NSA Alert - Special Report

01 Mar 2013 5:06 PM | Anonymous

Special Alert
IRS Getting Set to Accept More Form 1040 Forms

As NSAlert readers are aware, the IRS was forced to delay acceptance and processing for the tax forms listed below until the first week in March. The IRS computer programming will be completed over the weekend and has informed software developers and transmitters that they can begin sending in their stockpiled return inventory beginning at 7 AM ET on Sunday, March 3.  The IRS plan is to adhere to the following timeline:


 (1) When returns processing is operational at 7:00 AM, ET on Sunday, transmitters should only send their stockpiled inventory, evenly spread throughout the day on Sunday, This will allow the Modernized e-File team to quickly review reject trends to ensure the schemas and business rules work as intended.  Transmitters are requested NOT TO ENABLE ONLINE FILING for the forms until the IRS officially announces the processing of these forms targeted for the first week of March.

(2) Barring any problems, the IRS will issue a QuickAlert to transmitters early in the week of March 3 announcing the official opening. At that time, transmitters will be allowed to enable online filing for these forms.

TY 2012 Tax Forms Scheduled for Startup

• Form 3800 General Business Credit 

• Form 4136 Credit for Federal Tax Paid on Fuels 

• Form 5074 Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands 

• Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations 

• Form 5695 Residential Energy Credits 

• Form 5735 American Samoa Economic Development Credit  

• Form 5884 Work Opportunity Credit 

• Form 6478 Credit for Alcohol Used as Fuel 

• Form 6765 Credit for Increasing Research Activities 

• Form 8396 Mortgage Interest Credit 

• Form 8582 Passive Activity Loss Limitations 

• Form 8820 Orphan Drug Credit 

• Form 8834 Qualified Plug-in Electric and Electric Vehicle Credit 

• Form 8839 Qualified Adoption Expenses 

• Form 8844 Empowerment Zone and Renewal Community Employment Credit 

• Form 8845 Indian Employment Credit 

• Form 8859 District of Columbia First-Time Homebuyer Credit 

• Form 8864 Biodiesel and Renewable Diesel Fuels Credit 

• Form 8874 New Markets Credits 

• Form 8900 Qualified Railroad Track Maintenance Credit 

• Form 8903 Domestic Production Activities Deduction 

• Form 8908 Energy Efficient Home Credit 

• Form 8909 Energy Efficient Appliance Credit 

• Form 8910 Alternative Motor Vehicle Credit 

• Form 8911 Alternative Fuel Vehicle Refueling Property Credit 

• Form 8912 Credit to Holders of Tax Credit Bonds 

• Form 8923 Mine Rescue Team Training Credit 

• Form 8932 Credit for Employer Differential Wage Payments 

• Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit


IRS and Sequestration – Any Impact on Filing Season?

Although the sequester due to begin at midnight tonight is on the minds of everyone inside the Washington Beltway, we are also mindful that it is also a matter of concern for NSA members who are busy preparing tax returns.  With filing season barely underway (see the article above about the availability of forms this coming week) what will be the effect of the sequester on the IRS and return preparers?


Acting IRS Commissioner Steven Miller sent an email to all IRS employees today and said IRS employees will “continue to deliver for the nation’s taxpayers” in his memo.  That is why the IRS will wait until after tax filing season before furloughing its workers, Miller said.


“Despite our current and planned efforts to cut expenses, the reality is that our greatest expense, by far, is employee pay,” Miller wrote.  For that reason, if sequestration occurs, IRS employees should expect to be furloughed for five to seven days, or no more than one day per pay period, before the end of the fiscal year, according to Miller.


Casual “Merchants” Likely to Get IRS Underreporting Notices 

Small business taxpayers whose gross receipts, as reported by credit card companies and third-party networks, appear to exceed the income stated on their tax returns may soon be receiving notices from the IRS inquiring about the discrepancy. Specifically included in this category are individuals who sell items on Ebay and other online auction sites as well as food cart operators, mom-and-pop shops, or swap meet participants.


In various forums and meetings, IRS officials have said the agency would begin sending “soft letters” of inquiry to taxpayers whose Form(s) 1099-K, Merchant Card and Third Party Network Payments, show an unusually high portion of receipts from credit card payments and other reportable transactions but whose tax returns do not show commensurate levels of income. The letters would ask these taxpayers to provide additional information about the apparent over- or underreporting of their gross credit card and other receipts, the IRS said. 


