AICPA Requests Guidance on CARES Act Provisions

As CPAs and their clients continue to parse the details of the recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act, the AICPA is requesting guidance on several aspects of the bill’s employee retention credit provisions.

In a letter dated April 17 to David Kautter at the U.S. Department of the Treasury and Charles Rettig at the IRS, AICPA tax executive committee chair Christopher Hesse lays out seven key areas where the group believes more information is needed:

  • Guidance related to an employer’s deduction for payroll taxes reduced by the employee retention credit
  • Clarification that Section 2302 of the Act allows employers to defer payments of Social Security taxes originally due on or after March 27, 2020, regardless of when the compensation was earned (as well as similar clarification for self-employed individuals)
  • Clarification on situations when an employee works a reduced schedule but continues to be paid their regular wage – if a portion of the employee’s wages and qualified health care costs can be claimed as a credit
  • Additional guidance regarding the definition of a “partial” suspension of operations for purposes of Section 2301 of the Act
  • Definition of the term “trade or business” for purposes of Section 2301 of the Act
  • Clarification as to whether an employer aggregated under the aggregation rules under Section 2301 of the Act is barred from utilizing the retention credit if another related entity receives an SBA loan
  • Clarification as to whether a not-for-profit organization that has not been fully or partially suspended can use the gross receipts test to qualify for payment of retention pay

More news from the AICPA

AICPA Appeals to IRS, Treasury for ‘Extensive Relief’ for Taxpayers

In light of the ongoing uncertainty and challenges caused by the spread of the coronavirus pandemic, the AICPA called for the U.S. Department of the Treasury and IRS to provide more extensive relief to all taxpayers.

Noting its appreciation for the agencies’ efforts to extend the tax filing and payment deadlines announced in the recent Notice 2020-18, the AICPA is nevertheless stressing the importance of providing additional relief. The AICPA recommends:

Postponing all deadlines and providing additional time to make payments. The AICPA believes taxpayers who do not have an April 15 payment or filing date are inherently disadvantaged and would similarly benefit from a deferral. The group argues that these individuals and their advisors need additional time for filings, tax payments, estimated taxes and gathering pertinent information to include in those filings or payment calculations.

Providing appropriate filing and payment relief for all filers and taxpayers (including tax-exempt organizations and fiscal year corporations) for tax returns, information returns, elections, claims for refund and other correspondence. The AICPA says relief should also apply broadly to all types of taxes (including payroll, excise tax, estate, gift and generations-skipping transfer tax, etc.), noting that deferment of other taxes that are not income taxes is necessary to aid both businesses and their employees.

“With shelter-in-place orders issued throughout the country and a spreading pandemic, there is a significant list of filing and payment challenges left unresolved,” says AICPA Vice President of Taxation Edward Karl. “We urge the Treasury Department and IRS to grant additional relief in these uncertain times and offer our assistance in identifying specific areas in need of FAQs or formal authoritative guidance.”

More news from the AICPA

It’s Official: IRS Delays April 15 Filing Deadline to July 15

As COVID-19 continues to weigh down the U.S. and global economies, the IRS has updated and enhanced its relief efforts for taxpayers, announcing Friday that the filing deadline for tax returns will be pushed from April 15 to July 15, 2020.

Edward Karl, the AICPA’s vice president of tax policy and advocacy, thanked everyone involved in the bipartisan effort. “We know that having a chorus of voices from Congress urging the Treasury Department to formally extend the deadline until July 15 was instrumental to the final decision made by the administration.”

The postponement laid out in Notice 2020-18 applies automatically to any “individual, trust, estate, partnership, association, company or corporation” with a federal income tax return or income tax payment due on April 15. Taxpayers do not need to seek an extension. In addition, no interest, penalty or addition to tax for failure to file a federal income tax return or to pay federal income taxes will accrue between April 15 and July 15, 2020.

The new notice applies only to federal income tax returns and payments (including self-employment tax payments) due April 15, 2020, for 2019, and to estimated income tax payments due April 15, 2020, for 2020. The notice does not apply to any other type of federal tax or to any federal information returns.

Notice 2020-18 supersedes the agency’s previous guidance (Notice 2020-17) regarding interest, penalty, or additional tax for failure to file a federal income tax return or to pay federal income taxes, which had included limits to the amount of tax that could be postponed.

Senators Introduce Bill to Extend Tax Filing Deadline

One day after the AICPA called for an extension of the tax filing deadline, three U.S. senators have introduced the Tax Filing Relief for America Act, a bill to extend the deadline from April 15 to July 15, 2020.

The legislation was put forth March 19 by Sens. John Thune, Steve Daines and Angus King. The AICPA swiftly applauded the move, which follows a previous announcement by the U.S. Department of the Treasury that it would extend the tax payment deadline to July 15.

“Treasury’s decision to extend the tax payment deadline from April 15 to July 15 was an important first step, but it only makes sense to also extend the tax filing deadline itself,” Thune says in a statement. “There’s enough confusion amid this outbreak as it is, so I believe it’s incumbent upon Congress to provide as much clarity and relief as possible to American families.”

