, 2014/09/03, I.1). Articles on foreign-controlled domestic corporations and on municipal bonds are included in this issue.


Appeals Court Revisits PPACA Ruling. The U.S. Court of Appeals for the District of Columbia on September 4 agreed to reexamine its earlier ruling (Halbig v. Burwell, CA-D.C., 2014-2 ustc ¶50,366; TAXDAY, 2014/07/23, J.4) striking down subsidies for policies issued through the federal health exchange created by the PPACA (TAXDAY, 2014/09/05, J.3). A split three-judge panel of the court ruled in July against the government on the issue of whether the health insurance premium tax credit under Code Sec. 36B can be provided to individuals who obtain individual coverage on the federal exchange. Arguments are scheduled for December 17. The decision vacates the earlier ruling and staves off a possible hearing by the Supreme Court. In Halbig, a two-judge majority on the three-judge panel found that the statutory language was not ambiguous. On the same day in July, however, the U.S. Court of Appeals for the Fourth Circuit took the opposite position in King v. Burwell, CA-4, 2014-2 ustc ¶50,367, finding that the meaning of the PPACA language was ambiguous. In King, the Fourth Circuit deferred to the IRS’s interpretation, which the court believed was in keeping with the overall structure of the PPACA, and upheld Reg. §1.36B-2(a)(1).

PPACA Costs Examined. Thirty-five percent of manufacturers and 20 percent of service firms in New York reported that the PPACA increased their costs significantly in 2014, according to the New York Federal Reserve Manufacturing Survey and Business Leaders Survey. They indicated that their health care costs have gone up in 2014, with manufacturers reporting a median 10-percent increase and service firms a 9-percent increase. The Philadelphia Federal Reserve, in its Business Outlook Survey for August, found a similar impact on the bottom line. Eighteen percent of manufacturers increased the number of workers who are part-time due to the PPACA. In addition, 13 percent of firms increased the amount of work that they outsource to other firms in response to the PPACA. Close to 29 percent of firms increased the prices that they charge to consumers due to the PPACA.

Inversions Report. Congressional and administrative proposals that fail to address the underlying incentives driving inversions put 42,000 U.S. jobs at risk of going overseas, according to new research from the American Action Forum (AAF), a center-right think tank. The AAF study, released on September 4, also found that the federal tax code risks sending $988 billion in U.S.-based capital overseas. Placing a value on the potential equity flight is uncertain, according to the study’s author, but based on estimates, roughly 15 percent, or $988 billion in U.S.-based capital, is at risk of moving overseas. The largest American firms have nearly 299,000 headquarters employees, many of which would be at risk for having their positions relocated abroad. If roughly 15 percent of U.S.-based market capital is at risk, it suggests a proportional overseas relocation of 42,000 U.S. jobs, the study determined.

By Jeff Carlson, Stephen K. Cooper and Jennifer Cordaro, CCH News Staff

IRS accepting efiles normally

(Posted 9-8-2014) IRS transmissions are running normally this morning. Any efiles that we held over the weekend have been sent to the agencies this morning.

(posted 9-5-2014) IRS Extended Maintenance Window this weekend

IRS issued a Quick Alert for their extended maintenance this weekend.
You may continue sending efiles to CCH SFS this weekend; and we will hold the efiles to send them all Monday morning.

Subject: QuickAlerts - Technical - Extended Maintenance Window for the Modernized e-File (MeF) Testing and Production Environments

The MeF Sunday maintenance build window is being extended on Sunday, September 7, 2014. The system will be unavailable from 1:00 a.m. until 1:00 p.m., Eastern. The build will deploy critical system updates. This extended window impacts the MeF Testing and Production Environments.
Thank you in advance for refraining from accessing the MeF Testing and Production Systems during this period.

Tuesday, September 2, 2014

CCH Weekly Report from Washington, D.C. (Sept. 2, 2014)

CCH Weekly Report from Washington, D.C. (Sept. 2, 2014)

During the week of August 25, the CBO released its updated budget and economic outlook, the House Oversight Committee continued to call for a special counsel to investigate the IRS, and another possible corporate inversion came to light. Also during the week, the IRS issued a warning regarding a pervasive phone scam, as well as debt straddle rules, the new priority guidance plan, REIT qualification guidance and other pieces of guidance.

If federal tax laws and federal spending remain unchanged in the coming decade, then revenues will not keep up with spending due to health and retirement programs for the aged, the Congressional Budget Office (CBO) said in its updated budget and economic outlook (TAXDAY, 2014/08/28, C.1). According to the report released by CBO director Douglas Elmendorf on August 27, the fiscal year 2014 deficit will amount to $506 billion, which is approximately $170 billion less than the 2013 deficit.