The letters are an outgrowth of a provision in the Housing Assistance Tax Act of 2008, which required reporting of income from merchant payment cards beginning in 2011undefined including credit, debit, and certain electronic transactionsundefinedto provide the IRS a tool to help increase voluntary compliance and improve collections. 


The IRS has acknowledged it is aware that the amounts reported by various third-parties, such as PayPal, may not match a merchant's monthly reported income for legitimate reasons, including accounting discrepancies such as the use of an accrual system or a difference between parties calendar year versus fiscal year accounting systems.  Furthermore, discrepancies can arise because Form 1099-K is a report of gross receipts and does not take into account a refund of a merchant's cost of goods, or other deductions from gross income. 


The IRS plans to begin with the soft letters and to request taxpayers to amend their returns if they agree with IRS's assessment of underreporting. 


New Financial Statement Revenue Reporting Rules to Be Effective in 2017

The Financial Accounting Standards Board decided February 20 to make new accounting rules on revenue recognition for annual periods effective on January 1, 2017.  FASB also decided not to allow early adoption of the planned accounting standard, which it hopes to issue in final form no later than June 30. 


Virtually every sizeable commercial enterprise in the United States, Canada, and Europe, and many thousands of companies elsewhere around the world would have to apply the new revenue recognition rules.  The principles underlying FASB’s approach to the rulesundefinedwhich should provide consistent treatment for computer-based commerce as well as construction projectsundefinedare based on a company recognizing revenue from a contract with a customer when a contractual obligation is performed. Discussion at FASB, as well as background materials made available at the February 20 meeting, outlined a methodology containing five steps: 

• identify the contract with a customer; 

• identify the contract's separate performance obligations; 

• determine the transaction price; 

• allocate the transaction price to specific performance obligations in the contract; and 

• recognize revenue when or as the entity fulfills its performance obligation.


5IRS Issues 2013 Deduction Limits For Passenger Vehicle Depreciation 

The IRS on February 25 released the 2013 depreciation deduction limits under tax code Section 280F(a) for owners of passenger cars, trucks, and vans. 


Revenue Procedure 2013-21 provides the deduction limitations for owners of passenger automobilesundefinedincluding trucks and vansundefinedfirst placed in service during calendar year 2013. The guidance also includes the amount to be included in income by lessees of passenger automobiles first leased during calendar year 2013. 


Rev. Proc. 2013-21 will be published in Internal Revenue Bulletin 2013-12 on March 18.  A copy is also available at http://www.irs.gov/pub/irs-drop/rp-13-21.pdf


FASB to Release Going Concern Standard in April 

FASB has finalized its decision to require management to provide disclosures in the footnotes to the financial statements when existing events or conditions signal “that it is more likely than not that the entity may be unable to meet its obligations within a reasonable period of time from the financial statement date,” according to a staff update on the going concern project.  The going concern assessment would no longer be the duty of the auditor. 


FASB Chair Leslie Seidman suggested that the proposed standard would represent an improvement in financial reporting by having management make “an early presentation at a sooner point in time” that there may exist “potential doubt” about the ability of the enterprise to continue to operate and cover its obligations.


According to an update written by the FASB staff, at each reporting period, management would gauge the entity's potential inability to continue as a going concern and the need for related disclosures. “In doing so, management would consider the likelihood of an entity's potential inability to meet its obligations as they become due for a reasonable period of time,” staff accountants wrote.  A company’s management would assert in the financial statements that there is “substantial doubt” about the firm's ability to continue operating as a going concern when the likelihood of its inability to meet its obligations within a reasonable period of time reaches “probable,” according to the update.

 “The assessment would not consider the mitigating effect of management plans that are outside the ordinary course of business,” FASB's staff continued in the update. “Because the assessment is inherently judgmental,” the board aims that the term “more likely than not” should be viewed as an approximate benchmark for initiating disclosures “and not as a bright-line threshold,” the staff wrote. 


FASB plans for the standard released in April to list “example indicators” to aid management's assessment of the need for the disclosures about going concern.

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