Issue Number: 2020-08
Inside This Issue
- IRS increases visits to high-income taxpayers who have not filed tax returns
- Farmers, fishermen face March 2 tax deadline; IRS encourages Direct Pay
- Publications 2043 and 5136 now available on IRS.gov
- Feb. 25 webinar: Understanding Individual Taxpayer Identification Numbers (ITINs)
- Letter 4858, You May Not Have Met Your Due Diligence Requirements
- Taxpayers must reconcile marketplace advance payments and file Form 8962
- News from the Justice Department’s Tax Division
- Technical Guidance
1. IRS increases visits to high-income taxpayers who have not filed tax returns
As part of a larger effort to ensure compliance and fairness, the IRS will step up efforts to visit high-income taxpayers who in prior years have not filed one or more tax returns. Following the recent and ongoing hiring of additional enforcement personnel, IRS revenue officers across the country will increase face-to-face visits with high-income taxpayers who haven’t filed tax returns in 2018 or previous years. These visits are primarily aimed at informing these taxpayers of their tax filing and payment obligations and bringing these taxpayers into compliance.
“The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes,” said Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. “These visits focusing on high-income taxpayers will be taking place across the country. We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later.”
For the new visits taking place, high-income non-filers taxpayers are those who generally received income in excess of $100,000 during a tax year and did not file a tax return with the IRS.
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2. Farmers, fishermen face March 2 tax deadline; IRS encourages Direct Pay
Farmers and fishermen who chose not to make quarterly estimated tax payments must file their 2019 Form 1040 along with a payment for all taxes owed by March 2. This special rule normally applies to taxpayers whose farming or fishing income was at least two-thirds of their total gross income in either the current or the preceding tax year. Farmers and fishermen can avoid the estimated tax penalty by both filing and paying all taxes due by March 2. Those who made an estimated tax payment on or before Jan. 15 can instead wait and file by the regular April 15 deadline.
For more information on payment options such as IRS Direct Pay or to enroll in in the Electronic Federal Tax Payment System (EFTPS), visit IRS.gov/payments.
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3. Publications 2043 and 5136 now available on IRS.gov
The 2020 Publication 2043, IRS Refund Information Guidelines for the Tax Preparation Community, is now online. This year’s update includes a reminder that by law the IRS cannot issue refunds before mid-February for tax returns that claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). The IRS expects most EITC/ACTC Direct Deposit refunds to be available in taxpayer bank accounts or on debit cards by the first week of March. Your clients should check Where’s My Refund for their personalized refund date.
With the surge of tax return filing activity that typically occurs in late February, the IRS urges you to consider the many free, time-saving resources available on IRS.gov or the IRS2Go mobile app. You can avoid the rush by referring to the recently updated Publication 5136, IRS Services Guide, to find information and online tools to help prepare and file federal tax returns.
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4. Feb. 25 webinar: Understanding Individual Taxpayer Identification Numbers (ITINs)
The IRS will present the webinar, Understanding Individual Taxpayer Identification Numbers (ITINs), at 2 p.m. ET on Feb. 25.
This free 60-minute webinar will explain:
- Tax reform changes that impact ITIN holders
- The W-7 application process for ITIN renewals and common reasons for delays in processing W-7 applications
- The role of a Certifying Acceptance Agent
Tax pros can earn one education credit by participating.
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5. Letter 4858, You May Not Have Met Your Due Diligence Requirements
IRS is sending Letter 4858, You May Not Have Met Your Diligence Requirements, to some tax preparers who completed 2019 returns claiming the:
- Head of Household filing status (HoH)
- Earned Income Tax Credit (EITC)
- American Opportunity Tax Credit (AOTC)
- Child Tax Credit/Additional Child Tax Credit (CTC/ACTC)
- Credit for Other Dependents (ODC)
The IRS sends Letter 4858 to remind tax preparers about the importance of meeting due diligence requirements to ensure returns are complete and correct. Disregarding the requirements could result in penalties and other consequences for them and their clients. The penalty is $530 per failure for tax returns filed in 2020.
IRS will continue monitoring returns claiming HoH filing status, EITC, AOTC, CTC/ACTC and ODC during the upcoming filing season. For more information on due diligence and to view Letter 4858, go to our Tax Preparer Toolkit on EITC Central.
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6. Taxpayers must reconcile marketplace advance payments and file Form 8962
Failure to file Form 8962, Premium Tax Credit, to reconcile 2019 advance payments of the premium tax credit may affect return processing and delay your client’s refund. It may also affect your client’s ability to get advance payments of the premium tax credit or cost-sharing reductions. Taxpayers who do not file and reconcile their 2019 advance credit payments may not be eligible for advance payments of the premium tax credit in the future.
For more information, see Publication 5187, Affordable Care Act: What You and Your Family Need to Know, and Publication 974, Premium Tax Credit.
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7. News from the Justice Department’s Tax Division
On Feb. 14 a federal court in Ocala, Fla., entered a permanent injunction against Philip Mott Harris II and his business, 24/7 Tax Services LLC, barring them from preparing federal tax returns for others and owning or operating a tax preparation business. The court also ordered that Harris and 24/7 Tax Services LLC disgorge $544,874.56, representing gains they received for the preparation of tax returns. The government alleged the defendants prepared tax returns on which the defendants fabricated businesses and related business income and expenses, claimed improper filing status, and reported false household help income.
The U.S. District Court for the Northern District of Indiana issued an order permanently barring Daniel Bewley, a former Hobart and Lake Station, Ind., tax preparer, from preparing federal tax returns for others. Bewley consented to the civil injunction order. According to the complaint, Bewley operated a business that provided tax return preparation services under the names Bewley’s Tax Service and Forward Motion Tax Service. The complaint alleges that Bewley prepared returns that falsely understated the tax due by including false Schedules C that understated the amount of the customer’s income and false Schedules A that contained inflated deductions.
A Macon, Miss., tax return preparer was sentenced to 16 months in prison for aiding and assisting in the preparation and filing of a false tax return. According to court documents and statements made in court, from approximately January 2012 through April 2016, Shelleen Ivory-Farmer managed ABS Tax Services, a tax preparation business in Macon and falsified clients’ tax returns by claiming false education credits, itemized deductions, and business and farming losses to fraudulently increase client IRS refunds through the firm. The total tax loss caused by Ivory-Farmer was more than $1.1 million. In addition to the term of imprisonment, Ivory-Farmer was ordered to serve one year of supervised release and to pay $236,887 in restitution to the U.S.
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8. Technical Guidance
Revenue Ruling 2020-06 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate.
Notice 2020-11 provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under section 417(e)(3), and the 24-month average segment rates under section 430(h)(2) of the Internal Revenue Code.
Notice 2020-12 addresses the definition of “beginning of construction” for purposes of the carbon oxide sequestration credit under section 45Q.
Notice 2020-13 provides for adjustments to the limitation on housing expenses for purpose of section 911 of the Internal Revenue Code.
Revenue Procedure 2020-12 provides a safe harbor for partnerships to make valid allocations of the carbon oxide sequestration credit under section 45Q.
Revenue Procedure 2020-13 provides procedures applicable to a taxpayer in a farming business regarding the application of section 263A of the Internal Revenue Code (Code).
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