The Internal Revenue Service, working in partnership with state tax authorities and the tax preparation industry as part of their Security Summit initiative, reported significant progress Tuesday in the battle against tax-related identity theft, with new steps planned for next tax season.
Last year, the IRS stopped 883,000 confirmed identity theft returns, a 37 percent plunge in confirmed identity theft returns, compared to 2015. During the first eight months of this year, the IRS also stopped 443,000 confirmed identity theft returns, a 30 percent drop from the same time last year.
Financial institutions stopped 124,000 suspect refunds in 2016, a 50 percent plunge from 2015. So far this year, financial institutions have stopped 127,000 suspect refunds, in part reflecting a handful of cases involving several thousand accounts.
The number of people reporting they were identity theft victims fell to 376,000 in 2016, a 46 percent decrease from 699,000 in 2015. So far this year the trend has continued, with 189,000 taxpayers reporting themselves as victims of identity theft as of August, down approximately 40 percent from the same period last year.
“The states and the IRS have improved their ability to stop fraudulent refunds by working with financial institutions to help identify refunds that are questionable,” said IRS Commissioner John Koskinen during a conference call with reporters Tuesday. “And since 2015 the IRS has been running a pilot program to test the idea of adding a verification code to W-2 forms. This helps the IRS confirm the accuracy and integrity of tens of millions of electronically filed tax returns. These and other initiatives made a significant difference for taxpayers. The underlying numbers show we are making progress on multiple fronts with significant improvements taken in 2016 and we are continuing the dramatic trends in 2017.”
New Protections for 2018
The IRS and its Security Summit partners plan to add more protections for the 2018 filing season, as well as share more data points from tax returns than in the past.
In 2018, a new Verification Code box will appear on all official W-2 forms for the first time. Many taxpayers will see a 16-character code on approximately 66 million Forms W-2 to help authenticate the W-2. Taxpayers preparing their own returns and tax professionals will be urged to enter the code if the box contains the 16-digit number.
The Summit partners are putting greater emphasis on identity theft protections for business returns in the Form 1120 and 1041 series. The IRS will be asking tax professionals to get more information on their business clients to help the IRS authenticate that the tax return being submitted is actually a legitimate return filing and not an identity theft return. Some of the new questions people may be asked to provide when filing their business, trust or estate client returns include:
• The name and Social Security number of the company individual authorized to sign the business return. Is the person signing the return authorized to do so?
• Payment history – Were estimated tax payments made? If yes, when were they made, how were they made, and how much was paid?
• Parent company information – Is there a parent company? If yes, who?
• Additional information based on deductions claimed.
• Filing history – Has the business filed Form(s) 940, 941 or other business-related tax forms?
Intuit chairman and CEO Brad Smith hailed the progress that has been made, but said more needs to be done. “American taxpayers are still under siege from cybercriminals, so we remain steadfast in our commitment to fight tax cyberfraud. We’re proud of the progress being made," he said. "This year also marked the launch of the Tax Information Sharing and Analysis Center (ISAC), which has dramatically improved real-time security information sharing to strengthen our collective ability to safeguard taxpayers. Efforts to educate taxpayers and tax professionals have also resulted in greater awareness and accountability to protect online identities and increase the safety and security of the nation’s tax system. But there’s still much work to do. We have the opportunity to build on existing trusted customer requirements to continuously improve taxpayer authentication. As technology advances, we must continue to innovate to protect taxpayer information. And for those taxpayers who become a victim of tax fraud, it is imperative that we collectively provide faster, better relief and assistance to those who depend on us."
H&R Block’s new president and CEO Jeff Jones pointed to the progress made by the Security Summit, and like Smith he also praised Koskinen’s leadership. “As recent events show—the ongoing tax reform discussion, a new IRS commissioner to be named, and three new CEOs to the Security Summit—this forum is at the cusp of change,” he said. “But one thing that likely will never change is the adaptiveness of criminals. As someone who has experienced dealing with a data breach, I know we can never let up in our fight against cybercrimes and identity theft. We should expect criminals to continue employing a variety of approaches and tactics to find vulnerabilities in the system, and so I am fully committed to the Security Summit efforts to protect the tax ecosystem and to protect the legitimate taxpayer. Security of our clients’ information remains a top priority in the battle against this persistent and evolving threat.”
John Ams, executive director of the National Society of Accountants, noted that tax professionals are an important part of the solution. “The IRS and the various stakeholders have been heavily involved in the effort to safeguard the integrity of our tax administration process,” said Ams. “The tax professional community needs to play an integral part in that safeguarding process as well because the information needed by criminals to file fraudulent returns—name, address, income, where they work, how long they have lived or worked in a particular place, if they have a mortgage or a car loan, the names of family members—that is all kept in a tax professional’s file. Taxpayer data is the key to the kingdom in this digital age, and the files kept by tax professionals are increasingly a target for cybertheft. Tax professionals take seriously our obligations to safeguard the data, but we also recognize that we are tax professionals, not IT professionals. That is why we appreciate the work of the Security Summit, the ISAC and the IRS. We need to get the message out to taxpayers and tax professionals to make sure they are aware of the threat and how to secure their data and personal information.”
Phishing Scams
Accounting Today asked Koskinen about the increasing number of phishing scams being reported by the IRS against tax professionals, and whether that was a way for them to get around some of the identity theft filters and protections the IRS and its partners have put in place.
“It’s a challenge that we’ve been worried about with the Security Summit from the start,” he responded. “That is, as the states and the IRS get more secure and more able to in fact stop direct filings, the criminals are going to get more sophisticated and try to figure out how to get more data and the place to get more data, as John [Ams] was saying, is through the preparers, or companies. So we began to see in effect the early warnings came from members of the Security Summit, both in terms of attacks on preparers as well as the phishing schemes on companies. What they’re doing, and it’s difficult for people to be careful when they’re getting emails, is they send an email that looks real, and it says either you’ve got a problem with your account, and click here to access your account. They pretend to be a way to connect with your tax preparer, or for the tax preparer to connect with their client. Or the most insidious in some ways are the emails within a company to the CFO or the human capital departments, saying from the president, 'I need a list of the employees and their W-2’s and other information.' And the information is sent, but it doesn’t go to the CEO. It goes to an organized crime syndicate. So we have spent a significant amount of time through the Summit and all of our partners with campaigns to tax preparers urging them to put in security software and other firewalls in their systems. We’ve spent a lot of time and had great cooperation with the preparer community and the professional community trying to give them not only warnings, but increasingly advice on what steps to take.”
Courtney Kay-Decker, director of Iowa’s Department of Revenue, emphasized the 

