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In This Issue of NSAlert:
IRS Announces Changes To E-Services Login Procedure
The IRS has announced that, effective October 24, e-services users will be required to re-register using the Secure Access authentication process. This is part of the effort to combat identity theft and reduce fraudulent tax refunds.
Anyone who currently has an e-services account is affected by this change. This includes individuals who are registered as: Electronic Return Originators, Transmitters, Large Business Taxpayers with e-file mandates, Software Developers, ACA insurance provider fee/Branded prescription drug filers, ACA Information Return Transmitter/Issuer, Reporting agents, Not for Profit (VITA/TCE/LITC) users, States that use Transcript Delivery Service, and IVES Participants. E-services account holders who only use TIN Matching will also need to validate their identity. However, because there is no exchange of sensitive data, these users will have a more streamlined process.
Important Note: After you successfully register and each time you return to e-services, you will be required to enter your credentials (username and password) AND a security code that will be sent as a text to your mobile phone. This is a two-factor authentication protection. Currently, as you know, the IRS often warn e-services users of phishing emails from criminals seeking to steal your username and password. With two-factor authentication, your credentials alone are not enough to enter the system.
As mentioned above, the key component of the change is the move to the two-step Secure Access identity verification process. Users must validate their identities through this process before they can access their accounts. The verification process will involve questions related to financial records such as the name of the entity from which you lease your car, or the bank that holds your home mortgage. In addition, the IRS will send an account activation code to a mobile phone or, at your request, by mail.
The IRS has provided the following information to help ease the transition to the Secure Access system:
Here's what new users need to get started:
- A readily available email address;
- Your Social Security number;
- Your filing status and address from your last-filed tax return;
- Your personal account number from a:
-
- credit card, or
- home mortgage loan, or
- home equity (second mortgage) loan, or
- home equity line of credit (HELOC), or
- car loan
(The IRS does not retain this data)
- A readily available mobile phone. Only U.S-based mobile phones may be used. Your name must be associated with the mobile phone account. Landlines, Skype, Google Voice or similar virtual phones as well as phones associated with pay-as-you-go plans cannot be used;
- If you have a "credit freeze" on your credit records through Equifax, it must be temporarily lifted before you can successfully complete this process.
Because this process involves verification using financial records, there may be a "soft inquiry" placed on your credit report. This notice does not affect your credit score. The IRS does not retain your financial account information.
Note: If you have a pay-as-you-go mobile phone or a business/family plan mobile phone not associated with your name, you may request that we mail an activation code to the address we have on file for you. You still must have a text-enabled, U.S.-based phone to receive a security code text that completes the validation process and allows returning users to access their accounts.
First-time users of any Secure Access-supported tool must:
- Submit name and email address to receive a confirmation code;
- Enter the emailed confirmation code;
- Provide SSN, date of birth, filing status and address on the last filed tax return;
- Provide some financial account information for verification such as the last eight digits of their credit card number or car loan number or home mortgage account number or home equity (second mortgage) loan number;
- Enter a mobile phone number to receive a six-digit activation code via text message OR request an activation code by mail (see below);
- Enter the activation code sent to mobile phone;
- Create username and password, create a site phrase and select a site image.
First-time users who opt for an Activation Code by Mail must:
- Select Activation Code by Mail when prompted;
- Create username and password, create a site phrase and select a site image;
- Allow 5 to 10 days for mail delivery of the activation code;
- Return to the self-help tool and enter your username and password;
- Enter the activation code at the prompt;
- Enter number for any type of text-enabled phone at the prompt; this may include a pay-as-you-go mobile phone or a business/family plan mobile phone not associated with your name
- Check phone for a security code text;
- Enter the security code text at the prompt to complete the Secure Access validation process.
Returning users with existing credentials but new to Secure Access must:
- Log in with an existing username and password;
- Submit financial account information for verification, for example, the last eight digits of a credit card number or car loan number or home mortgage account number or home equity (second mortgage) loan account number;
- Submit a mobile phone number to receive an activation code via text OR request an activation code by mail (see above);
- Enter the activation code.
Returning users who previously completed the Secure Access process must:
- Log in with an existing username and password;
- Receive a security code text via mobile phone provided during account set up;
- Enter the security code into secure access.
Starting October 24, the IRS will temporarily add additional assistors to the e-Help Desk to provide assistance as needed. The assistors may be able to validate an existing user's identity over the phone. If the assistor can complete this process, they will generate an activation code and send it by mail. Once you receive the activation code by mail which will take five to 10 calendar days, you will be able to complete the registration process.
FASB Proposes Four Minor Revenue Fixes
The Financial Accounting Standards Board has proposed four minor amendments to clarify ambiguities in applying the 2014 revenue recognition standard, which takes effect for most entities after Dec. 15, 2017.
