2015 filing season to start January 20

The IRS announced today that it will start accepting electronically-filed 2014 returns on January 20, 2015.  It will also start processing paper returns on the same date.  There will be no staggered start dates this season.

The earlier open date should be a welcome relief to traditionally-early filers, who in recent years have had to wait until the end of January to file.

In recent years, late passage of tax extenders has caused delays in the start of filing season, as the Service has had to re-tool its programs to accommodate late changes to the Code.  This year’s across-the-board one-year extension of expiring provisions wreaked less havoc on the IRS’s systems than previous extender legislation, which has enabled the IRS to start processing returns earlier.

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Baucus Confirmed as Ambassador to China – Whither Tax Reform?

By a 96-0 vote yesterday, the Senate confirmed the appointment of Max Baucus (D- Montana) as Ambassador to China.  As Chairman of the Senate Finance Committee, Baucus has been known for his ability to work with the other side of the aisle to successfully push through tax measures, even at time upsetting members of his own party in the process.  His leadership on the Committee will be missed.

The departure of Baucus from the Senate obviously creates an opening for the Chairmanship of the Finance Committee, which is seen as one of the most powerful and prestigious positions in the Senate.  Speculation is that Ron Wyden (D-Oregon), who is currently a Finance Committee member, as well as Chairman of the Senate Energy & Natural Resources Committee, would assume the leadership role and give up his Energy chairmanship.

A tax code overhaul has been at the top of the Baucus-led Committee’s agenda for the past year, which has resulted in extenders and other legislation taking a back seat.  The Committee has issued discussion drafts on international tax reform, tax administration, cost recovery and tax accounting issues, and energy taxation – all intended to be cornerstones to a tax reform discussion.  Will the reform process continue to be the Committee’s top priority under new leadership?

The answer is most likely yes.  Wyden is also seen as a reformer, and has probably been hand-picked by the Administration for that very reason.

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Filing season starts today!

After a bit of a delay (this year attributed to the government shutdown in October), the IRS is now officially accepting 2013 electronically-filed returns.  Depending on your Electronic Return Originator, you should now be able to file.

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IRS plans to increase audits for small business entities

Faris Fink, commissioner of the Internal Revenue Service’s Small Business/Self-Employed Division, reportedly told attendees at a recent AICPA conference that the Service intends to increase its auditing efforts among small business partnerships and other flow-through entities.  Fink added that the strategy would include training agents to look more closely at flow-through entities.

Fink’s comments didn’t make any mention of increased audits of the partners and/or shareholders flow-through entities, but by extension, that has to be the intent!

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IRS to allow retroactive screening for Work Opportunity Tax Credit

The Work Opportunity Tax Credit, which had expired on December 31, 2011, was extended by the American Taxpayer Relief Act of 2012 for two years, retroactive to January 1, 2012.  The credit provides employers a credit for hiring individuals who fall into certain targeted group (a list of which can be found in IRC Section 51), but employers must submit the initially-completed Form 8850 within 28 days of the employee hire date in order for the employee to be eligible.

The IRS has issued Notice 2013-14, which grants to an employer a window until April 29, 2013 to submit a completed Form 8850 to the designated local agency for employees hired between January 1, 2012 and March 31, 2013.  Special rules apply to select qualified veterans categories, which were on different sunset schedules than the rest of the Section 51 targed group categories.

The net impact of the Notice is there is now no penalty for employees who ceased screening for the Work Opportunity Tax Credit at the beginning of 2012.

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Annual inflation adjustments for 2013 announced

Those of us who prepare returns are still trying to learn the 2012 items that are adjusted annually for inflation.  Still, the 2013 adjustments have been announced.  Here are the highlights:

  • The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for MFJ).
  • The personal exemption rises to $3,900, up from $3,800.
  • The Alternative Minimum Tax exemption, which is FINALLY indexed for inflation, is $51,900 ($80,800 for MFJ).
  • The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891.
  • The estate tax exclusion amount increases to $5,250,000, up from $5,120,000.
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IRS rolls out a safe harbor home office deduction

The IRS has issue Revenue Procedure 2013-13, which introduces a new safe harbor home office deduction for those taxpayers who otherwise qualify for the deduction.  The prescribed deduction $5.00 per square foot, up to 300 square feet (thus, an optional deduction of up to $1,500).  The $5.00 is not indexed for inflation, though the Rev. Proc. indicates that the IRS could update the rate from time to time.  The optional safe harbor deduction will be available for tax years beginning in 2013.

What happens to the prorated amount of mortgage interest and real estate taxes that you have been allocating to Form 8829?  You’ll get to deduct those in full on Schedule A without making any adjustment to the safe harbor deduction.

The Rev. Proc. does not change one’s eligibility for the deduction – therefore, you must still meet the Section 280A requirements to claim the deduction.

Why now?  The IRS estimates that use of the safe harbor deduction will reduce the paperwork and recordkeeping burden on taxpayers by about 1.6 billion hours annually.  I’ve always taken the Service’s paperwork burden estimates with a grain of salt, but I do believe that this will be beneficial for a lot of taxpayers who have been previously intimidated by the deduction.


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IRS to open filing season on January 30

The IRS announced this week that it will begin accepting electronically-filed returns for most taxpayers on January 30.  The open date is about a week later than expected, and the delay is attributed to the late nature of the passage of the American Tax Relief Act. Paper returns are affected by the delay as well.  The IRS has delayed processing of paper returns until January 30 as well.

Though the open date is later than normal, it’s still earlier than most brokerage firms will be delivering 1099s, so a large chunk of taxpayers will be waiting anyways.

Not everyone will be free to file on January 30.  If your return includes Form 4562 (depreciation), Form 3800 (general business credit), or any number of credit forms that were affected by the American Tax Relief Act, you’ll have to wait as late as possibly March in order to file your return.


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UPDATE: House passes tax bill

The House of Representatives passed the Senate tax bill this evening by a vote of 257-167. 85 Republicans supported the bill, along with a vast majority of Democrats.  Presidential signature is expected imminently.


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Happy New Year! Do we have a tax deal??

Vice-President Biden and Senate Minority Leader McConnell have negotiated an agreement on a “fiscal cliff” tax bill, and the bill has passed the Senate this morning by a 89-8 vote. The Senate bill is strictly a tax bill – the Biden-McConnell pact agreed to defer the spending cut discussion necessary to address debt ceiling issues for two months.

The highlights of the bill:

  • A top rate of 39.6% will kick in for married couples with taxable income of $450,000 and higher (the bracket would begin at $400,000 for single filers, and $225,000 for married filing separate filers).
  • A top rate of 20% will apply to capital gains and qualified dividends for the same $450,000 (MFJ) / $400,000 (Single) / $225,000 (MFS) brackets.
  • The personal exemption phaseout and itemized deduction haircut returns. Thresholds are $300,000 for married couples and $250,000 for individuals.
  • The AMT patch for 2012 has been included and – FINALLY – the AMT exemption amount has been permanently indexed for inflation starting in 2013.
  • The estate tax rate has been fixed at 40%, with $5,120,000 estate exemption amount.  The exemption is indexed for inflation.
  • Various expired provisions have been extended (some retroactively) through the end of 2013.

The bill does not include an extension of the 2-percentage-point reduction in employee FICA taxes, so employee FICA withholding reverts back to 6.2% (7.65%, when coupled with Medicare withholding) effective today.

The bill seemingly still has an uphill battle for passage in the House of Representatives, which may take up the bill as early as today.  The House killed a bill in December which would have imposed the 39.6% rate at the $1,000,000 level.

Stay tuned…

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