Year-end planning this year faces an almost perfect storm of uncertainties. Leading the pack is tax reform, with basic questions remaining on what “reform” will cover and when it will become effective ... if at all. Another source of uncertainty revolves around the regulatory reset that is expected soon from the Treasury Department and the Internal Revenue Service after months of consideration. Also deserving careful considered is the usual flow of developments released during the course of this past year by the IRS and the courts, as well as additional changes that will take place between now and year-end. On top of all that, of course, is consideration of each individual taxpayer’s circumstances, which can also vary from year to year.
TAX LEGISLATION
Serious questions persist over whether tax legislation will pass this year and, if so, whether it will involve sweeping tax reform, simple rate cuts, or something in between. Whether the focus will be on individuals or be business-centric or both also remains unresolved at the moment. Overlaid on these issues is whether changes will be made retroactive to the start of 2017, effective starting in 2018, or somewhere in between. For some more far-reaching provisions being considered, such as loss of state and local itemized deductions or a switch to immediate expensing, a phased-in schedule over a period of years may need to be accommodated.
Certain “extenders” provisions were not renewed by the PATH (Protecting Americans from Tax Hikes) Act, passed in late 2015. They await either a roll-in into a tax reform bill, passage within their own year-end tax bill, or simply lapsing without retroactive reinstatement. Those extenders, which expired at the end of 2016, include the above-the-line deduction for qualified tuition and related expenses, the exclusion for the discharge of indebtedness on a principal residence, the deduction of qualified mortgage insurance premiums, and the nonbusiness energy property credit for qualified energy property and improvements.
The PATH Act also extended bonus depreciation for five years, but it did so under a phasedown schedule set at 50 percent for 2015-17, dropping to 40 percent in 2018. That should favor purchases made in 2017 rather than in 2018 … unless full expensing for certain taxpayers under tax reform passes. The House GOP blueprint would allow all types of businesses full and immediate expensing as a write-off of the cost of investments for tangible property and intangible assets. Variations on this proposal have included immediate expensing for pass-through businesses of all investment in equipment, and, more modestly, an increase in the annual cap on Code Sec. 179 expensing from $500,000 to $1 million.
The fate of the health care taxes also adds to additional uncertainty this year: Will there be a 3.8 percent net investment income tax in 2018, will there be an individual mandate for 2017 (whether there will be an individual mandate for 2016 was uncertain for most of the filing season), and whether the health care taxes will get taken up as part of tax reform after the failure thus far of repeal and replace, etc.? At press time, and perhaps well into the fall, these questions may remain unanswered.
With all of these possibilities being considered by Congress, standard year-end strategies nevertheless may continue to apply: First, wait until the last possible moment to see which way Congress is headed and then use standard acceleration or deferral techniques to move income, deductions and credits between 2017 and 2018 for the best possible overall result.
For example, assume that Congress approves the Trump administration’s call for replacing and lowering the current individual tax rates with a new, three-bracket range: 10, 25 and 35 percent. Under current law, individual income tax rates are 10, 15, 25, 28, 33, 35 and 39.6 percent. If the current $153,100-to-$233,350 level for the 28 percent rate bracket for joint filers drops into a 25 percent rate bracket, as the administration’s three-rate proposal back in April had indicated, the tax savings would be about $2,400 on the difference, a good reason once Congress passes its tax legislation for the year to defer some income (or accelerate an equal amount of deductions) proportionate to this change.
Also of note, any dramatic increase in the standard deduction, which Trump has proposed raising to $30,000 for joint filers, may mean that 2017 will be their last opportunity for some taxpayers to take an itemized deduction for certain expenses or charitable donations, assuming that the change would be effective starting in 2018.
REGULATORY RESETS
The Trump administration has directed that government regulations in general be reviewed so they can be streamlined, especially within the context of business operations. The Treasury Department initially identified eight recent tax regulations for re-evaluation. For the most part, they represent rules over which the general business communities were at odds.
Regulations within the targeted group that perhaps are most compatible to a year-end strategy that delays transactions (or at least monitors recent transactions for a possibly better result, retroactively) include: TD 9778 under Code Sec. 752, dealing with liabilities recognized as recourse partnership liabilities; TD 9790 under Code Sec. 385, dealing with the treatment of stock versus debt; TD 9803 under Code Sec. 367, dealing with property transfers to foreign corporations; and REG-163113-02 under Code Sec. 2704, dealing with the estate and gift tax treatment of lapsed voting rights on liquidations.
Additional regulations are also being considered, perhaps with some tentative resolution by the time this article goes to press. Anticipated changes are expected to impact not only some onerous documentation requirements but, in some cases, application of the underlying rules themselves.


