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Ohio Central Area Tax Administrators

Ohio Central Area Tax Administrators. Small Business/Self-Employed Division Winter 2011 . Return Preparer Review. What is new? . PHASE ONE Mandatory registration for all preparers including those who already have a PTIN Annual user fee $64.25

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Ohio Central Area Tax Administrators

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  1. Ohio Central Area Tax Administrators Small Business/Self-Employed Division Winter 2011

  2. Return Preparer Review

  3. What is new? PHASE ONE • Mandatory registration for all preparers including those who already have a PTIN • Annual user fee $64.25 • SSN no longer valid ID number for paid preparers beginning Jan. 1, 2011. Must use PTIN

  4. Who needs a PTIN? Any individual who is compensated for preparing, or assisting in the preparation of, all or substantially all of a U.S. federal tax return or claim for refund

  5. Future Governance Return Preparer Office David Williams, Director • Registration • PTIN System • Testing • Continuing Education • Compliance Office of Professional Responsibility Karen Hawkins, Director • Adherence to ethical conduct and professional standards

  6. For PTIN assistance • FAQs on www.IRS.gov/taxpros • Primary Toll-Free:  877-613-PTIN (7846) • TTY:  877-613-3686 • Toll Number for International Callers:  +1 319-464-3272 • Hours of Operation:  Monday - Friday, 8:00 a.m. - 5:00 p.m. (CST)

  7. Background Checks Fingerprint checks will potentially be implemented in mid-2011 for individuals who are not attorneys, CPAs, or enrolled agents

  8. Suitability Checks – Tax Compliance • All preparers will be subject to tax compliance checks: • Have all returns been filed? • Have all taxes been paid (or proper payment arrangements made)? • Tip: • Be proactive. Resolve any tax compliance issues now.

  9. Competency Testing • Many preparers will be required to pass a competency test by Dec. 31, 2013 • Testing will begin approximately mid-2011 • Exempt from testing: • Attorneys, CPAs, and enrolled agents • Certain supervised preparers • Those who prepare no Form 1040 series returns

  10. Competency Testing • The initial test(s) will be for individuals who prepare Form 1040 series returns. • After competency testing has begun, new non-exempt preparers will be required to pass a competency test prior to obtaining a PTIN • After passing the test, the individual is officially an “Registered Tax Return Preparer”

  11. Continuing Education • Registered Tax Return Preparers will have a new requirement to complete 15 continuing education hours per year: • 3 hours of federal tax law updates • 2 hours of ethics • 10 hours of federal tax law • The CE requirement has not begun. The earliest it will begin is Fall 2011

  12. Target Implementation Timeline PTIN revoked if competency test not passed CE requirement begins - TBD PTIN renewals begin Testing available Searchable database available December 31 PTIN sign-up begins September 15 June 1 January 31 September 15 2010 2011 2012 2013 2014

  13. Additional Ongoing Efforts • Extension of Circular 230 ethical standards to all paid tax return preparers • Development of a comprehensive return preparer enforcement strategy • Development of a public awareness campaign to educate taxpayers, preparers, and employees on the new requirements and standards • Creation of a public database

  14. E-File Mandate

  15. Preparer E-File Mandate • Upcoming changes: - Tax return preparers who prepare 100 or more individual or trust returns in 2011 will be required to e-file - Tax return preparers who prepare 11 or more individual or trust returns in 2012 will be required to e-file • Additional guidance on exceptions, waivers, and taxpayer opt-outs is in development

  16. Proposed Exceptions • The client chooses to file on paper • An e-filed return is rejected by IRS e-file and the reject condition cannot be resolved • The preparer: • Receives a hardship waiver • Is a member of a recognized religious group that is conscientiously opposed to filing electronically • Has a software package does not support a form or schedule attached to a return • Is ineligible to e-file because the preparer is a foreign preparer living and working abroad and does not have a social security number, or • Is ineligible to e-file due to an IRS sanction

  17. Pending New Forms • Form 8944, Preparer e-file Hardship Waiver Request • Form 8948, Preparer Explanation for Not Filing Electronically

  18. Client Prefers Paper • Preparer should: • Explain the new law and benefits of e-file • Obtain a signed statement • Attach Form 8948 to the return

  19. Preparer E-File Mandate • In preparation for the 2011 filing season: • If you file 100 or more individual or trust returns, are you enrolled and accepted to e-file? Do you have an Electronic Filing Identification Number (EFIN)? • If yes, all you need to do is file your customers’ returns electronically • If no, the first step is to enroll to participate in IRS e-file, also known as becoming an Electronic Return Originator (ERO). You may do this anytime. Visit IRS.gov and click on the e-file logo.

