Economic Impact Payments – What You Need to Know

The Internal Revenue Service has extended the deadline for individuals to claim an Economic Impact Payment by five weeks to help individuals who have not received a stimulus payment. The Get My Payment tool explains that users have until November 21 Midnight ET to request their economic impact payment. Eligible individuals can also visit IRS.gov and use the Get My Payment tool to find out the status of their Economic Impact Payment. This tool will show if a payment has been issued and whether the payment was direct deposited or sent by mail. Get My Payment tool might give a user the option of providing their bank account information to receive their payment by direct deposit. For example, if an individual’s payment was sent by mail and the Post Office was unable to deliver it. An individual must file a 2019 tax return to receive the payment if required to do so. The IRS provides an online database of authorized e-file providers for individuals to electronically file their tax return.

Important security features when using the Get My Payment tool
• Before using the Get My Payment tool, an individual must verify their identity by answering security questions.
• If the answers to the security questions do not match IRS records after multiple attempts, the user will be locked out of the tool for 24 hours. This is for security reasons. Those who can’t verify their identity won’t be able to use Get My Payment. If this happens, people should not contact the IRS.
• If the tool returns a message of “payment status not available,” this may mean the IRS can’t determine the person’s eligibility for a payment right now. There are several reasons this could happen. Two common reasons are:
o A 2018 or 2019 tax return is not on file and the agency needs more information or,
o The individual could be claimed as a dependent on someone else’s tax return.
• In some cases, if a taxpayer has filed their 2019 tax return but the IRS hasn’t processed it yet, they may receive “payment status not available.” Taxpayers who’ve already filed a tax return don’t need to take any action. The IRS continues to issue Economic Impact Payments as tax returns are processed.

While millions of Americans have received their economic impact payments, some may have to provide additional information to the IRS to get their payments. Questions regarding eligibility requirements, requesting an economic impact payment, calculating an economic impact payment and more can be answered here.

Individuals who are not required to file a tax return
There is a tool for Non-Filers: Enter Payment Info Here to register for a payment. To be eligible to fill out the non-filer application, an individual must be eligible for an Economic Impact Payment and the individual is not required to file federal income tax returns for 2018 and 2019 for any reason including:
• The individual’s income is less than $12,200
• The individual is married filing jointly and together the income is less than $24,000, and
• The individual has no income.

Individuals who can be claimed as a dependent on someone else’s tax return should also not use the non-filer tool. The IRS underscores that individuals should not use this tool if they are filing a 2019 tax return. If an individual was required to file a 2019 tax return but they used the Non-Filer tool, this could delay processing their tax return and their Economic Impact Payment. More information about non-filers can be accessed here.

VW Contributor: Skylar Young
© 2020 Vandenack Weaver LLC
For more information, Contact Us

IRS Releases Part 4 and 5 of a Five-Part Security Summit Tips for Tax Professionals during COVID-19

This article wraps up the last of the ​Security Summit’s​ five-part series called Working Virtually: Protecting Tax Data at Home and at Work. ​As a refresher, the Security Summit is made up of the Internal Revenue Service (“IRS”), state tax agencies, and private-sector tax industry officials. The impetus for releasing this five-part series was to equip ​tax practitioners with specific strategies to assess and secure their home and office data, due to the fact that many tax professionals are not working from home.​ ​This article explains the fourth and fifth tips that the Security Summit issued. The fourth tip reminds tax practitioners to be alert of and avoid phishing scams. The fifth tip reminds tax professionals that federal law requires them to have a written information security plan. The Security Summit further recommends that practitioners create an emergency response plan if they experience a data theft.

Tip 4: Avoiding Phishing Scams
What should tax practitioners be on the lookout for to spot potential phishing scams? First, phishing emails can have an urgent message. For example, cybercriminals can send an email impersonating human resources or an administrator asking for the recipient to update their password or other personal information by clicking on a link. The link will then take the individual to a fake site that feigns the appearance of a trusted source requesting them to insert personal information. Or, the email could contain an attachment for the recipient to click on that instead downloads malware on their computer. Now cybercriminals are capitalizing on COVID-19 fears ​by presenting themselves as providers of face masks or personally protective equipment in short supply. Tax professionals should beware of emails from criminals posing as potential clients. Tax practitioners should thus stay vigilant in scanning all emails and urge on the side of caution rather than clicking on any email attachment or any link in an email. When in doubt, taxpayers and tax preparers can forward suspicious emails posing as the IRS to phishing@irs.gov.