OTHER NOTABLE DEVELOPMENTS
The IRS has been particularly aggressive during 2017 in litigating the right to charitable contributions for conservation easements. Frequently a taxpayer will not donate a conservation easement on its property unless it is assured of a charitable tax deduction. The strict rules on deductibility can result in a taxpayer realizing that a deduction is disallowed only after the fact of the transfer. Incomplete appraisals and lack of contemporaneous acknowledgement of the easement by the charity topped the list of deductions denied by the IRS and the Tax Court this past year. Especially as property contributions invariably seem to peak at year-end, properly timed documentation should not be overlooked in the rush to close out the contribution.
The IRS has also been taking notice of the sharing, or gig, economy. In addition to opening a Sharing Economy Tax Center on its Web site, it is also doing more to educate agents on relevant examination techniques. Activities that are involved in a sharing economy can vary and can range from selling goods online, advertising or other revenue from a Web site or blog, creating a crowdfunding site, short-term renting out a residence, or driving others for hire. Litigation over whether someone is an employee or independent contractor has increased, as well as the development of audit issues involving hobby-loss rules, the home office deduction, and the use of tax benefits through self-employed retirement and health insurance plans. Gig workers might do well in taking year-end inventory of how well they are following established rules.
As discussed in a prior column, as part of year-end planning, partners should include updating their partnership agreements and checking audit exposure. The new partnership audit regime is applicable for tax years starting in 2018. Waiting to modify partnership agreements after the fact may prove more than problematic.

