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In This Issue of NSAlert:
Is Your Tax Software Logging You Out "For Your Convenience"?
Numerous tax professionals have complained that the new security features of their tax software logs them out even when they are busy working at their computer. Are you having this issue?
Tax professionals typically login to their tax software at the beginning of the day and logout when they leave the office at night. However, they may also be working on a number of other applications during the day - spreadsheet, file folders, etc., IRS website, etc. The tax software will logout automatically if the preparer has not been making entries into the software application for 30 minutes even though the computer has been actively used in the other applications.
Making matters worse, the new security features in most tax software packages also have an "I am not a robot" step in the login process. This step, for example, requires the user to tell the software which of nine, or twelve, pictures have a particular feature – flowers, numbers, buildings, houses, etc. This feature, when used as a once per day, in the morning, login may be more manageable for tax professionals than a step that must be successfully navigated multiple times per day because the tax software has performed the 30 minute automatic logout.
NSA will be contacting the IRS Security Summit participants to determine whether this security feature can be modified to more closely conform to the actual working environment where the tax software is used. Specifically, can the tax software be modified to limit the automatic logout, including instances where the computer is actively being used in other applications. It may be that technical considerations will be an issue or privacy matters need to be assessed, but we will ask and will keep you informed on our progress.
New Accounting Guidance Clarifies Definition Of A "Business"
The Financial Accounting Standards Board (FASB) on January 5 issued Accounting Standards Update 2017-01 that clarifies the definition of a business. The FASB said that the ASU affects all companies and other reporting organizations that must determine whether they have acquired or sold a business.
FASB noted that the definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The new standard is intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.
Companies and auditors have voiced concern that the definition of a business "is applied too broadly and that many transactions recorded as business acquisitions are, in fact, more akin to asset acquisitions," FASB Chairman Russell Golden said in a prepared statement. "The new standard addresses this by clarifying the definition of a business while reducing the cost and complexity of analyzing these transactions," he said.
Public companies will have to apply the standard for their reporting covering annual periods starting after Dec. 15, 2017, and interim periods within their fiscal years. The effective date is Jan. 1, 2018, for public companies on a calendar-year reporting schedule. For all other companies and organizations, the accounting standard update is effective for annual periods starting after Dec. 15, 2018, and interim periods within annual periods beginning after Dec. 15, 2019.
A copy of ASU 2017-01 is available here.
IRS Verification Code to Appear on 47.8 Million Forms W-2
About 20 percent of Forms W-2, Wage and Tax Statement issued for tax year 2016 will include a verification code used in a pilot program to fight tax fraud and identity theft, IRS officials have announced.
The code will appear on nearly 47.8 million Forms W-2 for tax year 2016, up from 1.7 million for tax year 2015, according to Scott Mezistrano, representative for industry stakeholder engagement and outreach. The program uses a 16-character alphanumeric code to verify W-2 data on Form 1040, U.S. Individual Income Tax Return. The code will appear on copies B and C of affected forms, he said. Payroll service providers Automatic Data Processing LLC, Ceridian LLC, Intuit Inc., Paychex Inc., Payroll People Inc., PrimePay Inc. and Ultimate Software Group Inc. are among those participating in the pilot, he said.
The code should be entered on the 1040 when using tax-preparation software, so be looking for it.
FASB Proposes New Way To Classify Balance Sheet Debt
The Financial Accounting Standards Board proposed January 11 what it believes a less costly, simpler way for companies to determine whether to classify debt as being due in the near term—meaning current—or long term—noncurrent—in a classified balance sheet.
FASB said that the proposed Accounting Standards Update could result in a shift in the classification of certain debt arrangements between noncurrent liabilities and current liabilities as compared with current balance sheets in the following ways:
- Short-term debt that is refinanced on a long-term basis after the balance sheet date would no longer be classified as a noncurrent liability.
- Companies with debt that contains subjective acceleration clauses would no longer be required to assess the likelihood of acceleration of the due date when determining whether the debt is a noncurrent or current liability.
The proposal would also replace existing, rules-based guidance with an overriding classification principle. The principle would be based on legal terms of the debt agreement and the company's contractual rights as of the balance sheet date. The proposal also includes guidance about the "prominence" with which information about waivers of debt covenant violations should be displayed in financial statements.
Comments on the proposal are due by May 5. A copy of the proposed Accounting Standards Update is available here.
