IRS to Appeal Ruling Barring Licensing of Tax Preparers

The Internal Revenue Service said it will appeal a court’s ruling that it lacks the power to license tax preparers, a decision that might affect as many as 700,000 people who work on clients’ returns.

 

Immediately discontinuing the agency’s tax preparer oversight program “would result in a substantial disruption to tax administration,” the IRS said in a court filing yesterday accompanying a request to lift a court order barring it from regulating return preparers during its appeal.

 

U.S District Judge James Boasberg in Washington, D.C., ruling on a lawsuit filed by three preparers, invalidated the program Jan. 18. The agency overstepped its authority by relying on an 1884 law that allows it to regulate people presenting cases before the Treasury Department, he said.

 

The IRS program favored large corporate providers of tax services such as H&R Block Inc. and Intuit Inc. over smaller independent return preparers, said Dan Alban, an attorney with the Institute for Justice, a self-described libertarian public interest law firm representing the plaintiffs.
Large providers lobbied the IRS “for this program that they knew would put a lot of mom-and-pop preparers out of business,” Alban said in a phone interview from the group’s Arlington, Va.’s offices. “This is an example of protectionism at its finest.”

Program Proponents
Tax-preparation companies have expressed support for the program.

“We have been proponents of oversight, not to disadvantage competitors but in favor of consumers,” said Julie Miller, a spokeswoman for Intuit, the maker of TurboTax.

The IRS said the rules were designed to impose standards on return preparers who aren’t certified public accountants, attorneys or enrolled agents already licensed to practice before the agency.

The idea, promoted by Douglas Shulman while he was IRS commissioner, was to impose minimum standards and help the agency thwart tax fraud.

The agency’s licensing program affects from 600,000 to 700,000 preparers “who are responsible for a substantial number of the more than 80 million returns filed each year,” the IRS said in court papers.

The program required preparers to register with the federal government, pass a competency test and meet continuing-education requirements. A 15-hour continuing-education regime began in 2012 and the testing was set to go into effect this year.

Registration Fees
Almost 100,000 return preparers have registered to take the test and the IRS has collected more than $100 million in registration and competency-testing user fees, according the IRS filing. The agency said it has spent more than $50 million and assigned 167 employees to operate the program.

The IRS also would probably face lawsuits and demands for fee refunds if the injunction isn’t lifted during an appeal, the court filing said.

“All these actions—and taxpayer funds—would be wasted if the Court of Appeals subsequently overturned this court’s decision and reinstated the return preparer program,” the IRS said in its request to Boasberg to suspend the injunction against the program for at least 14 days to allow an appeal.

The case is Loving v. Internal Revenue Service, 12-cv- 00385, U.S. District Court, District of Columbia (Washington).

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IRS Steps Up Enforcement and Audits of High-Income Taxpayers

The Internal Revenue Service reported that audits of individuals topped 1 million in fiscal year 2012 for the sixth year in a row, a coverage rate of 1.03 percent of all tax returns filed, while audits in the upper income ranges remained substantially higher than other categories.

The IRS noted that it increased its examinations across all categories of business returns by more than 12 percent in fiscal 2012, with the largest increases coming in audits of flow-through entities, which include partnerships and Subchapter S corporations. Coverage rates exceeded 20 percent for the largest corporations.

The IRS also collected more than $50 billion in enforcement revenue in fiscal 2012, the third year in a row topping that figure. “The 2012 numbers were lower than 2010 and 2011, which were unusual years with enforcement dollars helped by large numbers of offshore tax cases coming in,” the IRS noted.

More than 38,000 disclosures of offshore accounts have been made to date through the IRS’s offshore voluntary disclosure programs, the IRS noted. In addition, the economic slowdown contributed to lower enforcement figures, as most enforcement dollars collected resulted from audits of returns for years during the slowdown.