Lastly, because phishing scams are commonplace, and often successful, the Security Summit urges tax professionals to educate all office personnel about the dangers and risks of opening suspicious emails – especially during the COVID-19 period.

Tip 5: Make a Plan for Protecting Data and Reporting Theft
The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley ACT, requires that tax professionals have a written security plan in place to safeguard their client’s tax data. This federal law is administered and enforced by the Federal Trade Commission (“FTC”). The FTC underscores that a tax preparer’s security plan must be appropriate to the company’s size and complexity, the nature and scope of its activities, and the sensitivity of the customer information it handles. Therefore, a security plan for a solo tax practitioner would differ from a global firm’s security plan. On the other hand, the FTC does have requirements that apply to all tax companies, irrespective of their size and complexity.

Each tax institution must:
● Designate one or more employees to coordinate its information security program;

● Identify and assess the risks to customer information in each relevant area of the company’s operation, and evaluate its effectiveness of the current safeguards for controlling these risks;

● Design and implement a safeguards program, and regularly monitor and test it;

● Select service providers that can maintain appropriate safeguards, making sure the contract requires them to maintain safeguards, and oversee their handling of customer information; and

● Evaluate and adjust the program in light of relevant circumstances, including changes in the firm’s business or operations, or the results of security testing and monitoring.

Failure to have a data security plan may result in an FTC investigation. The IRS may also treat a violation of the FTC safeguards rule as a violation of the IRS Revenue Procedure 2007-40 which stipulates the rules for tax professionals participating as an Authorized IRS e-file Provider.

On July 10, 2019, the IRS created this ​youtube video​ to reiterate that all tax preparers must have a written security plan. The video also reiterates the basic requirements for how tax preparers can safeguard taxpayer data. And, as an additional tool, you can revisit the “Taxes-Security-Together” Checklist​ the Security Summit rolled out during the 2019 summer as a starting point for analyzing office data security. You can also look at IRS ​Publication 4557, Safeguarding Taxpayer Data (PDF)​, which details critical security measures that all tax professionals should enact. Finally, the Security Summit noted that the FTC is currently re-evaluating the Safeguards Rule and has proposed new regulations. Therefore, tax preparers should be alert to any changes in the Safeguards Rule and its effect on the tax preparation community.

Creating a Data Theft Response Plan; Report Data Thefts to the IRS
The Security Summit also recommends that all tax practitioners create a response plan so that they have steps in place should they experience a data theft. If a client or the tax firm are the victim of data theft, the Security Summit states that they should immediately:

● Report it to the ​local IRS Stakeholder Liaison​. ​Stakeholder Liaisons will notify IRS Criminal Investigation and others within the agency. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in clients’ names and will assist through the process.

● Email the Federation of Tax Administrators at statealert@taxadmin.org. ​Get information on how to report victim information to the states. Most states require that the state attorney general be notified of data breaches. This notification process may involve multiple offices.

Cyber attackers could also steal a tax practitioner’s identity too. Tax practitioners should
regularly check their IRS e-Services e-File Application to see a weekly count of tax returns filed with their Electronic Filing Identification Number (“EFIN”). Excessive filings are a sign of data theft. E-file applications should also be kept up to date. Circular 230 practitioners also can review weekly the number of tax returns filed using their Preparer Tax Identification Number (“PTIN”). Excessive filings are also a sign of data theft.

As always, tax professionals should take advantage of the additional resources the IRS provides related to security recommendations and questions in ​Publication 4557 Safeguarding Taxpayer Data​ (PDF), as well as the National Institute of Standards and Technology (NIST’s) Small Business Information Security: The Fundamentals​ (PDF).