Sen. Jon Tester, D-Mont., chairman of the Senate Subcommittee on the Efficiency and Effectiveness of Federal Programs and the Federal Workforce, called on the Obama administration to focus on Defense Department contractors and employees who have unpaid federal tax liabilities (TAXDAY, 2014/08/28, C.2). Tester said these individuals who hold high security clearances are a threat to national security because of their unpaid tax debts.

House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., faulted that the Justice Department’s (DOJ) investigation into IRS targeting of Tea Party groups, and called for the appointment of a special counsel to investigate the Service (TAXDAY, 2014/08/27, C.1).

House Ways and Means ranking member Sander Levin, D-Mich., said the proposed merger between Burger King and Canadian food chain Tim Hortons Inc., highlights the need for Congress to act on legislation to diminish the incentives for corporate inversions (TAXDAY, 2014/08/27, C.2). Burger King executives defended the company’s planned merger, telling reporters on August 26 that the companies are seeking to expand international growth, not cut taxes through a corporate inversion.


FATCA IGA. The United States has reached a new Model 1 intergovernmental agreement with the Republic of Lithuania to implement the provisions of the Foreign Account Tax Compliance Act (FATCA) (TAXDAY, 2014/08/28, T.1). The agreement addresses the parties’ obligations to obtain and exchange information regarding reportable accounts, the time and manner for exchanging information, the application of FATCA to financial institutions in Lithuania, collaboration on compliance and enforcement, and consistency in the application of FATCA to partner jurisdictions.

TIGTA Report. The Treasury Inspector General of Tax Administration (TIGTA) reported that improvements are needed to the IRS External Leads Program, which receives leads from partner organizations about questionable tax refunds, to allow the IRS to more timely verify leads with their external partners (Ref. No.: 2014-40-057; TAXDAY, 2014/08/27, T.2). TIGTA recommended that the IRS establish more consistent time frames to verify leads based on analysis of current and historical lead data.


Phone Scam Tips. The IRS has issued a consumer alert providing taxpayers with tips to protect themselves from telephone scam artists calling and pretending to be with the IRS (IR-2014-84; TAXDAY, 2014/08/29, I.1).

Draft PPACA Forms. The IRS has released draft instructions for Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C that will be used for reporting medical care coverage under the Patient Protection and Affordable Care Act (PPACA) (TAXDAY, 2014/08/29, I.4). Form 1095-A, Health Insurance Marketplace Statement, is used to report information about family members who enroll in a qualified health plan through the Marketplace. Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, is used by employers with 50 or more full-time employees to report the information required under Code SecS. 6055 and 6056 about offers of health care coverage and enrollment in health care coverage for their employees. Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, must be used to report to the IRS summary information for each employer and to transmit Forms 1095-C to the IRS.

Debt Straddle Rules. Final regulations were issued under Code Sec. 1092, relating to the application of the straddle rules to a debt instrument (T.D. 9691; TAXDAY, 2014/08/27, I.1). The final regulations clarify that a taxpayer’s obligation under a debt instrument can be a position in actively traded personal property that is part of a straddle.

Priority Guidance Plan. The IRS has released the 2014-2015 Priority Guidance Plan. The plan contains 317 projects that are priorities for allocation of IRS resources offices during the 12-month period from July 2014 through June 2015 (TAXDAY, 2014/08/27, I.4). The IRS has also released its fourth-quarter update to the 2013-2014 Priority Guidance Plan, which includes eight additional projects.

Highway Use Tax. Owners of heavy highway vehicles were reminded that the federal highway use tax return is due on September 2, 2014 (IR-2014-82; TAXDAY, 2014/08/25, I.2). The September 2 due date generally applies to Form 2290 and the accompanying tax payment for the tax year that begins on July 1, 2014, and ends on June 30, 2015.

REIT Qualification Guidance. The IRS has provided guidance regarding aspects of a taxpayer’s qualification as a real estate investment trust (REIT) in the context of transactions involving debt secured by real estate the fair market value of which has declined (Rev. Proc. 2014-51; TAXDAY, 2014/08/25, I.4).

Contraceptive Coverage Guidance. The Departments of Health and Human Services (HHS), Labor (DOL), and Treasury have responded to two recent Supreme Court rulings by issuing interim final and identical proposed regulations allowing an alternative to the use of EBSA Form 700 (T.D. 9690; NPRM REG-129507-14; NPRM REG-129786-14; TAXDAY, 2014/08/25, I.5). They are also issuing proposed regulations that would extend the current religious employer accommodation for nonprofits to certain closely held for-profit entities.