  20. Enroll soon but no later than 45 days prior to e-filing Register for e-Services at IRS.gov and complete e-file application Mail required documents to the IRS Update e-file application within 30 days of changes Enroll

  21. Elimination of FTD Coupons Regulation 153340-09 Electronic Funds Transfer of Depository Taxes

  22. Elimination of FTD Coupons • Decision based on many factors: • Excessive cost to upgrade and maintain PATAX system • The free service of accepting and processing coupons was no longer in many banks’ business plans • Many banks had already stopped accepting coupons. • Deposit alternatives are available.

  23. Elimination of FTD Coupons Implementation Plan • Intent Letters will be issued to taxpayers who made a coupon deposit over the prior 18 month period. • The letter informs taxpayers they will no longer be able to use a paper federal tax deposit coupon after Dec.31, 2010.

  24. Elimination of FTD Coupons Implementation Plan • The letter informs taxpayers they are pre-enrolled in EFTPS and instructs them on how to activate the Personal Identification Number provided. • When the final regulation is approved, these same taxpayers will be notified that federal tax deposits must be made by EFTPS.

  25. Elimination of FTD Coupons Implementation Plan • Alternative payment options will be shared with stakeholders, which include: • Federal Tax Application (same-day wire transfer) for taxpayers with a U.S. bank account. • Payment with return if the payment falls at or below the de minimus amount prescribed for the particular return.

  26. Earned Income Tax CreditCompliance Initiatives& Due Diligence

  27. Targeted Compliance Aims to Improve Accuracy EITC return preparers may get letters or personal visits from the IRS starting Fall 2010

  28. Focus: Reducing Errors • Help new EITC preparers • Check for understanding among experienced preparers • Conduct on-site due diligence audits of preparers filing returns with high probability of EITC errors • Bar egregious preparers with a history of non-compliance from return preparation

  29. Consequences • Civil penalties for preparers • Penalties, repayment and interest for clients • Return-related preparer penalties can also result in • Disciplinary action by OPR • Suspension or expulsion from IRS e-file

  30. Due Diligence Common Errors Pay particular attention to the following issues that account for more than 60% of all EITC errors • Claiming child who does not meet the age, relationship or residency requirement • Filing as single or HOH when married • Under or over-reporting income

  31. Why EITC Due Diligence? • EITC error rate 23-28% • About 66% of EITC returns prepared by paid preparers • Law requires paid preparers to take extra steps to ensure correct EITC claims

  32. EITC Due Diligence • Internal Revenue Code §6695(g) • Due diligence requirements • Completion of Eligibility Checklist • Computation of the Credit • Records Retention • Knowledge Requirement • More than 90% of penalties assessed for failure to meet this requirement

  33. Consequences of EITC Due Diligence Non-compliance Due diligence penalties E-file sanctions Disciplinary action from OPR Injunction actions barring preparers from return preparation Criminal prosecutions

  34. EITC Central – Your Home for All Things EITC www.eitc.IRS.gov

  35. Overview of 2010 IncomeTax Law Changes

  36. Personal Exemptions • No AGI phase out of personal exemptions • All taxpayers can deduct 100% of personal exemptions Ref: IRC 151(d)(3)(F)

  37. Itemized Deductions • No AGI phase out of itemized deductions • All taxpayers can deduct 100% of itemized deductions • Schedule A phase outs may apply Ref: IRC 68(f)

  38. Conversions to Roth IRAs • Modified AGI and filing status requirements for converting a traditional IRA to a Roth IRA are eliminated • For any rollover in 2010 from an IRA to a Roth IRA, amounts that would be included as income: • will be included in income in equal amounts in 2011 and 2012 • Or taxpayer can choose to include entire amount as income in 2010. Ref: IRC 408

  39. W-2 Reporting on Employer-Provided Insurance Coverage • Optional for Tax Year 2011 • Draft Form W-2 for 2011 available for employers to report the value of coverage provided to employees on Form W-2 • Reporting is for information only • Employer contribution remains excluded from income • Value of employer contribution is not taxable

  40. Small Business Health Care Tax Credit • Maximum credit is 35% of premiums paid by employer • Two part phase-out of credit • fewer than 25 full-time equivalent employees • average wages less than $50,000 per employee • Excluded employees disqualified Ref: IRC 45R

  41. HIRE Payroll Tax Exemption • Exemption from the employer’s 6.2% share of Social Security tax • Effective for wages paid to qualified individuals from March 19, 2010, through December 31, 2010 • Employee’s share of social security and Medicare tax still apply to all wages • Elect out IRC 3111(d)

  42. New Hire Retention Credit • General business credit • Up to $1000 per retained qualified employee

  43. Retention Credit • Claimed on employer’s income tax return • Lesser of $1,000 or 6.2 percent of wages paid to qualified employee • Must retain qualified employee for 52 consecutive weeks • Wages cannot significantly decrease in the last 26 weeks of employment • Credit may be carried forward

  44. Questions?

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