News for Tax Professionals
Issue 2017-11
1. Beware of Last-Minute Email Scams
The Internal Revenue Service, state tax agencies and the tax software industry are warning tax professionals and taxpayers of last-minutephishing email scams, especially those requesting last-minute deposit changes for refunds or account updates.
Although the IRS, states and industry have enacted many safeguards against identity theft for 2017, cybercriminals are ever evolving and make use of sophisticated scams to trick people into divulging sensitive data. For example, one new scam poses as taxpayers asking their tax preparer to make a last-minute change to their refund destination, often to a prepaid debit card. The IRS urges tax preparers to verbally reconfirm information with the client should they receive last-minute email request to change an address or direct deposit account for refunds.
For more on cybersecurity and identity theft, visit Protect Your Clients, Protect Yourself.
2. Winter Storm Extension: Many Businesses Have Extra Time to Request Six-Month Extension
The IRS granted many businesses affected by this week’s severe winter storm additional time to request a six-month extension to file their 2016 federal income tax returns. The IRS is providing this relief to victims and tax professionals affected by this week’s storm (known as Winter Storm Stella) that hit portions of the Northeast and Mid-Atlantic.
3. IRS Adopts New Offer in Compromise Policy
The IRS has updated its policy covering Offer in Compromise applications: Applications will now be returned without consideration in instances where the taxpayer has not filed all required tax returns. In such cases, the application fee will be returned and any required initial payment submitted with the Offer will be applied to outstanding tax debt. This update is reflected on the Offer in Compromise page on IRS.gov and the newly updated Offer in Compromise Booklet (Form 656-B) available March 27.
4. IRS Updates Allowable Living Expense Standards for 2017
The 2017 updates to the Allowable Living Expense (ALE) standards will be available March 27. Use the ALE Standards to reduce subjectivity in determining what a taxpayer may claim as basic living expenses necessary to avoid undue hardship when the taxpayer must delay full payment of a delinquent tax. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas.
More information on the ALE standards and the collection process is available at Collection Financial Standards and Collection Procedures for Taxpayers Filing or Paying Late.
5. Technical Guidance
Revenue Ruling 2017-08 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by Section 1274.
The rates are published monthly for purposes of sections 42, 382, 412, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code.
Notice 2017-21 provides for adjustments to the limitation on housing expenses for purposes of section 911 of the Internal Revenue Code. These adjustments are made on the basis of geographic differences in housing costs relative to housing costs in the United States. Further, if the limitation on housing expenses is higher for taxable year 2017 than the adjusted limitations on housing expenses provided in Notice 2016-21, qualified taxpayers may apply the adjusted limitations for taxable year 2017 to their 2016 taxable year.
Revenue Procedure 2017-26 provides a waiver for the time requirements for individuals electing to exclude their foreign earned income who must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. Rev. Proc. 2017-26 adds South Sudan for tax year 2016 for which the minimum time requirements are waived. Generally, U.S. citizens or resident aliens living and working abroad are taxed on their worldwide income. However, if their tax home is in a foreign country and they meet either the bona fide residence test or the physical presence test, they can choose to exclude from their income a limited amount of their foreign earned income ($101,300 for 2016). Both the bona fide residence test and the physical presence test contain minimum time requirements.