VW Contributor: Skylar Young
© 2020 Vandenack Weaver LLC
For more information, Contact Us

Buyers Beware: Buying Real Estate Subject to Unpaid IRS Taxes

When purchasing real estate, it is important to be diligent in whether the seller owes unpaid taxes to the IRS.  In certain situations, the IRS can collect prior owner’s taxes from you the buyer of the real estate, even though the seller incurred those taxes.  A recent United States District Court, District of Nevada demonstrates this issue.

In the case of Shirehampton Drive Trust v. JP Morgan Chase Bank, No. 2:16-cv-02276 (D. Nev. 2019), the owner obtained a mortgage to purchase real estate property.  The owner later fell behind and failed to pay their monthly homeowner’s association (HOA) dues, and the HOA recorded a notice of delinquent assessment lien on the property.  The HOA then foreclosed on the property.  Shirehampton Drive Trust (Shirehampton), the plaintiff, purchased the property from the foreclosure sale and sued JP Morgan Chase Bank (the bank) to quiet title to the real property, and the bank filed a counter claim on the same grounds.  The IRS became involved as well and removed the case to Federal Court, filing a claim of its own on the grounds that the previous owner had outstanding unpaid Federal taxes.

Federal IRS Tax Liens arise by an operation of law when taxes are assessed.  Once the IRS records the tax debt, it has an interest in the taxpayer’s property, which generally includes real estate.  The IRS lien is generally made in the local county records and must be recorded to generally be valid.

The issue hung on which lien was superior, the IRS or the HOA lien.  Generally, the “first in time, first in right” rule applies, looking to the timing of when the liens were filed.  Shirehampton argued that the HOA lien was superior and thus they purchased the lien clear of the IRS Federal Tax Lien.  The IRS argued the HOA lien wasn’t perfected before the Federal Tax Lien, as under Nevada state law, the HOA lien would not be perfected until after notice was sent to the owner of the delinquent assessment.  The US District Court for the State of Nevada ruled for the IRS in that the IRS lien filed on May 1, 2009 was before the date the delinquent assessment was sent to the prior owner on July 24, 2009, even though the owner became delinquent of the HOA dues on March 1, 2009.  As notice of the lien was not perfected in being sent to the previous property owner, the IRS’ lien was superior.  Thus, Shirehampton purchased the property subject to the IRS’ lien and had to pay those unpaid taxes of the previous owner.

When dealing with tax issues and liens when buying property it is important to consult a tax attorney that can help you understand the consequences of liens encumbering the property, and not end up paying the unpaid taxes of the previous owner!

VW Contributor: Ryan Coufal
© 2019 Vandenack Weaver LLC
For more information, Contact Us

IRS Notice Provides Penalty Relief to Certain Partnership Return Filing Taxpayers

by Monte L. Schatz

The IRS has issued Notice 2017-47 that provides penalty relief to partnerships that filed certain untimely returns or untimely requests for extension of time who filed those returns for the first taxable year that began after December 31, 2015.

Section 2006 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Surface Transportation Act), Public Law 114–41, 129 Stat. 443 (2015), amended section 6072 of the Internal Revenue Code (the Code) and changed the date by which a partnership must file its annual return. The due date for filing the annual return of a partnership changed from the fifteenth day of the fourth month following the close of the taxable year (April 15 for calendar-year -2- taxpayers) to the fifteenth day of the third month following the close of the taxable year (March 15 for calendar-year taxpayers). The new due date applies to the returns of partnerships for taxable years beginning after December 31, 2015.

Many partnerships failed to timely file their various partnership returns (1065, 1065-B, 8804, 8805 or 7004 Extension requests for any of the other various partnership returns).  The assumption of these taxpayers was that the normal deadlines for their 2016 Partnership returns applied (namely April 18, 2017 for the actual returns and September 15, 2017 for those that filed the Form 7004 extension for any of these returns).    Normally in these circumstances the taxpayer is subject to late filing penalties; however, the new filing deadlines shortening the return filing period by one month resulted in many taxpayers filing late returns and the IRS has provided relief for those late filed returns.

