IRS Tax News

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  • 07 Sep 2011 10:04 AM | Anonymous
    WASHINGTON - The Internal Revenue Service today released the specifications for the competency test individuals must pass to become a Registered Tax Return Preparer.

    The test is part of an ongoing effort by the IRS to enhance oversight of the tax preparation industry. Preparers who pass this test, a background check and tax compliance check as well as complete 15 hours of continuing education annually will have a new designation: Registered Tax Return Preparer.

    The specifications identify the major topics that will be covered by the test, which will be available starting this fall. Although individuals who already have a provisional preparer tax identification number (PTIN) from the IRS do not have to pass the exam until Dec. 31, 2013, they may take the exam at any time once it is available.

    The test will have approximately 120 questions in a combination of multiple choice and true or false format. Questions will be weighted and individuals will receive a pass or fail score, with diagnostic feedback provided to those who fail.

    Test vendor Prometric Inc. worked with the IRS and the tax preparer community to develop the test. The time limit for the test is expected to be between two and three hours. The test must be taken at one of the roughly 260 Prometric facilities nationwide.

    To assist in test preparation, the following is a list of recommended study materials. This list is not all-encompassing, but a highlight of what the test candidates will need to know.


    Some reference materials will be available to individuals when they are taking the test. Prometric will provide individuals with Publication 17, Form 1040 and Form 1040 instructions as reference materials.

    The fee for the test has not been finalized but is expected to be between $100 and $125, which is separate from the PTIN user fee. Currently there is no limit on the number of times preparers can take the test, but they must pay the fee each time. Individuals must pass the test only once.

    Only certain individuals who prepare the Form 1040 series are required to take the test. Attorneys, Certified Public Accountants and Enrolled Agents (EAs) are exempt from testing and continuing education because of their more stringent professional testing and education requirements. Also exempt are supervised employees of attorneys, CPAs, attorneys or EAs who prepare but do not sign and are not required to sign the Form 1040 series returns they prepare and individuals who prepare federal returns other than the Form 1040 series.

    Approximately 730,000 return preparers have registered and received PTINs in 2011. Approximately 62 percent do not have professional credentials. The IRS does not yet know how many preparers will fall into other exempt categories, but those individuals will be required to identify themselves when they renew an existing PTIN or obtain a new PTIN beginning in October 2011.

    The IRS will notify those preparers who have a testing requirement and provide more details. Once the test is available, preparers who have on-line accounts can use their accounts to schedule a test time and select a Prometric site.

    At the time the current version of Publication 17 went to press, there were certain tax benefits that had not been finalized and several tax benefits were subsequently extended. See Legislative Changes Affecting the 2010 Publication 17 on IRS.gov for the details needed for study purposes.
  • 08 Aug 2011 9:53 AM | Anonymous

    The updated Circular 230, revised to reflect the new return preparer oversight program and other changes, is now available on IRS.gov. You may want to bookmark for easy reference.

  • 11 Jul 2011 5:00 PM | Anonymous
    WASHINGTON - The Internal Revenue Service announced today that it has reached an agreement with the Millennium Multiple Employer Welfare Benefit Plan (Millennium Plan).

    The Millennium Plan is presently the subject of a bankruptcy proceeding that was filed on June 9, 2010, in the U.S. Bankruptcy Court for the Western District of Oklahoma (Case No. 10-13528). Under the agreement reached with the IRS and the terms of the Order Confirming Modified Plan dated June 16, 2011, the Millennium Plan will terminate its operations, liquidate its assets and distribute approximately $80 million in assets to individual participants.

    The agreement with the IRS resolves certain issues relating to an IRS investigation into the design, marketing, operation and management of the Millennium Plan. The agreement with the IRS also provides a procedure for resolving hundreds of income tax and penalty examinations of employers and employees who participated in the Millennium Plan.  Finally, the agreement with the IRS addresses tax issues relating to the liquidation of the Millennium Plan, including information reporting and income tax withholding requirements.

    Section 6103 of the Internal Revenue Code strictly controls the disclosure of tax information.  In connection with this agreement, the Millennium Plan consented to the IRS issuance of this news release.
  • 11 Jul 2011 4:54 PM | Anonymous
    A home disaster can be stressful enough without reconstructing important records and accounting for belongings. The Internal Revenue Service encourages taxpayers to safeguard their financial and tax records before disaster strikes. Listed below are four simple tips for individuals on preparing for a disaster.

    1. Recordkeeping - Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents electronically and important documents like W-2s and tax returns can be scanned into an electronic format and stored on a flash drive or CD in a safe place. Keep it with other essential documents like home-closing statements, vehicle titles, insurance records and birth, death or marriage certificates and legal paperwork. Some online services can automatically back up computer files and store them offsite. Regardless of how you save your documents (whether it is electronically or on paper) ensure they are safe from the elements, but also encrypted and/or locked up to guard against disclosure or theft. 

