2014 TAX BENEFIT INCREASES!

For tax year 2014, the Internal Revenue Service announced today annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.
The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.

• The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
• The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
• The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
• The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)
• The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
• The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
• Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
• The annual exclusion for gifts remains at $14,000 for 2014.
• The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
• The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
• The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.

2014 PTIN RENEWAL PERIOD UNDERWAY FOR TAX PROS

The Internal Revenue Service today reminded the nation’s almost 690,000 federal tax return preparers that they must renew their Preparer Tax Identification Numbers (PTINs) for 2014. All current PTINs will expire on Dec. 31, 2013.
Anyone who, for compensation, prepares or helps prepare any federal return or claim for refund must have a valid PTIN from the IRS. The PTIN must be used as the identifying number on returns prepared.
“We ask that you renew your PTIN as soon as possible to avoid a last-minute rush. It’s easy to let this slip as the holiday season approaches,” said Carol A. Campbell, Director, IRS Return Preparer Office.
The PTIN system is ready to accept applications for 2014.
For those who already have a 2013 PTIN, the renewal process can be completed online and only takes a few moments. The renewal fee is $63. If you can’t remember your user ID and password, there are online tools to assist you. Preparers can get started at www.irs.gov/ptin.
If you are registering for the first time, the PTIN application fee is $64.25 and the process may also be completed online.
Form W-12, IRS Paid Preparer Tax Identification Number Application and Renewal, is available for paper applications and renewals, but takes four to six weeks to process. Failure to have and use a valid PTIN may result in penalties. All enrolled agents, regardless of whether they prepare returns, must have a PTIN in order to maintain their status.
There have been a number of enhancements to the online PTIN system since last year. They include:

• The fully functional "Manage My Account" tool allowing preparers to self-correct almost any field at any time (including professional credentials). Previously, most changes had to be made during renewal. A phone call was required for users to make changes during the rest of the year. However, for security reasons, name changes still require written documentation.
• Preparers can now view completed continuing education programs reported by IRS-approved providers beginning with 2013 courses. Providers report completed CE programs to the IRS based on your PTIN number. Enrolled agents must have a minimum of 16 CE hours annually and a total of 72 hours every  three years. Others can also view voluntary programs completed. If something is missing, contact your provider directly as we only display what providers send to us.
• Planning to take a year off for any reason? A new function allows certain preparers to inactivate their PTINs voluntarily and then reactivate the same number when they return to work. This is only for those preparers who plan to take a full year off. If you are paid to prepare tax returns during any part of a year, you must have a valid PTIN. Note: Enrolled agents must maintain a valid PTIN each year in order to maintain their EA credential and therefore are not eligible to inactivate their PTIN.

For more information about requirements for federal tax professionals and access to the online PTIN system, go to www.irs.gov/for-Tax-Pros.

IRS WARNS OF TELEPHONE SCAM

The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.
Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.
“This scam has hit taxpayers in nearly every state in the country.  We want to educate taxpayers so they can help protect themselves.  Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail
Other characteristics of this scam include:

• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
• Scammers may be able to recite the last four digits of a victim’s Social Security Number.
• Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
• Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
• Victims hear background noise of other calls being conducted to mimic a call site.
• After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

• If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
• If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.
• If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.
The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.