The IRS in Notice 2017-47 has announced relief will be granted automatically for penalties for failure to timely file Forms 1065, 1065-B, 8804, 8805, and any other returns, such as Form 5471, for which the due date is tied to the due date of Form 1065 or Form 1065-B. Partnerships that qualify for relief and have already been assessed penalties can expect to receive a letter within the next several months notifying them that the penalties have been abated.  For reconsideration of a penalty covered by this notice that has not been abated by February 28, 2018, contact the number listed in the letter that notified you of the penalty or call (800) 829-1040 and state that you are entitled to relief under Notice 2017-47.

SOURCE: IRS Guidewire Issue Number N-2017-47

© 2017 Vandenack Weaver LLC
For more information, Contact Us

IRS’s Large Business & International Division to Implement Campaigns

The Internal Revenue Service (“IRS”) Large Business and International (“LB&I”) division recently announced the roll-out of thirteen campaigns as part of the IRS’s examination process.  A campaign is an issue-based compliance process that centers on focused examinations.  These campaigns cover a range of topics, including positions on related party transactions and S Corporation losses claimed in excess of basis.  Campaigns are a new approach to enforcement by the IRS that the IRS hopes will identify the most serious tax administration risks, create specific plans to move toward compliance, and effectively deploy IRS resources.  A taxpayer can be the subject of multiple campaigns during an examination.

The IRS will issue “soft letters” to some taxpayers, in which the IRS identifies the campaign issue and indicates the taxpayer’s return appears to include this position.  The letter will articulate the IRS’s legal position and ask whether the taxpayer agrees to change its position by amending the return.  Soft letters will not be released publicly.

The IRS recently informed taxpayers that the receipt of a soft letter does not mean the IRS has opened an examination.  Further, taxpayers are not required to respond to the letters.  However, failure to respond could lead to an examination.

Taxpayers should be aware that this new approach means businesses and high-net-worth individuals dealing with any of the identified issues may face increased IRS audit risk.  These taxpayers should work with their legal advisors to avoid or prepare for IRS challenges.

© 2017 Vandenack Weaver LLC
For more information, Contact Us

New Relief for Late Retirement Account Rollovers

The Internal Revenue Service recently provided new relief for failures to comply with the 60 day deadline for the rollover of distributions from retirement accounts. The 60 day rollover period relates to the process for moving funds from one retirement account to another – a process which is most common when a person is switching jobs. After receiving a distribution from a retirement account, if the funds are not deposited into another retirement account within 60 days, the distribution becomes taxable.

Previously, if an individual unintentionally violated the 60 rollover period, the only option for relief was to request a private letter ruling (PLR) from the Internal Revenue Service, which can cost up to $10,000. As a result of a new Revenue Procedure, there is a new process for failed retirement account rollovers.

An individual may now provide a financial institution with a “self-certification” to correct a failed rollover based on specific permitted reasons. Those reasons are listed below:

1. The financial institution receiving the contribution or making the distribution to which the contribution relates made an error;
2. The distribution check was misplaced and never cashed;
3. The distribution was deposited into an account that the taxpayer mistakenly thought was an eligible retirement plan;
4. The taxpayer’s principal residence was severely damaged;
5. A member of the taxpayer’s family died;
6. The taxpayer or a member of the taxpayer’s family was seriously ill;
7. The taxpayer was incarcerated;
8. Restrictions were imposed by a foreign country;
9. The post office made an error;
10. The distribution was made on account of a levy under Sec. 6331, the proceeds of which have been returned to the taxpayer; or
11. The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain it.

For more information, see the Internal Revenue Service, Revenue Procedure 2016-47, available at https://www.irs.gov/pub/irs-drop/rp-16-47.pdf.

© 2016 Vandenack Weaver LLC
For more information, Contact Us

 

IRS Shuts Down E-file PIN Tool

In response to recent cyber-attacks on the Electronic Filing PIN App (“e-file PIN”), the Internal Revenue Service (“IRS”) announced the e-file PIN capability is no longer available online or through the toll-free phone service.  Prior to the shutdown, taxpayers could use the e-file PIN tool as an alternative method for signature verification on individual tax returns.

