Senate panel advances IRS commissioner and introduces IRS reform bill

A closely divided Senate Finance Committee advanced the nominee for the next Internal Revenue Service commissioner, Charles Rettig, by a vote of 14 to 13, but he awaits a vote by the full Senate.

Rettig is a tax attorney at the Beverly Hills law firm Hochman, Salkin, Rettig, Toscher & Perez, P.C. who has spent most of his career representing clients before the IRS. If he is confirmed by the full Senate, he would succeed acting commissioner David Kautter, who is also the Assistant Secretary of the Treasury for Tax Policy. Kautter has been acting commissioner since the end of John Koskinen’s term last November. Rettig would be coming in at a time when the IRS is dealing with the massive tax cuts law that Congress passed last December.

“For the IRS to implement the biggest tax overhaul in a generation, it is essential that the agency is fully staffed and led by a strong, capable commissioner,” said Senate Finance Committee chairman Orrin Hatch, R-Utah, in a statement. “The job of commissioner is further complicated by years of mistrust and scandals at the agency. Chuck Rettig is the right pick to both implement tax reform and restore trust in the IRS. I am pleased that the committee advanced his nomination, and I look forward to the Senate acting quickly on his nomination so he can get started on the hefty tasks he will be charged with as the agency’s leader.”

However, Democrats on the committee voted against confirming Rettig, in part as a protest against the IRS and the Treasury Department’s decision this week to let 501(c)4 tax-exempt organizations, such as political action groups, avoid listing the names of their donors (see Many political tax-exempts no longer required to report donors).

“The Trump administration has taken a qualified nominee and dumped him right in the middle of a dark-money political firestorm of their own creation,” said Sen. Ron Wyden, D-Ore., the ranking Democrat on the committee. “And a radical change in tax law regarding transparency and disclosure has dragged the IRS and Treasury into a swirling set of questions about the president’s foreign financial ties and motivations. As a result, this nomination is no longer an isolated debate that can begin without context.”

Despite their differences, Hatch and Wyden agreed to introduce bipartisan legislation Thursday aimed at reforming some of the IRS’s administrative practices, echoing legislation that already passed the House in April.

The Taxpayer First Act is also based on two 114th Congress bills (S. 3156 and S. 3157) that passed the Finance Committee unanimously in 2016. It aims to increase taxpayer protections and electronic filing; enhance whistleblower protections; reform policies concerning IRS employees; increase scrutiny of IRS audit criteria; and support prevention of identity theft and tax refund fraud.

“Ensuring the IRS has greater flexibility and bringing it into the 21st century continues to be a top priority – especially with the largest rewrite of the tax code in more than three decades on the books,” Hatch said in a statement. “We’ve been working hand in glove with the administration to ensure a proper and seamless implementation of new policies and are confident this bill will streamline the agency in a way that protects taxpayers from fraud and abuse, increases electronic filing and supports IRS employees.”

“With every passing day there’s a new headline about hackers and crooks stealing taxpayer dollars and personal data,” Wyden stated. “Congress must do more to protect American taxpayers from fraud and financial abuse. This bipartisan legislation will make common-sense changes to help taxpayers and streamline administrative rules at the IRS, which will allow tax officials and agents to better safeguard the American people against financial predators.”

EITC due diligence warnings on the way

Preparers who filed returns claiming the Earned Income Tax Credit but who possibly fell short of due diligence requirements will soon receive IRS Letter 4858, “Alert to Return Preparers Related to EITC Claims.”

In response to concerns about fraudulent or mistaken EITC claims, over the past few years the IRS has been putting more of a burden on tax preparers to vet their clients more carefully, including filling out Form 8867, “Paid Preparer’s Due Diligence Checklist.”

https://www.eitc.irs.gov/tax-preparer-toolkit/preparer-due-diligence/consequences-of-failing-to-meet-your-due-diligence) for preparers ranging generally from $500 to $5,000.

IRS instructions for preparers who receive the notice include: “Review your office procedures to make sure you meet all four due diligence requirements. If you receive this letter, we will continue to monitor the refundable credit returns you prepare.”

The Tax Preparer Toolkit on IRS.gov has more information on due diligence requirements.

Consejos de impuestos para extranjeros residentes y no residentes

Incluso si no eres un ciudadano estadounidense, si vives en los Estados Unidos o pasas una cantidad significativa de tiempo allí, todavía tienes que pagar el impuesto sobre la renta de EE.UU.