Another factor behind the fiscal 2012 numbers reflected changes in agency staffing and budget resources, the IRS noted. After a nearly flat budget in fiscal 2011, the IRS’s fiscal 2012 budget was cut $305 million. The reduction affected the level of staffing available to deliver service and enforcement programs. Overall full-time staffing has declined by more than 8% over the last two years, and staffing for key enforcement occupations fell nearly 6 percent in the past year.

Also in fiscal year 2012, the IRS continued to confront the challenge of refund fraud caused by identity theft. The IRS more than doubled the number of staff dedicated to preventing refund fraud and assisting taxpayers victimized by identity theft, with more than 3,000 employees working in this area. As a result of these increased efforts, the IRS in fiscal 2012 was able to prevent the issuance of more than 3 million fraudulent refunds worth more than $20 billion, an increase from approximately 1.8 million refunds worth about $14 billion the previous year.

On the service side, the IRS said it saw continued strong growth in electronic filing by individuals, as the e-filing rate in fiscal 2012 exceeded 80 percent for the first time. Taxpayer interest in online interactions continued to increase as well, with Web page visits on IRS.gov up nearly 17 percent to 372 million.

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IRS Responds to Court Ruling Upending its Regulatory Plan

In a surprising turn of events, the U.S. District Court for the District of Columbia issued a ruling Friday effectively stopping the Internal Revenue Service from implementing its Registered Tax Return Preparer (RTRP) program launched in 2011.

The IRS issued a statement today in response to the decision that it “continues to have confidence in the scope of its authority to administer this program.” The statement went on to say that the Service is “considering how best to address the court’s order” noting that further action will be taken soon.

The RTRP program was created to regulate paid tax preparers other than those already under Circular 230’s regulatory structure such as Enrolled Agents, certified public accountants and attorneys. The program required other paid preparers to register with the IRS, pass a competency test and complete specified continuing education.

Ultimately, the Court opined that the IRS overstepped its statutory authority in interpreting language in an 1884 law referring to “representatives” that “practice” before the IRS. The Court asserted that tax preparation is not included in the definition of “practicing” before the IRS. Thus, the Court maintains that the IRS has no authority to regulate preparers who only prepare returns.

The Court issued both a declaratory judgment that IRS lacks statutory authority to promulgate or enforce the new regulatory scheme for RTRPs and injunctive relief that permanently enjoins IRS from enforcing this registration scheme. Citing the Administrative Procedure Act, the Court explained that its decision was based on the requirement that it “hold unlawful and set aside agency action, findings, and conclusions” that are “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.”

According to statements made today by IRS Return Preparer Office Director Carol Campbell the IRS concedes that at this point there are more questions than answers surrounding the Court’s decision. Campbell invited stakeholders to submit questions for consideration as the IRS assesses the ramifications of the court decision and evaluates next steps.

For the time being, IRS has shut down its RTRP operation, which means preparers other than EAs, CPAs and attorneys will not be required to register with the IRS, take a competency exam or take courses toward continuing education. However, it should be noted that the decision does not impact the PTIN program, so all practitioners should still maintain their PTINs.

Clearly, the question of the hour is, what happens now? The IRS essentially has three options: (1) to accept the Court’s decision as issued and unwind its RTRP program, perhaps making it voluntary; (2) to enlist Congress’ help to pass a law granting the IRS authority to regulate preparers other than those previously defined in Circular 230; or (3) to appeal the Court’s decision to the Circuit Court, which seems likely based on the statement issued today.

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IRS Delays Tax Season until End of January

The Internal Revenue Service said that it plans to open the 2013 tax filing season and begin processing individual income tax returns on Jan. 30, more than a week after the initially planned start date of Jan. 22, but some returns cannot be processed until late February or March.

 

The reason is the late passage of the fiscal cliff legislation, the American Taxpayer Relief Act, by Congress on New Year’s Day. The IRS said it would begin accepting individual tax returns on Jan. 30 after updating its forms and completing the programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted Jan. 2. The announcement means that the vast majority of tax filers—more than 120 million households—should be able to start filing tax returns starting Jan 30.