CONCLUSION
Many of the variables that will go into effective year-end planning this year will likely continue to remain unresolved until as late as December. Nevertheless, at that time, the implementation of year-end strategies for the most part will take a familiar path on which typical acceleration and deferral techniques may be employed.
For example, acceleration of deductions and credits, whether motivated by tax reform, regulations, case law or personal circumstances, may include, among other strategies, the payment of expenses and state/local taxes into 2017, the bunching of itemized deductions into 2017, and the completion of economic performance in 2017. On the income side, deferral-of-income techniques may include, among others, entering into installment contracts and like-kind exchanges, deferring bonuses, delaying retirement distributions over and above required minimum distributions, delaying Roth conversions, and generally holding onto appreciated assets.
Despite best-laid plans, there is no doubt that between now and year-end 2017, at least some additional twists will arise to further challenge planning.
There may be some comfort in the fact, however, that early realization of that possibility is itself good preparation.

Often times, taxpayers  leave money on the table when they file their tax returns. Whether it is fear of IRS, not knowing it is allowed and/or simply because you don’t have a proof.


There are so many legally allowed deduction taxpayers miss on because of unorganized record keeping. My advice to everyone is;

• Be organized save receipt
•  Keep good record of everything you spent
  
•  Pay with debit or credit card that you’d have a statement to match
  
•  Categorize receipts in your shoe box
  
•  Use the itemized deductions Schedule A
  

Now it is time to know what you need track of as deductions in your tax return!

1.  Charitable Contributions whether cash, check or household items Charitable contributions are only deductible if you itemize deductions on  Form 1040, Schedule A.
   

To be deductible, you must make charitable contributions to qualified organizations. Payments to individuals are never deductible i.e. Salvation Army, Goodwill and/or recognized religious establishment.
You can deduct only the amount that exceeds the fair market value of the benefit received if your contribution entitles you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance, or sporting event.
For a contribution of cash, check or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the amount and the date of the contribution. In addition to deducting your cash contributions, you generally can deduct the fair market value of any other property you donate to qualified organizations. For any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services. One document from the qualified organization may satisfy both the written communication requirement for monetary gifts and the contemporaneous written acknowledgment requirement for all contributions of $250 or more.

Also, donated time, miles driven and travel are deducted. Good record keeping and proof is required.

  Out of pocket paid medical expenses Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.
  2- Deductible medical expenses –not paid by employer- may include but are not limited to the following:

•  Payments of fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners
  
•  Payments for in-patient hospital care or nursing home services, including the cost of meals and lodging charged by the hospital or nursing home
  
•  Payments for transportation primarily for and essential to medical care that qualify as medical expenses, such as payments of the actual fare for a taxi, bus, train, ambulance, or for medical transportation by personal car, the amount of your actual out-of-pocket expenses such as for gas and oil, or the amount of the standard mileage rate for medical expenses, plus the cost of tolls and parking fees
  
•  Payments for insurance premiums you paid for policies that cover medical care or for a qualified long-term care insurance policy covering qualified long-term care services. 
  

