Issue Number: 2020-05
Inside This Issue
- IRS kicks off 2020 tax filing season
- IRS takes next step on abusive micro-captive transactions
- IRS, partners nationwide mark Jan. 31 as "EITC Awareness Day"
- PTIN expiration letters
- Jan. 31 filing deadline for employers, other businesses to file wage statements, independent contractor forms
- Work Opportunity Tax Credit extended
- New Form 1040-SR, alternative filing option available for seniors
- News from the Justice Department’s Tax Division
-
Technical guidance
1. IRS kicks off 2020 tax filing season
The IRS successfully opened the 2020 tax filing season this week as the agency began accepting and processing federal tax returns for tax year 2019. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the April 15 tax deadline.
"The IRS workforce has worked for nearly a year to prepare for the opening of tax season," IRS Commissioner Chuck Rettig said. "Our dedicated employees are committed to help taxpayers, process tax returns and serve the nation − not just through the April 15 tax deadline but throughout the year."
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2. IRS takes next step on abusive micro-captive transactions
The IRS announced the overwhelming acceptance of a time-limited settlement offer made to certain taxpayers under audit who participated in abusive micro-captive insurance transactions. Nearly 80% of taxpayers who received offer letters elected to accept the settlement terms. In addition, the IRS is establishing 12 new examination teams that are expected to open audits related to thousands of taxpayers in coming months.
“The overwhelming acceptance rate of the private settlement offer is a reflection of the success of the government’s work to stop this abuse,” IRS Commissioner Chuck Rettig said. “Taxpayers who elected to accept the IRS’ terms have done the right thing by coming into compliance with their federal tax obligations and putting this behind them. Putting an end to abusive schemes is a high priority for the IRS.”
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3. IRS, partners nationwide mark Jan. 31 as "EITC Awareness Day"
The IRS and its partners nationwide highlight the Earned Income Tax Credit on Jan. 31, "EITC Awareness Day."
Outreach events and activities are scheduled to promote EITC awareness around the country. For more information about the EITC or to use the EITC Assistant, visit IRS.gov/eitc.
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4. PTIN expiration letters
With the launch of filing season this week, the IRS Return Preparer Office is sending the following PTIN expiration letters to return preparers who have not yet renewed their PTINs.
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5. Jan. 31 filing deadline for employers, other businesses to file wage statements, independent contractor forms
The IRS reminds employers and other businesses that Jan. 31 is the filing deadline for submitting wage statements and forms for independent contractors with the government. Employers must file their copies of Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31. The deadline also applies to certain Forms 1099-MISC, Miscellaneous Income, filed with the IRS to report non-employee compensation to independent contractors.
As the IRS no longer grants an automatic extension of time to file Form W-2., requests for more time to file must be submitted before the due date. Details can be found on the instructions for Form 8809, Application for Extension of Time To File Information Returns.
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6. Work Opportunity Tax Credit extended
A valuable tax credit is available to those who hire long-term unemployment recipients and others certified by their state workforce agency. The Work Opportunity Tax Credit is a federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment.
Learn more about the Work Opportunity Tax Credit by visiting IRS.gov.
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7. New Form 1040-SR, alternative filing option available for seniors
A new tax form, Form 1040-SR, U.S. Tax Returns for Seniors, is available for seniors. The form features larger print and a standard deduction chart with a goal of making it easier for older Americans to read and use.
Taxpayers born before Jan. 2, 1955, have the option to file Form 1040-SR whether they are working, not working or retired. The form allows income reporting from other sources common to seniors such as investment income, Social Security and distributions from qualified retirement plans, annuities or similar deferred-payment arrangements.
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8. News from the Justice Department’s Tax Division
The U.S. Department of Justice Tax Division this week reported:
A federal court in Columbus, Ga., permanently barred Stacy Lee and Heather Lee from preparing tax returns for others and from owning, operating, or franchising a tax return preparation business, the Justice Department announced. The court also ordered Stacy Lee and Heather Lee to close their tax return preparation stores, and they both consented to the relief. According to the complaint, Stacy Lee operated two tax return preparation stores under the names Fast Track Tax Service in Talbotton, Ga., and TimeLee Tax Service in Columbus. Stacy Lee’s daughter, Heather Lee, allegedly prepared tax returns at the two stores as well. From 2013 to 2018, Stacy Lee prepared 3,728 tax returns and Heather Lee prepared 1,116 tax returns, the complaint alleges. The government further claimed that Stacy and Heather Lee prepared false federal income tax returns, understated federal income tax liabilities, and improperly claimed tax credits in order to obtain inflated tax refunds for customers. In particular, the defendants fabricated deductions for charitable contributions, unreimbursed employee business expenses, and medical expenses; reported profits and losses for fictitious businesses; and claimed false education credits, energy credits, and childcare credits.
A former Philadelphia tax return preparer was sentenced to 24 months in prison for aiding in the preparation of a false client tax return. According to court documents and statements made in court, Abdoulaye Coumbassa owned and operated Abbi Tax Services and Accounting (Abbi Tax). From at least 2012 to 2015, Coumbassa prepared and filed fraudulent tax returns and related forms and schedules on behalf of his clients. By reporting fictitious businesses with false business losses, Coumbassa sought inflated refunds for his clients from the IRS. At times, Coumbassa included the fake business losses without the client’s knowledge. In total, Coumbassa caused a tax loss of $2.1 million to the IRS. In addition to the term of imprisonment, U.S. District Judge R. Barclay Surrick ordered Coumbassa to serve one year of supervised release and to pay approximately $250,000 in restitution to the United States.
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9. Technical guidance
Notice 2020-06 proves that if a RMD statement is provided for 2020 to an IRA owner who will attain age 70½ in 2020, the IRS will not consider such statement to be incorrect, provided that the financial institution notifies the IRA owner no later than April 15, 2020, that no RMD is due for 2020.
Revenue Ruling 2020-04 clarifies the manner to properly compute the income limits applicable to the low-income housing credit under section 42 of the Internal Revenue Code.
Revenue Procedure 2020-08 makes specific modifications to Rev. Proc. 2020-5 to allow for the new electronic submission process of the Form 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.
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