The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension. The IRS has already begun processing some business tax returns (see IRS Begins Accepting Business Tax Returns).

“We have worked hard to open tax season as soon as possible,” IRS Acting Commissioner Steven T. Miller said in a statement. “This date ensures we have the time we need to update and test our processing systems.”

Miller had previously warned Congress about a delayed tax season until lawmakers decided what to do about the expiring tax rates and the alternative minimum tax (see IRS Warns Congress Tax Season Might Be Delayed until March or Later without AMT Patch).

The IRS said it would not process paper tax returns before the anticipated Jan. 30 opening date. 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 best option for taxpayers is to file electronically,” Miller said.

The opening of the filing season follows passage by Congress of an extensive set of tax changes in ATRA on Jan. 1, 2013, with many affecting tax returns for 2012. While the IRS worked to anticipate the late tax law changes as much as possible, the final law required that the IRS update forms and instructions as well as make critical processing system adjustments before it can begin accepting tax returns.

The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.

The IRS said it anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late AMT patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.

The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances.

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IRS Proposes Truncated Taxpayer Identification Numbers to Curb Identity Theft

The Internal Revenue Service has issued proposed regulations to create a new taxpayer identifying number known as the IRS Truncated Taxpayer Identification Number, or TTIN, that can be used instead of a Social Security number in response to the growing problem of identity theft-related tax fraud.

The TTIN would provide an alternative to using a Social Security number (SSN), Individual Taxpayer Identification Number (ITIN), or IRS Adoption Taxpayer Identification Number (ATIN). The filer of certain information returns would be able to use a TTIN on the corresponding payee statements to identify the individual being furnished a statement. The TTIN would display only the last four digits of an individual’s identifying number and is shown in the format XXX-XX-1234 or ***-**-1234.

The IRS has been struggling to curb identity theft. From 2008 through the middle of 2012, the IRS identified more than 600,000 taxpayers who have been affected by identity theft. Last tax season, the IRS added filters to its system to check for signs of identity theft, stop suspicious tax returns and contact the taxpayer before the return is processed, but that in turn led to delayed tax refunds for millions of taxpayers (see Fraudulent Tax Refund Attempts Caused Delays for Legitimate Taxpayers in 2012). The IRS has also enhanced the use of Identity Protection Personal Identification Numbers for identity theft victims.

In 2011 the IRS protected $1.4 billion in refunds from being erroneously sent to identity thieves, according to the IRS Advisory Council. Through mid-April 2012, the IRS had stopped over 325,000 questionable returns with $1.75 billion in claimed refunds using filters specifically targeting refund fraud.

However, the impact of identity theft on tax administration is significantly greater than the amount the IRS detects and prevents, according to the Treasury Inspector General for Tax Administration. TIGTA’s analysis of tax returns using characteristics of IRS-confirmed identity theft has identified approximately 1.5 million tax returns with potentially fraudulent tax refunds totaling in excess of $5.2 billion. TIGTA estimates that the IRS could potentially issue $21 billion in fraudulent tax refunds over the next five years as a result of identity theft.

The IRS’s proposed regulations would affect the filers of certain information returns who will be permitted to identify an individual payee by use of a TTIN on the payee statement furnished to the individual, and those individuals who receive payee statements containing a TTIN. The TTIN can be used in payee statements on 1099, 1098 and 5498 series forms, except for the 1098-C. The IRS has already begun testing the use of the TTIN under a 2011 pilot program.

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IRS’s Level of Taxpayer Service Continues to Decline

The Internal Revenue Service faced challenges last tax season providing telephone service to taxpayers and responding to their correspondence, continuing the negative trends in recent years despite some efficiency gains and efforts to improve service, according to a new report by the Government Accountability Office.

In 2012, 82 percent of individual taxpayers filed their returns electronically, reducing the IRS’s processing costs. The IRS also increased calls answered using automated service and added a variety of self-service tools that helped provide greater efficiency.