IRS delays 2014 Tax Filings based on goverment closure

2014 Tax Season to Start Later Following Government Closure; IRS Sees Heavy Demand As Operations Resume

The Internal Revenue Service today announced a delay of approximately one to two weeks to the start of the 2014 filing season to allow adequate time to program and test tax processing systems following the 16-day federal government closure.
The IRS is exploring options to shorten the expected delay and will announce a final decision on the start of the 2014 filing season in December, Acting IRS Commissioner Danny Werfel said. The original start date of the 2014 filing season was Jan. 21, and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4.
The government closure came during the peak period for preparing IRS systems for the 2014 filing season. Programming, testing and deployment of more than 50 IRS systems is needed to handle processing of nearly 150 million tax returns. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year.
About 90 percent of IRS operations were closed during the shutdown, with some major workstreams closed entirely during this period, putting the IRS nearly three weeks behind its tight timetable for being ready to start the 2014 filing season. There are additional training, programming and testing demands on IRS systems this year in order to provide additional refund fraud and identity theft detection and prevention.
“Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right,” Werfel said. “The adjustment to the start of the filing season provides us the necessary time to program, test and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers. We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.”
The IRS will not process paper tax returns before the start date, which will be announced in December. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit. The April 15 tax deadline is set by statute and will remain in place. However, the IRS reminds taxpayers that anyone can request an automatic six-month extension to file their tax return. The request is easily done with Form 4868, which can be filed electronically or on paper.
IRS processes, applications and databases must be updated annually to reflect tax law updates, business process changes, and programming updates in time for the start of the filing season.
The IRS continues resuming and assessing operations following the 16-day closure. The IRS is seeing heavy demand on its toll-free telephone lines, walk-in sites and other services from taxpayers and tax practitioners.
During the closure, the IRS received 400,000 pieces of correspondence, on top of the 1 million items already being processed before the shutdown.
The IRS encourages taxpayers to wait to call or visit if their issue is not urgent, and to continue to use automated applications on IRS.gov whenever possible.
“In the days ahead, we will continue assessing the impact of the shutdown on IRS operations, and we will do everything we can to work through the backlog and pent-up demand,” Werfel said. “We greatly appreciate the patience of taxpayers and the tax professional community during this period.”

How will Gov Shutdown effect IRS Operations????

Due to the current lapse in appropriations, IRS operations are limited. However, the underlying tax law remains in effect, and all taxpayers should continue to meet their tax obligations as normal.

Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law. The IRS will accept and process all tax returns with payments, but will be unable to issue refunds during this time. Taxpayers are urged to file electronically, because most of these returns will be processed automatically.

No live telephone customer service assistance will be available, however most automated toll-free telephone applications will remain operational. IRS walk-in taxpayer assistance centers will be closed. 

While the government is closed, people with appointments related to examinations (audits), collection, Appeals or Taxpayer Advocate cases should assume their meetings are cancelled. IRS personnel will reschedule those meetings at a later date. 

Automated IRS notices will continue to be mailed.  The IRS will not be working any paper correspondence during this period. Here are some basic steps for taxpayers to follow during this period.

How does this affect me? 

• You should continue to file and pay taxes as normal. Individuals who requested an extension of time to file should file their returns by Oct. 15, 2013.
• All other tax deadlines remain in effect, including those covering individuals, corporations, partnerships and employers. The regular payroll tax deadlines remain in effect as well.
• You can file your tax return electronically or on paper –– although the processing of paper returns will be delayed until full government operations resume. Payments accompanying paper tax returns will still be accepted as the IRS receives them.
• Tax refunds will not be issued until normal government operations resume.
• Tax software companies, tax practitioners and Free File will remain available to assist with taxes.

What IRS services will be available?

• For taxpayers seeking assistance, only the automated applications on the regular 800-829-1040 telephone line will remain open.
• The IRS website, www.IRS.gov, will remain available, although some interactive features may not be available.
• The IRS Free File partners will continue to accept and file tax returns.
• Tax software companies will continue to accept and file tax returns.

IRS NEW PER DIEM RATES!

Notice 2013-65 announces the special per diem rates effective October 1, 2013, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home.  The rates are the special transportation industry rate, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method.
Rev. Proc. 2011-47 provides the rules for using per diem rates, rather than actual expenses, to substantiate the amount of expenses for lodging, meals, and incidental expenses for travel away from home.  Taxpayers who may use per diem rates to substantiate the amount of travel expenses under Rev. Proc. 2011-47 may use the federal per diem rates published annually by the General Services Administration.  Rev. Proc. 2011-47 allows certain taxpayers to use a special transportation industry rate or rates under a high-low substantiation method for certain high-cost localities.  The IRS announces these rates and the rate for the incidental expenses only deduction in an annual notice.
Use of a per diem substantiation method is not mandatory.  A taxpayer may substantiate actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence for proper substantiation.
Notice 2013-65 will be published in Internal Revenue Bulletin 2013-42 on Oct. 15, 2013.