3-    Unreimbursed business expenses (also known as employee business expenses) Some employees may be able to deduct certain work-related expenses. The following facts from the IRS can help you determine which expenses are deductible as an employee business expense. You must be itemizing deductions on IRS Schedule A to qualify.

Expenses that qualify for an itemized deduction generally include:

• Business travel away from home
  
•  Business use of your car
  
•  Business meals and entertainment
  
•  Travel
  
•  Use of your home
  
•  Education
  
•  Supplies
  
•  Tools
  
•  Miscellaneous expenses
  

4-    Education expenses 
 Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student.

Qualified expenses are amounts paid for tuition, fees and other related expense for an eligible student that are required for enrollment or attendance at an eligible educational institution. You must pay the expenses for an academic period* that starts during the tax year or the first three months of the next tax year.
Eligible expenses also include student activity fees you are required to pay to enroll or attend the school. For example, an activity fee that all students are required to pay to fund all on-campus student organizations and activities.

Expenses that Do Not Qualify Even if you pay the following expenses to enroll or attend the school, the following are not qualified education expenses:

• Room and board
  
•  Insurance
  
•  Medical expenses (including student health fees)
  
•  Transportation
  
•  Similar personal, living or family expenses
  

5-    Moving expenses related to job change If you move your home you may be able to deduct the cost of the move on your federal tax return next year. This may apply if you move to start a new job or to work at the same job in a new location. In order to deduct your moving expenses, your move must meet three requirements:

1.      Your move must closely relate to the start of work.  In most cases, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2.      Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your prior job location. For example, let’s say that your old job was three miles from your old home. To meet this test, your new job must be at least 53 miles from your old home.

3.      You must meet the time test.  You must work full-time at your new job for at least 39 weeks the first year after the move. If you’re self-employed, you must also meet this test. In addition you must work full-time for a total of at least 78 weeks during the first two years at the new job site. If your tax return is due before you meet the time test, you can still claim the deduction if you expect to meet it.

6-    Use of home office If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. 

Requirements to Claim the Deduction Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:

·        Regular and Exclusive Use.

You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.

·        Principal Place of Your Business.

You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.

·        Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.

7-    Legal Expenses 
 You can deduct legal fees related to doing or keeping your job.
8-    Career Advancement Expenses 
 You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:

•       You are looking for a job in a new occupation,
  
•        There was a substantial break between the ending of your last job and you’re looking for a new one, or
  
•         You are looking for a job for the first time.
  

Employment and outplacement agency fees.    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation.

Continued Education classes and seminars cost

At M-E Accounting we strive to provide clients as well as prospects with best and most beneficial business consultation. Small Business owners always ask; how to promote their product or service, how to be seen as authentic business? Also, the most common request and/or concern is how to get business credit for finance and/or vendors.

Generally they stumble upon cost ignoring the fact of weighing the cons vs. the pros. They often ask how much before they know how beneficiary these thing to their business success and prosperity!  

The following are guideline points as to how to utilize technology to promote your business, how to authenticate it and how to build business credit. Then, I will explain how these are investment not expense.

1-    Get into Social Media 
 Social media i.e. Facebook, Link and Google Plus etc. are the great use of technology that promote business offered services or products. You subject your business to be known to a broader audience, show your qualification and introduce your service or product.

Opening a business web page that’s connected to a social media engine is a great opportunity for customers to know you, your business and what you sell. It is also your tool to receive calls and make a sale. As important to have a social media page as crucial to businesses that sell product to open a WEB Store. Everyone now make a purchase online. So, it is an opportunity one must cash in.

If a small business owner is a computer savvy, he/she can build his/her business web page with the least cost. But there will be no cost to establish a social media connection. Also, whether you are knowledgeable of these elements of technology or not, a web store will need professional help, and that may cost a little.  

