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Preparer Competency Examination Update – It’s Time to Put In Your 2Cents

Katherman Kitts & Co. LLP Certified Public Accountants

If you want to tell the IRS exactly what you think the content of the competency exam should be, now is the time.  Notice 2011-48 invites comments.

Notice 2011-48 invites public comments on the content and administration of the registered tax return preparer competency examination (competency examination).  The Treasury Department and the Internal Revenue Service have published final regulations (TD 9527, 76 FR 32286) under 31 CFR Part 10 that require certain individuals to pass a competency examination to become a registered tax return preparer.  The IRS has selected a vendor to support the IRS in developing and administering the competency examination for the Form 1040 series tax returns and accompanying schedules.

Notice 2011-48 will be published in Internal Revenue Bulletin 2011-26 on June 27, 2011.

For My Student Followers – an Explanation of IRS Guidance Sent Out Into The Cosmos

Are you looking for some information that will explain all the available IRS guidance sent out into the cosmos?

The following is a list of explanations/definitions should you be interested, need some reading material, or want something to put you to sleep at night.

 

For anyone not familiar with the inner workings of tax administration, the array of IRS guidance may seem, well, a little puzzling at first glance. To take a little of the mystery away, here’s a brief look at seven of the most common forms of guidance.

In its role in administering the tax laws enacted by the Congress, the IRS must take the specifics of these laws and translate them into detailed regulations, rules and procedures. The Office of Chief Counsel fills this crucial role by producing several different kinds of documents and publications that provide guidance to taxpayers, firms and charitable groups.

Regulation

A regulation is issued by the Internal Revenue Service and Treasury Department to provide guidance for new legislation or to address issues that arise with respect to existing Internal Revenue Code sections. Regulations interpret and give directions on complying with the law. Regulations are published in the Federal Register. Generally, regulations are first published in proposed form in a Notice of Proposed Rulemaking (NPRM). After public input is fully considered through written comments and even a public hearing, a final regulation or a temporary regulation is published as a Treasury Decision (TD), again, in the Federal Register.

Revenue Ruling

A revenue ruling is an official interpretation by the IRS of the Internal Revenue Code, related statutes, tax treaties and regulations. It is the conclusion of the IRS on how the law is applied to a specific set of facts. Revenue rulings are published in the Internal Revenue Bulletin for the information of and guidance to taxpayers, IRS personnel and tax professionals. For example, a revenue ruling may hold that taxpayers can deduct certain automobile expenses.

Revenue Procedure

A revenue procedure is an official statement of a procedure that affects the rights or duties of taxpayers or other members of the public under the Internal Revenue Code, related statutes, tax treaties and regulations and that should be a matter of public knowledge. It is also published in the Internal Revenue Bulletin. While a revenue ruling generally states an IRS position, a revenue procedure provides return filing or other instructions concerning an IRS position. For example, a revenue procedure might specify how those entitled to deduct certain automobile expenses should compute them by applying a certain mileage rate in lieu of calculating actual operating expenses.

Private Letter Ruling

A private letter ruling, or PLR, is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s specific set of facts. A PLR is issued to establish with certainty the federal tax consequences of a particular transaction before the transaction is consummated or before the taxpayer’s return is filed. A PLR is issued in response to a written request submitted by a taxpayer and is binding on the IRS if the taxpayer fully and accurately described the proposed transaction in the request and carries out the transaction as described. A PLR may not be relied on as precedent by other taxpayers or IRS personnel. PLRs are generally made public after all information has been removed that could identify the taxpayer to whom it was issued.

Technical Advice Memorandum

A technical advice memorandum, or TAM, is guidance furnished by the Office of Chief Counsel upon the request of an IRS director or an area director, appeals, in response to technical or procedural questions that develop during a proceeding. A request for a TAM generally stems from an examination of a taxpayer’s return, a consideration of a taxpayer’s claim for a refund or credit, or any other matter involving a specific taxpayer under the jurisdiction of the territory manager or the area director, appeals. Technical Advice Memoranda are issued only on closed transactions and provide the interpretation of proper application of tax laws, tax treaties, regulations, revenue rulings or other precedents. The advice rendered represents a final determination of the position of the IRS, but only with respect to the specific issue in the specific case in which the advice is issued. Technical Advice Memoranda are generally made public after all information has been removed that could identify the taxpayer whose circumstances triggered a specific memorandum.

Notice

A notice is a public pronouncement that may contain guidance that involves substantive interpretations of the Internal Revenue Code or other provisions of the law. For example, notices can be used to relate what regulations will say in situations where the regulations may not be published in the immediate future.

Announcement

An announcement is a public pronouncement that has only immediate or short-term value. For example, announcements can be used to summarize the law or regulations without making any substantive interpretation; to state what regulations will say when they are certain to be published in the immediate future; or to notify taxpayers of the existence of an approaching deadline.

IRS Patrol: IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers (Optional Reporting of the Cost of Health Coverage in 2011)

 

Engraving of the U.S. Treasury building in 1804.

engraving of the US Treasury building in 1804

 

Stacie says:  Doesn’t good news come in three’s?  Well here is good news number two for the day – the IRS announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan.  The reporting is now optional in 2011.

WASHINGTON — The IRS today issued a draft Form W-2 for 2011, which employers use to report wages and employee tax withholding. The IRS also announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.  The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.

The IRS Announces: No More Paper Coupons It’s Time to Learn How To Use EFTPS

Treasury Department official, surrounded by pa...

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Stacie Clifford Kitts, CPA

It’s time for those taxpayers who are fighting the electronic age to step it up.  The IRS today issued proposed Regs to discontinue the use of paper coupons as early as next year.  If you try to send in a paper coupon after December 31, 2010, there wont be anyone at the Treasury Department to process it.  More information about the proposed Regs is presented below:

Proposed Regulations Expand the Use of Electronic Payment System and Discontinue Paper Coupons Next Year

Consistent with a Financial Management Service initiative announced in April of this year, the IRS today issued proposed regulations to significantly increase the number of electronic transactions between taxpayers and the federal government.

The proposed regulations (REG 153340-09) would eliminate the rules for making federal tax deposits by paper coupon because the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010.  The proposed regulations generally maintain existing rules for depositing federal taxes through the Electronic Federal Tax Payment System (EFTPS).

Using EFTPS to make federal tax deposits provides substantial benefits to both taxpayers and the government.  EFTPS users can make tax payments 24 hours a day, seven days a week from home or the office.

Deposits can be made online with a computer or by telephone.  EFTPS also significantly reduces payment-related errors that could result in a penalty.  The system helps taxpayers schedule dates to make payments even when they are out of town or on vacation when a payment is due.  EFTPS business users can schedule payments up to 120 days in advance of the desired payment date.

Information on EFTPS, including how to enroll, can be found at EFTPS website or by calling EFTPS Customer Service at 1-800-555-4477.

Some businesses paying a minimal amount of tax may make their payments with the related tax return, instead of using EFTPS.  More details regarding taxes required to be deposited using EFTPS, dollar thresholds and other specific requirements are in the proposed regulations.

Additional Information:

  • Publication 4132, which explains the process of enrolling and paying via the Internet
  • Publication 966, The Secure Way to Pay Your Federal Taxes for Businesses and Individuals
  • Publication 4169, Tax Professional Guide to Electronic Federal Tax Payment System
  • Publication 4320, EFTPS Toolkit, which contains PDF(s) and descriptions of EFTPS educational materials and their intended target audience, and is for use by tax professionals and financial institutions to assist in educating their clients on the benefits of EFTPS.
  • Publication 4275, Express Enrollment for New Businesses
  • Electronic Payment Options Home Page
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