However, the IRS’s level of telephone service (the percentage of callers seeking live assistance who receive it) declined to 68 percent. In addition, of the 21 million pieces of paper correspondence received by the IRS, approximately 40 percent were considered overage (meaning that IRS did not respond within 45 days of receipt), an increase compared to last year.

While the IRS plans to continue to pursue efficiency gains, its strategy for future years does not specifically address how it plans to reverse these negative trends. Reversing the declines in telephone and correspondence services may require the IRS to consider difficult tradeoffs, the GAO report noted, such as reassessing which phone calls the IRS should answer with a live assistor and which it should not because automated services are available.

The tax filing season is an enormous undertaking, the GAO report acknowledged. The IRS needs to process millions of tax returns, issue billions of dollars in refunds, and provide service to millions of taxpayers over the phone, online and face-to-face. The IRS also needs to identify taxpayers who owe additional taxes and begins the process of collecting their balance due.

The GAO identified approximately 3.8 million returns in which taxpayers self-acknowledged a total balance due of $13.8 billion for tax year 2010, the most recent data available. During the IRS’s notice phase, when the agency sends letters to taxpayers informing them how to pay the balance, the majority of this amount is either fully paid or accounted for through installment agreements.

However, at least $4.4 billion remained uncollected after the IRS sent as many as four notices to taxpayers. These amounts become subject to more costly collection actions, such as phone calls or face-to-face contact.

Best practices, such as risk-based approaches in which contacts are tailored to the taxpayer, have helped increase collections in states such as New York and California. The IRS has also developed an analytics plan and uses some risk-based processes to identify which notices taxpayers will receive. But the agency has not yet implemented the plan and management responsibilities are unclear. As a result, the IRS has not tested more advanced risk-based approaches. This may lead to delayed collection of taxpayer debt, higher costs for the IRS, and additional penalties for taxpayers who pay late.

The GAO recommended that the IRS outline a strategy to improve taxpayer service, define appropriate levels of service, and describe how it intends to manage performance declines; clearly define the roles and responsibilities of those reviewing the notice phase; and pilot risk-based approaches for contacting taxpayers who have a balance due.

In response to GAO’s first recommendation, the IRS said it is pursuing several steps to improve service and described its plans to implement the other recommendations.

“While significant gains in taxpayer service and collection of taxes have been achieved, more can be done in some areas noted in your report,” wrote IRS Acting Commissioner Steven T. Miller in a statement. “For example, we are pursuing implementation of Advanced Consolidated Decision Analytics (ACDA), which will apply a risk-based approach to balance due returns, expediting taxpayer contact after the first notice. Successful implementation of ACDA will assist the IRS in collecting taxes due more efficiently and effectively.”

Miller added that the IRS plans to offer better customer service at the IRS by improving contact center efficiency, providing issue resolution alternatives to reduce customer demand, and equipping the workforce with productivity tools.

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Taxpayers Reported Billions in Potentially Erroneous Noncash Charitable Contributions

Approximately 60 percent of taxpayers who claim large-dollar noncash charitable contributions on their returns may not be complying with federal reporting requirements, according to a new report, with potentially erroneous contributions estimated at $3.8 billion in 2010.

 

The report, from the Treasury Inspector General for Tax Administration, found that the Internal Revenue Service is not ensuring that taxpayers are complying with reporting requirements for claiming noncash charitable contributions. An estimated 273,000 taxpayers claimed approximately $3.8 billion in potentially erroneous noncash charitable contributions in tax year 2010, which resulted in an estimated $1.1 billion reduction in tax.

“Taxpayers can generally deduct noncash charitable contributions made to qualifying organizations during the tax year on their Federal tax returns,” said TIGTA Inspector General J. Russell George in a statement. “However, taxpayers who do not comply with the reporting requirements for noncash contributions could be incorrectly reducing their tax liabilities and receiving tax refunds to which they are not entitled,” he added.