Extranjero residente o no residente

El IRS (siglas en inglés para Servicio de Impuestos Internos) usa dos pruebas, la prueba de la tarjeta verde y la prueba de presencia sustancial, para evaluar tu estado de extranjero. Si cumples con los requisitos de cualquiera de ellos, se te considera un extranjero residente para efectos fiscales, de lo contrario, te tratan como un extranjero no residente.

Si eres un extranjero con una tarjeta de residencia, es decir, cuando el Servicio de Inmigración y Ciudadanía de los Estados Unidos te permiten residir legalmente en el país, eres un extranjero residente. Sin embargo, si no tienes una tarjeta de residencia y pasas al menos 31 días en los EE.UU. durante el año fiscal en curso y un total de 183 días, durante los tres últimos años fiscales (incluido el año fiscal en curso), lo más probable es que satisfagas el requisito de presencia física y también te traten como un extranjero residente.

Contando 183 días

Al contar el número de días que estás presente en los EE.UU. durante el período de tres años, no tienes que incluir cada día. En su lugar, cuenta sólo una fracción de los días en dos de los tres años. Supongamos, por ejemplo, que estás tratando de averiguar tu estado para el año fiscal 2017, ya que viviste en los EE.UU. por 60 días. Cuenta los 60 días para 2017, un tercio de los días en el 2016 y una sexta parte de los días en el 2015. Por lo tanto, si estuvieras en los EE.UU. durante 120 días en 2016 y 180 días en 2015, sólo incluye 40 días para 2016 y 30 días en 2015, con el total para el período de tres años, siendo 130 días. En este escenario, se paga impuesto a los ingresos como un extranjero no residente.

Además, no se tienen en cuenta los días en que están presentes físicamente en los EE.UU. bajo las siguientes circunstancias:

Días que te desplazas para trabajar en los Estados Unidos a partir de una residencia en Canadá o México, si regularmente viajas desde Canadá o México.

Días que estás en los Estados Unidos por menos de 24 horas cuando estás en tránsito entre dos lugares fuera de los Estados Unidos.

Días que estás en los Estados Unidos como un miembro de la tripulación de un buque extranjero.

Días que no puedes salir de los Estados Unidos debido a una condición médica que surgió durante tu estadía.

Días que eres un "individuo exento".

Un "individuo exento" para los propósitos de este ensayo se refiere a las siguientes personas:

Un individuo temporalmente presente en los Estados Unidos como un individuo de un gobierno extranjero en virtud de una visa "A" o "G".

Un maestro o aprendiz temporalmente en los Estados Unidos bajo una visa "J" o "Q", que cumple sustancialmente con los requisitos de la visa.

Un estudiante temporalmente en los Estados Unidos bajo una visa "F", "J", "M" o "Q", que cumple sustancialmente con los requisitos de la visa.

Un atleta profesional temporalmente en los Estados Unidos para competir en un evento deportivo de caridad.

Impuestos a los residentes extranjeros

Como residente legal de EE.UU., estás sujeto a las normas fiscales de los ciudadanos estadounidenses. Esto significa que tienes que reportar todos los ingresos que ganas en las declaraciones de impuestos anuales, con independencia del país en el que lo ganas. Al preparar tu declaración, siempre puedes utilizar el 1040, o si eres elegible, el 1040A o el 1040EZ.

Impuestos a los no residentes

Un no residente también debe pagar impuestos a los ingresos al IRS, pero sólo en el ingreso que está vinculado efectivamente a los EE.UU., que generalmente incluye el dinero que gana, mientras está en los EE.UU. Sin embargo, el IRS, no tiene autoridad para imponer impuestos sobre los ingresos que los no residentes ganan en sus países de origen o en cualquier país extranjero para este caso. Al preparar tu declaración de impuestos de los EE.UU., debes usar el Formulario 1040NR o uno más corto como el 1040NR-EZ, si eres elegible. Independientemente de la forma que utilices, sólo informarás de las cantidades que se consideran ingresos de fuente estadounidense. Al igual que los extranjeros residentes y ciudadanos estadounidenses, hay deducciones y créditos que puedes reclamar para reducir tu ingreso gravable.