Edward Karl, the AICPA’s vice president of tax policy and advocacy, says taxpayers and preparers are finding it difficult to comply with the filing deadlines. “Offering taxpayers only relief for federal income tax payments but not for the filing of any tax or information returns is not sufficient, nor does it recognize the burdens our citizens are facing across the country. More must be done immediately. This is why the AICPA supports Senator Thune’s legislation that will help millions of individuals and businesses, and the CPAs who advise them.”

AICPA president and CEO Barry Melancon said on March 18 that the administration had not gone far enough to provide relief during the COVID-19 crisis. “Nearly 60% of all taxpayers turn to a tax practitioner to prepare and file their tax returns, and individual and business tax filing deadlines are fast approaching. Even the relatively simple process of filing an extension form requires calculations based on data and information from the taxpayer. Given the current environment, this extension process is impossible for many taxpayers.”

The AICPA is urging Congressional leadership to support the legislation, which was cosponsored by Sens. Richard Burr and Chris Van Hollen.

The AICPA continues to encourage its members to refer to the following resources that can help them manage clients’ needs and their business at this time:

More news from the AICPA

A Call for Definitive Taxing Structure of Cryptocurrencies

In 2014, the IRS implemented guidelines on how cryptocurrencies should be taxed, but the government did not declare it an actual currency.

Even though the industry has grown exponentially since 2014, the IRS has not issued any new regulations. This has prompted the AICPA to request that the agency “release additional, much needed, guidance on virtual currency.”

According to CNBC, Tyson Cross, a U.S.-based tax attorney, began assisting clients with declaring their digital currencies as early as 2013.

Cross suggests that crypto holders try to preempt any tax-related issues by taking a few preventative measures:

  • Establish a record-keeping process. Capital gains tax should be implemented for every crypto transaction.
  • Regularly download your transaction history. This includes keeping a separate record of these transactions as a backup.
  • Determine your gains and losses after every transaction. Virtual currencies held for less than 12 months are seen as a short-term gain, while those held for longer are seen as a long-term gain.

White House Names Kautter as Acting IRS Commissioner

President Donald Trump has announced his intention to designate Assistant Secretary of the Treasury for Tax Policy David Kautter as acting commissioner of the IRS. Kautter, who formerly worked for RSM US LLP and Ernst & Young, will succeed John Koskinen.

“I look forward to having David Kautter as acting commissioner of the IRS. David will provide important leadership while we wait to confirm a permanent commissioner,” says treasury secretary Steven Mnuchin. “Assistant secretary Kautter has had an illustrious 40-year career in tax policy, and I am confident that the IRS and the American people will benefit from his experience and insight.”

Kautter was PIC of the national tax practice of RSM he served as director of national tax for more than 13 years at Ernst & Young.

Whistleblower Behind Caterpillar Tax Headache Could Make $600 Million

Caterpillar, the world’s largest maker of bulldozers and other construction equipment, faces a $2 billion IRS bill and possible criminal charges, while the accountant who tipped off the feds may make a windfall, Bloomberg BusinessWeek reported.

Daniel Schlicksup, an accountant who had been with Caterpillar for 16 years, sent emails in 2008 to top executives with the subject line, “Ethics issues important to you, the board and Cat shareholders.” This occurred after a meeting in which he concluded that no one had passed his tax concerns on to the CEO. He had been telling his bosses that the company was engaged in an overseas tax arrangement that he figured had helped it illegally avoid more than $1 billion in taxes.

BusinessWeek reported, “He alluded to his concerns about the tax strategy and described, in emotional terms, a systematic effort to shut him down. ‘I am now an example to my colleagues, peers and others that they made the correct choice when they chose to not report ethical issues and ignore company policy,’ he wrote. Attached to the email was a 15-page memorandum describing how his superiors had retaliated against him for speaking out. The next morning he sent 137 pages of documents purporting to show how, with the help of its auditor, PricewaterhouseCoopers, Caterpillar had devised a way to shift billions in profit to Switzerland to avoid U.S. taxes.”

Since then, the IRS has demanded $2 billion in back taxes and penalties, a U.S. Senate committee has concluded Caterpillar avoided taxes on more than $8 billion in revenue, and federal agents searched the Peoria, Ill., headquarters and took away computers, documents and other evidence that could be related to false financial statements. Caterpillar executives could face jail time if criminal charges are brought.

The IRS typically pays whistleblowers 15% to 30% of what it collects. If Cat pays the full $2 billion, Schlicksup may receive $300 million to $600 million. But nothing is guaranteed. The IRS determines how much a whistleblower contributed to a case and, in turn, how much he or she is paid.

A company spokeswoman says, “Caterpillar believes its tax position is right. We are in the process of responding to the government’s concerns and hope to be in a position to bring this matter to resolution within a reasonable time frame.”

Read the full story here.