In February, the IRS announced that criminals attacked the system and accessed more than 100,000 e-file PIN numbers, but did not steal taxpayer information.   The IRS did not close down the system at that time and instead elected to provide more security, noting the program’s application programming interface was embedded in most commercial return preparation software and a shutdown would cause a major disruption.  The IRS planned to shut down the program later this year, but additional attacks prompted an earlier shut down.

The IRS reports that only a small number of taxpayers used the e-file PIN tool, so the effect on taxpayers should be minimal.  Most taxpayers opted to use their adjusted gross income from their prior-year tax return to authenticate their returns.  Taxpayers who have not filed their tax returns this year and need a replacement e-file PIN will need assistance from their respective tax software providers.

  © 2016 Vandenack Williams LLC
For more information, Contact Us

Small Business Health Care Tax Credit

As a result of the Affordable Care Act (ACA), qualified small employers may be eligible to receive a tax credit for a portion of the health insurance premiums paid on behalf of their employees. The Internal Revenue Service recently released a reminder regarding the credit.

There are several requirements for small businesses to qualify for the credit. The small business must have fewer than twenty-five (25) full time equivalent employees, pay an average wage of less than $50,000 a year, and pay at least half of the employee health insurance premiums. Additionally, the employers must be enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace, or meet certain exceptions to the requirement.

The maximum credit is 50% of the premiums paid. Portions of the credit are phased out for employers paying employees over $25,000 and employers with more than 10 full time employees. The credit may not be claimed for more than two consecutive years.

If your business might qualify for the Small Business Health Care Tax Credit, a calculator is available through Healthcare.gov to estimate your tax credit, see https://www.healthcare.gov/shop-calculators-taxcredit/

© 2016 Vandenack Williams LLC
For more information, Contact Us

As Small Business Week Ends, A Reminder of a Few Resources Available to Entrepreneurs

As small business week comes to a close, including special resources and webinars available at various federal government entities only during the week, a variety of different resources remain available for the entrepreneur from the federal government. For example, the resources at the Internal Revenue Service (IRS) include instructional publications, tax calculators, and informational videos on the varied tax requirements for small business. Further information can be found at the following link: https://www.irs.gov/uac/IRS-Marks-Small-Business-Week-2016-with-Four-Webinars

The Small Business Administration (SBA) also offers a variety of resources for a small business, including information ranging from securing a SBA loan to creating a business plan. During small business week, the SBA hosts informational webinars about issues facing entrepreneurs, most notably securing capital to operate and grow. Further information from the SBA can be found at the following link: https://www.sba.gov/nsbw/

For those entrepreneurs in Nebraska, the state offers resources through the Department of Economic Development. Information about local taxes, lenders, and business registration in Nebraska can be found at the following link: http://www.neded.org/business/start-a-business

© 2016 Vandenack Williams LLC
For more information, Contact Us

Initial Steps for Victims of Tax Related Identity Theft

As the 2016 tax season comes to a close, many taxpayers may have discovered they were victims of identity theft. Taxpayers often discover that they have been a victim of identity theft after they receive information that a tax return has already been filed using their social security number. If you are e-filing and a return has already been filed, your filing will likely be rejected. If the IRS suspects identity theft, you will receive Letter 5071C, which will request you verify your identity. Such verification can be completed online at https://idverify.irs.gov/IE/e-authenticate/welcome.do.

 After discovering that you have been a victim of identity theft, you should take multiple actions to protect your identity and correct any fraudulent returns with the IRS. It is recommended that you contact the FTC at identitytheft.gov and contact one of the major credit bureaus to place a fraud alert on your credit. If you have received a notice from the IRS or your attempt to e-file a return was denied, you should immediately contact the IRS. If your e-filing has been denied and you believe it is related to identity theft, you must complete Form 14039, Identity Theft Affidavit. Form 14039, a paper copy of your return, and any required payment of tax should be mailed to the IRS.

 If issues persist related to any fraudulently filed tax returns, additional information can be obtained from the IRS’s website, https://www.irs.gov/, or by contacting Vandenack Williams LLC.

© 2016 Vandenack Williams LLC
For more information, Contact Us