Doble condición de los contribuyentes

En el año de transición entre ser un no residente y un residente para efectos fiscales, se considera en general un Contribuyente en Estado Dual. Un Contribuyente en Estado Dual presenta dos declaraciones de impuestos para el año, una declaración para la porción del año que fue considerado un no residente y otra por la porción del año considerado residente. En algunas situaciones, el contribuyente puede optar por ser tratado como residente durante todo el año en el año de transición para evitar tener que presentar dos declaraciones separadas.

Filing season begins Jan. 29

Filing season will begin on Monday, Jan. 29, the Internal Revenue Service announced.

The final tax deadline will be Tuesday, April 17. (April 16 is Emancipation Day, a legal holiday in Washington, D.C.). The IRS expects nearly 155 million individual returns to be filed in 2018.

In 2017, the IRS began accepting returns on January 23; it set the date at January 29 this year to make sure that its key processing systems are ready, and to give it time to determine how late December’s Tax Cuts and Jobs Act will impact tax returns.

Many tax professionals and tax preparation chains will begin preparing returns before January 29, and many software companies are planning to accept them and then submit the returns when IRS systems open. Although the IRS will begin accepting both electronic and paper returns on January 29, paper returns will start to be processed later in mid-February as system updates continue. 

The IRS said that it expects to issue more than 90 percent of refunds in less than three weeks, but did not that it legally cannot issue refunds claiming the Earned Income Tax Credit and the Additional Child Tax Credit before mid-February.

IRS adjusts due dates for partnerships

The Internal Revenue Service has issued a notice providing more time for partnerships, real estate mortgage investment conduits and some other types of businesses to file their returns.

Notice 2017-71 provides that any act performed for the 2016 taxable year of a partnership, REMIC, or certain other entities will be treated as timely for all purposes under the Tax Code, except with respect to interest, if the act would have been timely if the Surface Transportation Act had not changed the due date for partnership returns.

The 2015 legislation had accelerated the due date to March 15 for filing partnership returns and issuing K-1 schedules to partners instead of the traditional due date of April 15. However, the bill provoked objections and in September the IRS issued guidance providing penalty relief for some types of partnerships that didn’t file the required returns by the new due date for tax years beginning in tax year 2016. The new notice appears to expand that relief to REMICs.

A REMIC isn’t a partnership, the IRS noted, but under Section 860F(e) of the Income Tax Regulations it’s generally treated as a partnership for purposes of the Tax Code. For example, the due date and availability of an extension of time for filing a REMIC’s annual return are determined as if it were a partnership. As a result, the new due date also applies to the returns of a REMIC for taxable years beginning after Dec. 31, 2015.

A partnership can get a six-month extension of time to file Form 1065, 1065-B, or 8804, and a REMIC can receive a six-month extension to file Form 1066, by filing Form 7004, “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns,” by the statutory due date. A partnership that receives an extension of time to file Form 1065 receives a concurrent extension to furnish its partners with Schedules K-1. Also, a partnership that receives an extension of time to file Form 8804 receives a concurrent extension of time to file Forms 8805 and to furnish copies of the forms to its partners. The six-month extension can apply to additional returns that a partnership may be required to file by the due date of its Form 1065 or 1065-B, but that doesn’t affect the due date for a partnership to furnish partners with K-1 schedules. 

An entity that fails to timely meet its obligations to file and furnish returns is still subject to penalties, the IRS cautioned, including those that fail to file Forms 1065, 1065-B, 1066, 8804 and 8805 by the due date.

Properly classifying workers remains a major problem

Worker misclassification is a perennial issue for the Internal Revenue Service and state taxing authorities due to the perception that many employers are not properly classifying their workers.
By avoiding labeling their workers as employees, employers also avoid paying minimum wages, overtime, payroll taxes, worker’s compensation, unemployment, Social Security contributions, health benefits, paid leave, 401(k) benefits and unpaid leave under the Federal Family and Medical Leave Act. 

And workers have some benefits to being considered independent contractors, such as the ability to deduct certain business expenses that are not available to employees, the ability to set up their own retirement plans, and the fact that they are not subject to withholding. Of course, many workers want to be considered employees so they can get the benefits due to employees, such as vacation pay, overtime pay and health insurance.

It’s easy for an accountant to make a mistake because there is no bright-line test to judge whether a worker is an employee or an independent contractor. 

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