The proposed clarifications would:
- state that loan guarantee fees are governed by the accounting standard on guarantees and not revenue recognition;
- clarify when some receivables can be recorded before their due date;
- explain that a refund liability isn't a contract liability; and
- reinstate guidance on the accrual of advertising costs.
The proposals "are not expected to have a significant effect on current accounting practice or create a significant administrative cost for most entities," FASB said.
FASB said it wants comments on its proposal, Technical Corrections and Improvements to ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), submitted by Oct. 4, 2016. A copy of ASU 2014-09 is available here.
IRS Office Of Professional Responsibility Announces Sanctions
The IRS Office of Professional Responsibility on September 19 released the names of practitioners subject to recent disciplinary actions and the specific misconduct involved in each case.
Announcement 2016-26 lists attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents and appraisers sanctioned by OPR, along with the effective dates of the disciplinary actions described.
The IRS said disbarment or suspension from practice, censure and monetary penalties are among the sanctions to be imposed for violation of the rules. OPR's periodic disciplinary sanction announcements include an entry for each individual sanctioned that provides a brief description of the misconduct and the relevant section number of Circular 230.
A copy of Announcement 2016-26 is available here.
S Corp Division, Tax-Free Transplant Flights Among PLR Items
The IRS has released a private letter ruling in which it considered the impact of a proposed reorganization on a corporation's S election
In the ruling, PLR 201638004 available here, the Service considered a plan where members of a limited liability company, which has made an S election, will contribute their interests to a newly formed LLC in exchange for its equity units; the original LLC will then elect to be a disregarded entity or qualified Subchapter S subsidiary for federal tax purposes, as the new LLC expects to continue the original S election.
The existing LLC will distribute assets comprising the business line to be retained to the new LLC in a transaction expected to be disregarded for tax purposes. The new LLC will then contribute all equity in the original LLC to a second newly formed LLC; equity units in that LLC will be distributed pro rata to members in a transaction intended to qualify under Section 355. The distributed LLC will ultimately elect S corporation treatment in its own right, so that the members of the original LLC ultimately own all of the equity of two new S corporations, each holding one business line.
The Service considered only the initial steps in the proposed transaction, in which the first new LLC is formed and funded, followed by the original LLC's disregarded entity election. It held that the remaining steps in the restructure will be disregarded for purposes of determining whether the initial steps result in realization of gain or loss under Section 1001 or a reorganization under Section 368(a)(1)(F).
The remaining steps will be treated as a direct transfer of the distributed business line by the first new LLC to the distributed LLC in exchange for all the latter's equity units and the assumption of associated liabilities, followed by the pro rata distribution of those equity units to the new LLC's members, the IRS said. The original LLC's S election won't terminate as a result of the initial steps but continues for the new LLC, the Service said.
Koskinen Calls Impeachment 'Improper' During Hearing, Won't Resign
IRS Commissioner John Koskinen expressed regret that the agency failed to preserve all the information congressional investigators sought in a 2014 probe of the agency, but told members of the House Judiciary Committee that it would be "improper" to impeach him.
Koskinen told the panel he regrets "failings" by himself and IRS staff members related to allegations that the agency destroyed e-mails sought by congressional investigators and that he misled Congress about those records. Koskinen said he didn't try to be misleading. "I responded honestly and in good faith as events unfolded," he said.
The House has not impeached an appointed executive branch official in 140 years, and it has never impeached any official below the rank of cabinet secretary.
NSAlert provided a brief background on the impeachment effort by some members of the House in the issue dated September 9, 2016.
During the hearing, Rep. Jason Chaffetz (R-Utah), who chairs the House Oversight and Government Reform Committee, told Koskinen that he had been frustrated by what he called the commissioner's failure to acknowledge to Congress that his June 2014 testimony was not true. "This is the first time," said Chaffetz said, adding that he believes Koskinen should be held accountable.
Whether the hearing will prevent the House from moving toward impeachment is unclear. Members of the ultra conservative House Freedom Caucus, which had pressed for a faster floor vote, said last week that the hearing would "give every American the opportunity to hear John Koskinen answer under oath why he misled Congress, allowed evidence to be destroyed, and defied congressional subpoenas and preservation orders."
Still, Rep. John Fleming (R-La.), who spearheaded the drive for a floor vote, has said the Freedom Caucus could still try to bring an impeachment resolution to the floor in November "if regular order is not followed through with," referring to the usual manner in which bills make their way to the House floor for votes —that is, by way of consideration by committees of jurisdiction.
It is unclear what the next steps will be, if any, prior to the election.
Reminder: Extension Filers May NEED AGI
The IRS has cautioned that taxpayers who requested extensions to a file tax return may need the adjusted gross income amounts from their 2014 returns to submit the return electronically.
Extension filers should locate their 2014 return or order a tax transcript; the AGI amount is clearly labeled on both documents, the Service said in a new release, IR-2016-124. The extension deadline for filing returns is Oct. 17.
A copy of IR 2016-124 is available here.
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