2-    Get Authenticated
 For a business to be authenticated, one has to follow certain rules and regulations. First and foremost; business has to be registered with local and state authorities, Obtain professional license if required and registered with a group or a professional entity. Also, business affiliated with local Chamber of Commerce gains authentication as a chamber’s partner. Visit US CHAMBER OF COMMERCE https://www.uschamber.com for detail.

When business complete two years of practice, it is recommended to register with the Better Business Bureau (BBB). For more details see http://www.bbb.org

3-    Get Business Credit 

Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections under Federal Tax Law for Same-Sex Married Couples  

Note: On Sept. 23, 2013 IRS issued Notice 2013-61 providing guidance for employers and employees to claim refunds or adjust overpayments of FICA taxes and employment taxes with respect to certain benefits and remunerations provided to same-sex spouses.

IR-2013-72, Aug. 29, 2013

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.

Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.

Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.

How to File a Claim for Refund Taxpayers who wish to file a refund claim for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return.

Taxpayers who wish to file a refund claim for gift or estate taxes should file Form 843, Claim for Refund and Request for Abatement. For information on filing an amended return, see Tax Topic 308, Amended Returns, available on IRS.gov, or the Instructions to Forms 1040X and 843. Information on where to file your amended returns is available in the instructions to the form.

Future Guidance Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling.

Other agencies may provide guidance on other federal programs that they administer that are affected by the Code. 

Revenue Ruling 2013-17, along with updated Frequently Asked Questions for same-sex couples and updated FAQs for registered domestic partners and individuals in civil unions, are available today on IRS.gov. See also Publication 555, Community Property.

Treasury and the IRS will begin applying the terms of Revenue Ruling 2013-17 on Sept. 16, 2013, but taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so, as long as the statute of limitations for the earlier period has not expired.

(Ref. https://d.docs.live.net/0daa823320872187/ME/LETTERS/Same%20Sex%20Marriage.docx)

Same tax issues now for same-sex couples

By Kay Bell • Bankrate.com

Gay and lesbian couples got relationship equality with the June 26 U.S. Supreme Court ruling that the Defense of Marriage Act, or DOMA, is unconstitutional. Now that the law has been struck down, same-sex marriage is legal in the eyes of the federal government.

That means that same-sex married couples can, among other tax matters, now file joint tax returns. But as is often the case with taxes, such equality may work in their favor. Or it could make things worse.

"From the perspective of tax equality, no one wants to pay more in taxes," says CPA Nanette Lee Miller, partner in the San Francisco-based accounting firm Marcum LLP." But with tax equality, everyone would be subject to the same rules."

Thirteen states and Washington, D.C., recognize the marriage of same-sex couples. California is now added to that list, after the high court's dismissal of a separate same-sex marriage case, which was heard in March, the day before the DOMA arguments.

On the federal level, however, DOMA had defined marriage as a legal union between one man and one woman. And that made a big difference in how some tax laws had been applied. Now, for better or worse, they will be applied more equitably.

That was made official Aug. 29, when the Treasury Department and Internal Revenue Service announced that same-sex married couples, regardless of where they live, will be recognized as married for federal tax purposes. As long as the couple was legally married in a jurisdiction that sanctions the weddings, they are married in Uncle Sam's tax eyes even if they later move to a state that does not recognize same-sex marriages.

(Ref. http://www.bankrate.com/finance/taxes/3-tax-traps-same-sex-couples-can-avoid-1.aspx )

Affordable Care Act (ACA) Taxpayers can save more in a 401(k) but will face stiffer penalties for skipping health insurance.

Some major changes are coming that will effect tax benefits, retirement accounts and the Obamacare tax penalty.

The Senate recently extended several tax provisions – including mortgage debt forgiveness and credits for energy-efficient home improvements – that had expired at the end of last year.