Taxpayers who donate motor vehicles must attach a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to their tax returns. However, the IRS is still not effectively identifying taxpayers who are not complying with reporting requirements for donations of motor vehicles.

TIGTA made six recommendations for improvement to the IRS. IRS management agreed with three of the six recommendations, and partially agreed with one.

“We agree with a number of recommendations in the report and continue to make improvements in this area,” wrote Peggy Bogadis, commissioner of the IRS’s Wage and Investment Division. “For example, we agree with your recommendation to clarify reporting instructions provided to taxpayers who are required to complete and submit Form 883, Noncash Charitable Contributions. Additionally, we also agree to expand our procedures used to process tax returns claiming noncash contributions to ensure that we initiate correspondence to obtain missing Forms 8283 and/or qualified appraisals before the applicable charitable contribution is allowed.”

However, Bogadis pointed out that that TIGTA’s analysis of tax return data for 507 accounts identified only 55 returns, or 11 percent, with missing documentation. She noted that Math Error Authority is limited by the Tax Code, so the majority of cases that were identified do not fall under the IRS’S Math Error Authority and need to be addressed through deficiency procedures.

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IRS Offers Simpler Option for Calculating Home Office Tax Deduction

The Internal Revenue Service plans to introduce a simplified way for small business owners and home-based employees to claim the home office tax deduction.

 

Small business owners and employees who work from home and who maintain a qualifying home office will be able to deduct up to $1,500 per year.  The new option allows qualified taxpayers to deduct annually $5 per square foot of home office space on up to 300 square feet, for as much as $1,500 in deductions.  To take advantage of the new option, taxpayers will complete a much simpler version of the current 43-line form.

The new simplified option will be available starting with the 2013 return that most taxpayers file early in 2014.

The IRS anticipates taxpayers will be able to save more than 1.6 million hours per year in tax preparation time from this simpler calculation method. The effort was described by Deputy Treasury Secretary Neal S. Wolin and SBA Administrator Karen Mills as part of the ongoing efforts by the Obama administration to reduce paperwork burdens.

“The announcement builds on the President’s commitment to streamline and simplify the tax code for small businesses and to reduce the burden for tax compliance,” they wrote. “It is part of broader efforts to make interacting with the federal government easier and more efficient for businesses of all sizes.”

The new option for the home office deduction will be available starting with the tax year 2013 return, according to Mills and Wolin, which most taxpayers file early in 2014. In addition, the IRS is accepting comments for improving upon this new option.

Current restrictions on claiming the home office deduction, such as the requirement that a home office be used regularly and exclusively for business and the limit on the amount of the deduction tied to income derived from the particular business, will still apply under the new option.

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Instead of filling out the 43-line Form 8829, which often entails complex calculations of allocated expenses, depreciation and carryovers of unused deductions, taxpayers can claim the optional deduction through a significantly simplified form.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller in a statement. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

While homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions do not need to be allocated between personal and business use, as is required under the traditional method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees, are still fully deductible, the IRS noted.

Further details on the new option can be found in Revenue Procedure 2013-13, posted Tuesday on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after January 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

• E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.

• Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

• Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.

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Will the Fiscal Cliff Lead to Fiscal Theft?

The Internal Revenue Service stated on Tuesday that they will begin processing individual tax returns on Jan. 30, 2013, marking the official beginning of “tax season” for tax professionals.

However, some returns, including those containing “residential energy credits, depreciation or general business credits” will not be ready for processing until late February or early March (see IRS Delays Tax Season until End of January). In fact, there are at least 30 forms affected by this particular delay, according to the IRS Web site.

This could result in making tax return identity theft an epidemic problem. Accounting Today has covered tax return identity theft extensively, and this practitioner has, as recently as Wednesday morning, been on television advising viewers that the best defense is a strong offense (i.e., file as early as possible!). Practitioners and taxpayers are subject to accuracy related rules (in addition to signing under the pains and penalties of perjury) and are thus forced to wait for forms to be ready for IRS processing before actually filing. That is a tremendous disadvantage that doesn’t exist for tax return identity thieves.