IRS Completes the “Dirty Dozen” Tax Scams for 2015

The IRS wrapped up the 2015 “Dirty Dozen” list of tax scams with a warning to taxpayers about aggressive telephone scams continuing during the early weeks of this year’s filing season.

The aggressive, threatening phone calls from scam artists are reported on a daily basis in states across the nation. The IRS urged taxpayers not to give out money or personal financial information as a result of these phone calls or from emails claiming to be from the IRS.

View an infographic on the “Dirty Dozen” Tax Scams

Phone scams and email phishing schemes are among the “Dirty Dozen” tax scams the IRS highlighted, for the first time, on 12 straight business days from Jan. 22 to Feb. 6. The IRS has also set up a special section on IRS.gov highlighting these 12 schemes for taxpayers.

“We are doing everything we can to help taxpayers avoid scams as the tax season continues,” says IRS Commissioner John Koskinen. “Whether it’s a phone scam or scheme to steal a taxpayer’s identity, there are simple steps to take to help stop these con artists. We urge taxpayers to visit IRS.gov for more information and to be wary of these dozen tax scams.”

Illegal scams can lead to significant penalties and interest for taxpayers, as well as possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them. Taxpayers should remember that they are legally responsible for what is on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task. For more, see the Choosing a Tax Professional page.

Here is a recap of this year’s “Dirty Dozen” scams:

  • Phone Scams: Aggressive and threatening phone calls by criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent months as scam artists threaten police arrest, deportation, license revocation and other things.  (IR-2015-5)
  • Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will not send you an email about a bill or refund out of the blue. (IR-2015-6)
  • Identity Theft: Taxpayers need to watch out for identity theft, especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. The IRS is making progress on this front, but taxpayers still need to be extremely careful and do everything they can to avoid becoming a victim. (IR-2015-7)
  • Return Preparer Fraud: Taxpayers need to be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service, but there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.  (IR-2015-8)
  • Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to help people get their taxes in order. (IR-2015-09)
  • Inflated Refund Claims: Taxpayers need to be on the lookout for anyone promising inflated refunds. Taxpayers should be wary of anyone who asks them to sign a blank return, promises a big refund before looking at their records, or charges fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony storefronts and word of mouth via community groups and churches to find victims. (IR-2015-12)
  • Fake Charities: Taxpayers should be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. Be wary of charities with names that are similar to familiar or nationally known organizations. (IR-2015-16)
  • Hiding Income with Fake Documents: Hiding taxable income by filing false Form 1099s or other fake documents is a scam. A paid tax return preparer should never suggest falsifying documents to reduce tax bills or inflate tax refunds. Taxpayers are legally responsible for what is on their returns regardless of who prepares them. (IR-2015-18)
  • Abusive Tax Shelters: Taxpayers should avoid using abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2015-19)
  • Falsifying Income to Claim Credits: Taxpayers should avoid inventing income to erroneously claim tax credits. Taxpayers are sometimes talked into doing this by scam artists. Taxpayers are best served by filing the most accurate return possible because they are legally responsible for what is on their return. (IR-2015-20)
  • Excessive Claims for Fuel Tax Credits: Taxpayers need to avoid improper claims for fuel tax credits. The fuel tax credit is generally limited to off-highway business use, including use in farming. Consequently, the credit is not available to most taxpayers. But yet, the IRS routinely finds unscrupulous preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds. (IR-2015-21)
  • Frivolous Tax Arguments: Taxpayers should avoid using frivolous tax arguments to avoid paying their taxes. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2015-23)

AICPA Sues IRS to Stop Return Preparer Program

The American Institute of CPAs (AICPA) has filed a federal lawsuit challenging the IRS’s voluntary tax return preparer program, blasting it as an “illegitimate exercise of government power” and calling for the court to declare the rule unlawful.

The IRS recently issued a rule for its Annual Filing Season Program, a voluntary initiative offering certification to unenrolled preparers who complete educational requirements, in the wake of losing a lawsuit in a ruling declaring an earlier attempt to regulate tax preparers as an overreach of power.

The IRS said in a statement it has the “authority to implement a voluntary continuing education program for uncredentialed tax return preparers, and this does not conflict with any administrative or legal requirements. We have reviewed the matter and believe that it does not violate the court’s decision in the Loving case.” AICPA, meanwhile, said in its filing that the IRS’s program represents an “obvious attempt to bypass the Court’s binding decision and to assume powers Congress has not given it.”

Find out more.

Ex-BDO Partner Gets 3 Months in Prison

A former partner at Chicago-based BDO (FY13 net revenue of $683 million), Robert Greisman was sentenced to prison after defrauding the government in a tax shelter scheme, according to Reuters.

Greisman was sentenced to three months in prison by U.S. District Judge William Pauley in Manhattan. He pled guilty to charges of conspiracy, tax evasion and IRS obstruction. In this case, four other partners or employees have pled guilty.

“My regret is ever-present in my mind each and every day,” Greisman told Pauley at the sentencing.

After his jail term, Greisman will have three years of probation which includes six months of home confinement. He is required, along with the others that were convicted, to repay $69 million to the IRS.