Those extensions will apply retroactively, but it's unclear whether taxpayers will be able to claim them beyond 2014, which makes it challenging for taxpayers (and their accountants or tax preparers) to plan ahead. "Consumers don't know what to do," says Paul Gevertzman, a tax partner in accounting firm Anchin, Block & Anchin in New York City. "Should I make this purchase? Is it going to be deductible? Should I wait until they've changed the law? It hampers people from making these decisions."

However, the IRS has announced a few other small changes to the tax code going forward that you can plan on. Here's a look at what you need to know.

Health care Under the Affordable Care Act, the penalty for not having health insurance increases from $95 per adult (or 1 percent of income, whichever is greater) in 2014 to $325 per adult (or 2 percent of income) in 2015. If you're enrolled in health insurance through the federal marketplace, you can renew your current plan or choose a new one through Feb. 15, 2015, although some states have different deadlines for their own marketplaces.

Other changes apply to flexible spending accounts and health savings accounts. As of 2015, employees can save $2,550 in an FSA, up from $2,500. Previously, FSAs had a "use it or lose it" rule that forced employees to use up funds for eligible medical expenses before Dec. 31 (or in some cases, during a spring grace period) or forfeit that money. 

Earlier this year, the IRS announced that employers could now allow employees to carry over up to $500 from one year's FSA into the next. But if you're also using an HSA, then you can't also take advantage of the FSA carry over provision. Gevertzman says an HSA is better than an FSA for most people because it has higher contribution limits (up to $3,350 for individuals or $6,650 for a family in 2015) and greater flexibility. "It's almost like a retirement plan because you don't use it or lose it," he says. "Whatever you don't spend gets carried forward, and you can earn income that gets tax deferred."

Inflation adjustments IRS announced several tax benefits that will increase next year due to inflation. The maximum Earned Income Tax Credit amount will be $6,242 for those filing jointly who have three or more qualifying children, up from $6,143 in 2014. The personal exemption will rise to $4,000, up from the 2014 exemption of $3,950, but that exemption phases out at higher income levels (beginning at $258,250 for single taxpayers or $309,900 for married couples filing jointly and phasing out completely at $380,750 for single taxpayers or $432,400 for married couples filing jointly).

All of a child’s unearned income (for instance, interest or dividends) above $2,100 will be taxed at the parent’s tax rate, up from $2,000 in 2014. However, the annual gift tax exclusion remains at $14,000 per person.

Retirement. The IRS has increased the contribution limit for 401(k) and similar plans from $17,500 to $18,000 for 2015. The catch-up contribution limit for those age 50 and over will also increase $500, from $5,500 to $6,000. While the 401(k) contribution limit has been gradually rising the past few years, the catch-up contribution limit had remained at $5,500 for the past several years.

An extra $500 in a retirement account may not seem like much, but saving that amount over 25 years, assuming an 8 percent annual return, could yield an extra quarter million dollars in your retirement portfolio, points out Kimberly Foss, certified financial planner and founder and president of Empyrion Wealth Management in Roseville, California. "In one year's time, people just discard [the opportunity to save more]," she says. "But it does make a difference, especially in those critical compounding years between 40 and 65."

Starting in 2015, the IRS will also limit nontaxable IRA rollovers to one every 12 months regardless of how many individual retirement accounts you have. In the past, people with multiple IRAs would take advantage of a provision allowing them to withdraw money, and put it back within 60 days without the tax hit of an early distribution. By rolling money from one IRA to another, they could essentially give themselves a short-term loan because the money was held in separate accounts. "If you had a fair amount of IRA funds and you didn't care about the paperwork, you could set up multiple IRAs and do multiple loans per year," says Robert Zeigen, tax director at professional services company CBIZ MHM in Florida. "That was pretty common." Note that trustee-to-trustee transfers between IRAs and rollovers from traditional to Roth are not limited.

(Ref. http://money.usnews.com/money/personal-finance/articles/2014/12/23/tax-changes-coming-in-2015 )

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