Tax return identity thieves just need to file. No waiting for Form 4562 or any of the other 30 or so forms causing this delay. The concept of the “accurate tax return” isn’t on the mind of an identity thief. And this issue clearly wasn’t on the minds of Washington lawmakers when the fiscal cliff negotiations were in process. In addition to delaying the IRS, the effects of the Washington delay may also put more taxpayers at risk of tax return identity theft.

As practitioners, many of us have been at the forefront of communicating the concerns of tax return identity theft to the public. Although this practitioner hasn’t personally experienced a client being subject to identity theft, we’ve nonetheless been advocates for filing early for the 2012 tax return filing season. In fact, it’s our responsibility to not only warn our clients of the potential for tax return identity theft, but to also advise them as to what measures we have taken, as custodians of their very private information, to ensure that such information is secure, at least within our control.

Taxpayers are advised to become more and more diligent in the selection of a paid preparer, and it’s important for practitioners to know what the public is being told:

• Avoid practitioners who charge a fee, but refuse to sign a tax return.

• Avoid practitioners who charge a fee that is based upon a percentage of the refund. Practitioners may be asked from time to time, in the context of an IRS examination, to furnish copies of invoices for services provided, and one of the primary reasons is for the IRS to review the billing structure.

• Make sure the practitioner is either a CPA or attorney, or otherwise registered with the IRS and holding a valid Preparer Tax Identification Number, or PTIN.

• Finally, taxpayers are advised to ask what steps their tax practitioner has taken, or is taking, to combat identity theft. A practitioner must be able to show a client how their private information, and that of their family, is protected. Further, all of us, frankly, should be asking anyone we do business with who may have our information, exactly what their safeguards are. It is disconcerting to think what could be happening out there, with respect to Mr. and Mrs. Public who couldn’t get financing on the purchase of a used car, for example, and not knowing or even asking what happens with their personal information afterwards.

Avoiding the pitfalls in any of the above categories certainly goes a long way toward giving the public some confidence. And this practitioner believes anyone reading Accounting Today is already “in the choir.” But the truth is, the tax return identity theft epidemic is still with us, and perhaps Washington, in its infinite wisdom, perpetuated the problem through inaction. We will just have to wait and see if dealing with the “fiscal cliff” resulted in Congress dealing the U.S. Treasury a blow with respect to more fiscal theft.

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IRS Issues Inflation Adjustments for Latest Tax Rates

The Internal Revenue Service has released the annual inflation adjustments for 2013, including the tax rate schedules and other tax changes from the recently enacted fiscal cliff legislation with its new tax rate of 39.6 percent and permanently patched Alternative Minimum Tax.

Revenue Procedure 2013-15 provides the 2013 cost-of-living adjustments for inflation for certain items, including the tax tables. It also includes items whose values were specified in the American Taxpayer Relief Act of 2012 (ATRA), such as the beginning of the 39.6 percent income tax brackets; the beginning income levels for the limitation on certain itemized deductions, and the beginning income levels for the phaseout of the personal exemptions.

In addition Rev. Proc. 2013-5 modifies Rev. Proc. 2011-52 to reflect an amendment to Section 132(f)(2) made by ATRA concerning qualified transportation fringe benefits. Specifically, for 2012, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $240.

he tax items for 2013 of greatest interest to most taxpayers include the following changes.

• Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates—10, 15, 25, 28, 33 and 35 percent—remain the same as in prior years. The guidance contains the taxable income thresholds for each of the marginal rates.

• The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.

• The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).

• The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $150,000 ($300,000 for married couples filing jointly). It phases out completely at $211,250 ($422,500 for married couples filing jointly.)

• The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).

• 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 for tax year 2012.

• Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.

• For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

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