IRS Reminds Tax Professionals To Revalidate Identity For IRS E-Services
The IRS has issued a reminder to tax professionals to recipients of Letter 5903 that time is running out to revalidate your identity in order to continue accessing your IRS e-Services account.
If you received a Letter 5903 from the IRS you MUST revalidate to access your account. Failure to take any action will result in the suspension of your e-Services Registration Account.
You may revalidate your account either online or by telephone. To validate online, you will use Get Transcript Online's Secure Access authentication process. Select "first-time user" and complete the authentication process. To validate by telephone, call the e-Services Help Desk and provide the Unique Security Code from your letter 5903. The IRS has additional personnel staffing the Help Desk. That number is: 866-255-0654.
Help Desk Hours: The e-help Desk will provide extended hours of service only for e-Services users who have received Letter 5903, asking them to validate their identities. Extended hours for the e-Help Desk are:
- Monday thru Friday: 6:30 a.m.- 8:00 p.m. Central Time
- Saturday: 9:00 a.m.- 3:00 p.m. Central Time
- Jan. 16, 2017 Martin Luther King Holiday 9:00am -3:00 p.m. Central Time.
IRS Updates ACA Questions and Answers
Although the incoming Trump Administration has said it will move swiftly to repeal some or all of the Affordable Care Act, it is unclear what effect this may have on the current tax provisions. In any event, tax professionals need to be concerned with current filing requirements for 2016 returns.
To assist in that effort, The IRS has updated three sets of Questions and Answers related to information reporting requirements and shared responsibility provisions for employers. They are now posted on the Affordable Care Act Tax Provisions Questions and Answers page on IRS.gov.
- Information Reporting by Employers on Form 1094-C and Form 1095-C - These Q&As provide additional information about completing Form 1094-C and Form 1095-C for calendar year 2016 that are to be filed in 2017. The Q&As may be used in conjunction with the Instructions for Forms 1094-C and 1095-C, which provide detailed information about completing the forms.
- Reporting of Offers of Health Insurance Coverage by Employers - Certain employers are required to report to the IRS information about whether they offered health coverage to their employees and if so, information about the coverage offered. This information also must be provided to employees. These Q&As address these reporting requirements.
- Employer Shared Responsibility Provisions Under the Affordable Care Act - The Affordable Care Act added the employer shared responsibility provisions under section 4980H of the Internal Revenue Code. These updated Q&As provide information about the employer shared responsibility provisions.
Security Summit Alert: New Two-Stage E-mail Scheme Targets Tax Professionals
The Internal Revenue Service, state tax agencies and tax industry leaders have warned tax professionals to be alert to an email scam from cybercriminals posing as clients soliciting their services.
A new variation of this phishing scheme is targeting accounting and tax preparation firms nationwide. The scheme's objective is to collect sensitive information that will allow fraudsters to prepare fraudulent tax returns.
These latest phishing emails come in typically two stages. The first email is the solicitation, which asks tax professionals questions such as "I need a preparer to file my taxes." If the tax professional responds, the cybercriminal sends a second email. This second email typically has either an embedded web address or contains a PDF attachment that has an embedded web address.
In some cases, the phishing emails may appear to come from a legitimate sender or organization (perhaps even a friend or colleague) because they also have been victimized. Fraudsters have taken over their accounts to send phishing emails.
The tax professional may think they are downloading a potential client's tax information or accessing a site with the potential client's tax information. In reality, the cybercriminals are collecting the preparer's email address and password and possibly other information.
Massachusetts Fails to Adopt New Federal Filing Deadline For Corporations
Corporate taxpayers in Massachusetts will have to deal with different state and federal filing deadlines after a bill to align the two failed to pass in the Massachusetts Legislature.
The new federal filing deadlines are March 15 for partnerships and S corporations, and April 15 for individual and C corporation returns. When the federal government announced in 2015 that it would change to these new filing deadlines, most states quickly adjusted their deadlines to match them, but Massachusetts and a handful of other states did not do so. Massachusetts corporate interests backed a bill to require the state to align its deadlines with the feds, but lawmakers failed to take up the bill Jan. 3, the final day of the legislative session.
That means corporate filers in Massachusetts will have to comply with two deadlines when filing their 2016 taxes. Massachusetts requires S corporations and C corporations to file on March 15, which will force some companies to use estimated figures and then amend their returns after they receive actual figures, according to tax professionals. As a result, they expect many companies to seek filing extensions.
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