    2. Document Valuables - The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos or video in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims in the event of a disaster. 

    3. Update Emergency Plans - Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches or if a fire occurs.  Review your emergency plans annually. 

    4. Count on the IRS - In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been affected by a federally declared disaster, you can receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return.  Clearly indicate the official name of the disaster in red at the top of the form, to expedite processing and waive the usual fee for tax return copies.
     
    For more information type “Preparing for a Disaster” in the search box at www.irs.gov.

  • 05 Jul 2011 12:27 PM | Anonymous
    WASHINGTON - The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

    The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51. In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

    "This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."

    While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

    The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

    The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

    The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.

    Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

    Mileage Rate Changes

     Purpose  Rates Jan 1 through June 30, 2011
     Rates July 1 through December 31, 2011
     Business  51 cents
     55.5 cents
     Medical/Moving  19 cents
     23.5  cents
     Charitable  14 cents
     14 cents

  • 14 Jun 2011 10:32 AM | Anonymous
    The IRS has just released the final Circular 230 regulations.  The regulations affect those who practice before the IRS and providers of continuing education programs.  To the read the regulations, click here.
  • 10 Jun 2011 5:57 PM | Anonymous
    WASHINGTON As part of an initiative to ensure that tax return preparers are competent and qualified, the Internal Revenue Service today issued final regulations requiring paid tax return preparers to register with the IRS to obtain a Preparer Tax Identification Number (PTIN). A new online application system to obtain a PTIN is now available.

    All paid tax return preparers who prepare all or substantially all of a tax return are required to use the new registration system to obtain a PTIN.

    Access to the online application system will be through the Tax Professionals page of IRS.gov. Individuals who currently possess a PTIN will need to reapply under the new system but generally will be reassigned the same number.

    Getting a new, industry-wide registration system in place is essential to our efforts to improve the standards and oversight of tax return preparation, said IRS Commissioner Doug Shulman. These efforts are essential to the future of the nations tax system. This will create higher standards for the tax preparation community and ensure quality service for taxpayers.

    The IRS set up a special toll-free telephone number, 1-877-613-PTIN (7846), that tax professionals can call for technical support related to the new online registration system.

    Applicants will pay a $64.25 fee to obtain a PTIN, which will be valid for one year. As part of that fee the IRS will receive $50 per user, as authorized by final user fee regulations issued by the IRS today, to pay for technology, compliance and outreach efforts associated with the new program. And a third-party vendor will receive $14.25 per user to operate the online system and provide customer support.

    Receipt of a PTIN will be immediate after successful online registration. Or a paper application may be submitted on Form W-12, IRS Paid Preparer Tax Identification Number Application, with a response time of four to six weeks. Before registration, applicants should consider that the date the PTIN is assigned is established as the annual renewal date.

    Individuals without a Social Security number will also need to provide one of the following: Form 8945, PTIN Supplemental Application for U.S. Citizens Without a Social Security Number Due to Conscientious Religious Objection, or Form 8946, PTIN Supplemental Application for Foreign Persons Without a Social Security Number.

    The new online registration system and final regulations are part of a series of steps underway to increase oversight of federal tax return preparation.

    In January, Shulman announced the results of a comprehensive six-month review of the tax return preparer industry, which proposed new registration, testing and continuing education of federal tax return preparers. With 60 percent of American households using a tax preparer to help them prepare and file their taxes, higher standards for the tax return preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. Currently, many return preparers do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee.

    Work on Testing, Continuing Education Components Continue

    The start of the PTIN registration process begins as the IRS continues to review the testing and education components of the return preparer initiative as recently announced in proposed regulations that would amend Treasury Circular 230.

    The proposed Circular 230 regulations announced that attorneys, certified public accountants and enrolled agents would not be subject to additional testing or continuing education requirements in order to obtain a PTIN. These professionals are currently subject to strict professional standards of conduct and ethics.

    Pending finalization of guidance, the IRS has under serious consideration extending similar treatment to a discrete category of people who engage in return preparation under the supervision of someone else -- for example, some employees who prepare all or substantially all of the return and work in certain professional firms under the supervision of one of the above individuals who signs the return.

    The IRS will provide guidance defining this area in the coming months, and will continue to seek feedback during this process to help ensure the creation of a fair, equitable oversight system that minimizes burden.

    On the continuing education requirements, the IRS recognizes the need to have transition rules in place and plans to issue additional guidelines by the end of the year.

    For more, see the Tax Professionals page on IRS.gov, which features an FAQ page on the new registration system and who needs a PTIN.

  • 10 Jun 2011 5:52 PM | Anonymous
    The Internal Revenue Service has issued the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

    Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
    • 51 cents per mile for business miles driven
    • 19 cents per mile driven for medical or moving purposes
    • 14 cents per mile driven in service of charitable organizations
    (The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.)

    A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

    Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

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