e-News for Tax Professionals 2019-36

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Issue Number:  2019-36

Inside This Issue

1. IRS Makes Identity Protection PINs Available to More Taxpayers
2. Relief for Drought-Stricken Farmers, Ranchers
3. Oct. 10 Webinar:  Relief Procedures for Certain Former Citizens
4. IRS Releases Draft 2019 Forms 1065, 1120-S, and Schedules K-1
5. News from the Department of Justice Department Tax Division
6. Technical Guidance

The IRS is expanding the opt-in Identity Protection Personal Identification Number (IP PIN) program to taxpayers in an additional 10 states for the 2020 filing season. This brings the availability of IP PINs to taxpayers in a total of 19 states and the District of Columbia. The opt-in program is designed for taxpayers who are not victims of identity theft or refund fraud.

For 2020, IP PINs will be available to taxpayers who previously filed in Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Florida, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Texas and Washington.

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Farmers and ranchers forced to sell livestock because of drought may have an additional year to replace the livestock and defer tax on any gains. This one-year extension gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock. Details can be found in Notice 2006-82. More information on reporting drought sales and other farm-related tax issues can be found in Publication 225, Farmer’s Tax Guide.

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The IRS will present the webinar, Relief Procedures for Certain Former Citizens, at 10 a.m. ET on Oct. 10. This 100-minute webinar will address filing requirements under the relief procedures, common issues taxpayers may encounter, and how the IRS will handle submissions. Tax pros can earn two continuing education credits by participating.

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The IRS this week issued a draft of the tax year 2019 Form 1065, U.S. Return of Partnership Income, and Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc. The changes to the form and schedule aim to improve the quality of the information reported by partnerships both to the IRS and the partners of such entities. Certain similar changes can also be found in the draft of the tax year 2019 Form 1120-S, U.S. Income Tax Return for an S Corporation, and its Schedule K-1 , Shareholder’s Share of Income, Deductions, Credits, etc.

The draft 2019 Form 1065 and Schedule K-1 and the draft Form 1120-S and its Schedule K-1 are near-final forms. The drafts are intended to give tax practitioners a preview of the changes and software providers the information they need to update systems before the final updated forms and schedules are released in December. The IRS is accepting comments at IRS.gov/FormComments.

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The U.S. Department of Justice Tax Division this week reported:

A Philadelphia tax return preparer, Abdoulaye Coumbassa, pleaded guilty to aiding and assisting in the preparation of a false tax return before the US District Court in Philadelphia. Coumbassa, who owned and operated Abbi Tax Services and Accounting (Abbi Tax), prepared and filed fraudulent U.S. Individual Income Tax Returns Forms 1040 and related forms and schedules on behalf of his clients with the IRS from at least 2012 to 2015. The indictment alleged that Coumbassa falsified clients’ returns by, among other things, attaching false Schedules C to the clients’ Forms 1040. These Schedules C falsely claimed that the client had a business that lost money, which loss was used to offset taxable income and therefore inflate the refunds or create a refund rather than tax due and owing. The defendant agreed in his plea agreement that a reasonable estimate of the total tax loss exceeded $2 million. Coumbassa faces a statutory maximum sentence of three years in prison and a $250,000 fine for aiding in the preparation of a false tax return. He also faces a period of supervised release, restitution and monetary penalties.

A Las Vegas tax return preparer, Michael A. Sandoval, pleaded guilty to multiple tax crimes including one count of tax evasion, one count of aiding and assisting in the preparation and filing of a false tax return, and one count of making and subscribing a false tax return. According to court documents, Sandoval provided payroll and tax preparation services for individuals and companies through his Las Vegas business Nevada Financial Solutions Inc. (NFS). Sandoval used NFS to commit multiple tax crimes. First, when two of his clients provided NFS with $471,178 in payments to be forwarded to the Internal Revenue Service (IRS) as money due for their quarterly employment taxes, Sandoval did not provide those payments to the IRS, but instead spent the funds for his personal benefit. Second, Sandoval filed and caused the filing of false individual income tax returns for a substantial number of clients by reporting fraudulent deductions, including false Schedule C business losses and charitable contribution and state and local tax deductions. These fraudulent deductions caused a tax loss of over $2.8 million. Lastly, Sandoval fraudulently understated his income from NFS on his individual income tax returns for the years 2010 through 2017, causing an additional tax loss of $100,138. In total, Sandoval caused a tax loss totaling $3,425,654. Sandoval faces a statutory maximum of five years in prison on the tax evasion charge and three years in prison for each of the false tax return charges. Sandoval also faces a period of supervised release, restitution and monetary penalties.

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Revenue Procedure 2019-39 sets forth a system of recurring remedial amendment periods for correcting form defects in a section 403(b) plan (both for section 403(b) individually designed plans and section 403(b) pre-approved plans) first occurring after March 31, 2020 (the ending date for the initial remedial amendment period under Rev. Proc. 2013-22, 2013-18 I.R.B. 985, ends).

Revenue Procedure 2019-40 provides relief for certain U.S. persons affected by the repeal of section 958(b)(4) by the Tax Cuts and Jobs Act.

TD 9876, Removal of Temporary Regulations on a Partner’s Share of a Partnership Liability for Disguised Sale Purposes, contains final regulations concerning how partnership liabilities are allocated for disguised sale purposes.

TD 9877, Liabilities Recognized as Recourse Partnership Liabilities under Section 752, contains final regulations addressing when certain obligations to restore a deficit balance in a partner’s capital account are disregarded under section 704 of the Internal Revenue Code (Code), when partnership liabilities are treated as recourse liabilities under section 752, and how bottom dollar payment obligations are treated under section 752.

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