eNews for Tax Professionals 2020-11

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Issue Number:  2020-11

Inside This Issue

1. IRS.gov: Coronavirus information and tax relief
2. IRS announces Offer in Compromise fee increase, waiver
3. Foreign trust Form 3520-A filing date reminder and tips to avoid penalties
4. Stay up-to-date with IRS e-News subscriptions
5. Additional tax relief for Puerto Rico earthquake victims
6. News from the Justice Department’s Tax Division
7. Technical Guidance

The IRS has established a special web page to help taxpayers, businesses and others affected by the coronavirus. The web page will be updated as new information becomes available.

For health information about the COVID-19 virus, visit the Centers for Disease Control and Prevention (https://www.coronavirus.gov). Other information about actions being taken by the U.S. government is available at https://www.usa.gov/coronavirus and in Spanish at https://gobierno.usa.gov/coronavirus.

Additionally, the IRS this week advised that high-deductible health plans (HDHPs) can be used to pay for 2019 Novel Coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA). As stated in Notice 2020-15, health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing or treatment of COVID-19 before plan deductibles have been met. As in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.

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The IRS released final regulations that increase the Offer in Compromise application fee to $205. In addition, the regulations provide a new way for the IRS to waive the Offer in Compromise application fee for low-income taxpayers, based on their adjusted gross income (AGI).

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The due date for the foreign trust’s information reporting return, the Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner (Under section 6048(b)), is the fifteenth day of the third month following the end of the foreign trust’s taxable year. An extension of time to file Form 3520-A may be requested by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. 

Learn how to avoid penalties:

Form 3520-A 

• File by the fifteenth day of the third month after the end of the trust’s tax year, the due date may be extended by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns.
• Form 7004 must be filed with an Employer Identification Number (EIN) for the foreign trust. Forms 7004 for a foreign trust cannot be processed under an individual’s Social Security Number (SSN). Please obtain an EIN for the foreign trust. 
• If the foreign trust does not file a Form 3520-A, the U.S. owner of the foreign trust must file a substitute Form 3520-A by completing a Form 3520-A to the best of their ability and attaching it to a timely filed Form 3520, including extensions (see Form 3520 Instructions for more information on filing a substitute Form 3520-A). Do not separately file a duplicate Form 3520-A if you are filing a substitute 3520-A attached to your timely filed Form 3520, with extensions.

Form 3520

• When completing Form 3520, be sure to check Box 1K on page 1, and enter the form number of the income tax return if an extension was filed.
  
  If the foreign trust fails to timely file a complete and accurate Form 3520-A, and its U.S. owner also fails to file a complete and accurate substitute Form 3520-A (by attaching a Form 3520-A to its timely filed 3520, including extensions), the U.S. owner is subject to a separate penalty, equal to the greater of $10,000 or 5 percent of the gross value of the portion of the foreign trust's assets treated as owned by the U.S. owner under the grantor trust rules at the close of the taxable year. This penalty is in addition to any applicable penalty of the same amount for the U.S. owner’s failure to timely file a complete and accurate Part II of Form 3520.  See IRC section 6677(a) through (c) and the Instructions for Form 3520 and Form 3520-A.

See more on Foreign Trust Reporting Requirements and the Reminder to U.S. Owners of a Foreign Trust on IRS.gov.

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Did you know the IRS has 20 e-News subscription newsletters? In addition to e-News for Tax Professionals, the IRS offers email subscriptions tailored to tax exempt and government entities, small and large businesses and individual taxpayers. Some of the more popular subscription newsletters include:

• IRS Tax Tips – These brief, concise tips in plain language that cover a wide-range of topics of general interest to taxpayers. They include the latest on tax scams and schemes, tax reform, tax deductions, filing extensions and amending a return. IRS Tax Tips are distributed daily during tax season and periodically throughout the year.
  
  
• IRS Newswire − Subscribers to IRS Newswire receive news releases the day they are issued. These cover a wide range of tax administration issues ranging from breaking news to details related to legal guidance.
  
  
• IRS News in Spanish (Noticias del IRS en Español) − Readers get IRS news releases, tax tips and updates in Spanish as they are released. Subscribe at Noticias del IRS en Español.
  
  
• IRS Outreach Connection − This newest IRS subscription offering delivers up-to-date materials for tax professionals and partner groups inside and outside the tax community. The material for Outreach Connection is specifically designed so subscribers can share the material with their clients or members through email, social media, internal newsletters, e-mails or external websites. Subscribe by visiting IRS.gov/outreachconnect.

Sign up by visiting IRS e-News Subscriptions.

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Taxpayers in the counties of Aguada, Añasco, Barceloneta, Coamo, Moca, Naranjito, Salinas, and Santa Isabel now qualify for tax relief following earthquakes that took place beginning on December 28, 2019, in parts of the Commonwealth of Puerto Rico.

Visit the IRS disaster relief page for all updates on tax relief for disaster victims.

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A federal grand jury in Newport News, Va., returned an indictment today charging tax preparer Angela C. Harper with aiding and assisting the preparation of false returns. According to the indictment, Harper owned At Ease Tax Services, a tax preparation business that she operated from her home and hotel rooms in the Newport News area. Between 2014 and 2018, Harper allegedly falsified clients’ tax returns by claiming false credits and deductions in order to inflate their refunds. Harper also allegedly did not sign as preparer on the returns or provide copies of the returns to clients. If convicted, Harper faces a statutory maximum sentence of three years in prison for each count, a period of supervised release, restitution and monetary penalties.

A federal court permanently enjoined Mary E. Shade, d/b/a MS Tax, of Piqua, Ohio, from owning or operating a tax return preparation business and preparing tax returns for others. The complaint against Shade alleges that Shade routinely understates her customers’ tax liabilities by fabricating itemized deductions, creating false Schedules C with inflated or fraudulent business losses, and reporting false credits in order to offset their income to generate tax refunds. The complaint also alleges that, over the course of the years 2012 through 2019, Shade filed over 5,500 tax returns, and that by repeatedly understating her customers’ tax liabilities, Shade has caused the United States to lose substantial tax revenue.

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Notice 2020-16 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.

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