2016 Business Tax Updates

Happy New Year! I hope 2016 was a great year for you, your family and your business. We are looking forward to a healthy, happy and prosperous 2017!
Several significant tax law changes took effect in 2016 that may affect your business’s federal tax filings in 2017.  Please take a moment to read through this as it contains important tax updates.

We are grateful for your patience with us but due to the busy nature of tax season, we ask you to allow a reasonable amount of time for us to prepare your return.  Also, to make your appointments move more efficiently, please have all documents ready and all calculations totaled before coming in for your appointment.   Please keep in mind, if you’re Quickbooks file or bookkeeping is incomplete or in total disarray, expect to file an extension.
If SCL Tax Services is completing your bookkeeping, please be sure that we have the necessary documents to complete your annual bookkeeping.  Business Tax Check List 

There are new tax deadlines for some businesses beginning in 2016 (6 month extensions are available if requested)

Partnership Returns (Form 1065)            due March 15th
S-Corp. Returns (Form 1120S)                  due March 15th
Corp. Returns (Form 1120)                        due April 18th

Individual Returns (Form 1040)               due April 18th
FBAR Filing                                                   due April 18th

Accelerated Filing Deadlines for Forms W-2, W-3, and Form 1099-MISC
New for 2016, the deadline for filing both electronic and paper Forms W-2 to employees and to the Social Security Administration (SSA) is January 31, 2017. Previously, the deadline was the end of February to file paper Forms W-2 with the SSA and until the end of March to make electronic filings. The January 31 deadline also applies to Forms W-2AS, W-2GU, W-2VI, W-3 and W-3SS.
If you are filing any Forms 1099-MISC and reporting an amount in Box 7, Nonemployee Compensation, the deadline for filing these forms has also been moved up to January 31, 2017. If you are not reporting an amount in Box 7, the deadline remains February 28 for paper filings and March 31 for electronic filings.
Extensions of time to file Forms W-2 with the SSA are no longer automatic. For filings due on or after January 1, 2017, you may request one 30-day extension and the IRS will only grant the extension in extraordinary circumstances or catastrophe. An extension of time to furnish Forms W-2 to employees may be requested by sending a letter to the IRS, but if an extension is for more than 10 employees, the request must be filed electronically. Requests for an extension of time to furnish Forms W-2 to employees are not automatically granted. If approved, an extension will generally be for no more than 15 days from the due date, unless the need for up to a total of 30 days is clearly shown.

Security and Identity Theft
We have implemented a “no-click” e-mail policy. This means we will not open any documents that you have sent us via email, which when combined with our latest security software and other steps makes it extremely difficult for electronic intruders to get through our defenses. This brings the question about how you will transfer data to us, and vice versa. We now will accept data from you in 4 ways: regular mail; drop-off; fax; or mandatory upload to our web portal. We know these changes will cause some hassle on your (and our part) but it is the best way to protect your and our confidentiality.  More details to follow.

Increased Penalties for Failure to Timely File Certain Information Returns
In addition to the accelerated filing deadlines for 2016 Forms W-2, Forms W-3, and Forms 1099-MISC, higher penalties apply for (1) the failure to file correct Forms W-2 by the due date; (2) the intentional disregard of filing requirements; (3) the failure to furnish Forms W-2; and (4) the intentional disregard of payee statement requirements. In addition to applying to Forms W-2, W-3, and 1099-MISC, other common forms subject to these increased penalties include: Schedules K-1 for Forms 1041, 1065, and 1120S.
Penalties for the late filing of these information returns have also increased. For each information return or payee statement with respect to which a failure occurs, the penalty has been increased from $100 to $250, and the maximum penalty that may be imposed has been increased from $1,500,000 to $3,000,000. The per-failure penalty for intentionally disregard the filing requirements also has been increased, from $250 to $500.

Vehicle Deductions and Substantiation
Deductions for vehicle-related expenses are an important part of most business tax returns. Whether such deductions pass scrutiny with the IRS depends on whether the business complies with the strict substantiation requirements necessary for such deductions. With respect to deductions relating to vehicles, we need to ensure that your business records include the following information with respect to each vehicle used in the business: (1) the amount of each separate expense with respect to the vehicle (e.g., the cost of purchase or lease, the cost of repairs and maintenance); (2) the amount of mileage for each business or investment use and the total miles for the tax period; (3) the date of the expenditure; and (4) the business purpose for the expenditure. The following are considered adequate for substantiating such expenses: (1) records such as an account book, diary, log, statement of expense, or trip sheets; and (2) documentary evidence such as receipts, canceled checks, bills, or similar evidence.
Records are considered adequate to substantiate the element of an expense only if the records are prepared or maintained in such a manner that each recording of an element of the expense is made at or near the time the expense is incurred.

Work Opportunity Tax Credit (WOTC)
This is a Federal tax credit incentive to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment.  Employers can hire eligible employees from the following target groups for WOTC: [Unemployed Veterans (including disabled veterans)Temporary Assistance for Needy Families (TANF) RecipientsFood Stamp (SNAP) RecipientsDesignated Community Residents (living in Empowerment Zones or Rural Renewal Counties)Vocational Rehabilitation Referred IndividualsEx-FelonsSupplemental Security Income RecipientsSummer Youth Employees (living in Empowerment Zones)].  The credit varies according to each group.  I can provide you with more information if you are an eligible employer.

Foreign Accounts (FBAR)
If you have read any news in the last year you know that the IRS is looking closely for offshore accounts. If you have an account, retirement account, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund) please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items.

We now offer Life Insurance and Retirement planning through Prudential Insurance.  Please ask us if you are interested.

Please find the “Business Tax Check List” website link here for your convenience.

Officially, the tax season begins January 23rd when the IRS will open the gateway to begin accepting electronically filed returns.
Our office is ready to start preparing your taxes before the 23rd once you have all your documents.

Monday – Friday                  10:00am – 8:00pm
Saturday                               10:00am – 6:00pm 
Sunday                                  12:00pm – 3:00pm
Of course, we will also be available outside of these hours by appointment only.
If you need a special appointment, please call our office for scheduling.

Thank you and we look forward to working with you again this year.



Here Come the Private Tax Debt Collectors … Again

Seven things you need to know about the upcoming IRS program


There are almost 19 million people who owe more than $400 billion in back taxes to the U.S. Treasury.

Right now, 4 million taxpayers are paying the IRS through installment agreements, and the IRS is chasing 7 million more taxpayers for payment.

In late 2015, Section 32102 of the Fixing America’s Surface Transportation, or FAST, Act was put into law, requiring the IRS to use private debt collectors for delinquent tax debts.

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The details of how the IRS implements this program will determine how successful it is – and how it will impact taxpayers and their advisors.
Previous attempts

This is the not the first time the IRS has been instructed to use private debt collectors.

The first attempt started in 1996 and lasted a little more than a year. The second lasted from 2006 to 2009. The first program collected about $3 million, at a cost of more than $1 million. The 2006-2009 program yielded $98 million, at a cost of $47 million.

During these initial attempts, there was widespread concern about how private debt collectors treated taxpayers and their personal information. The private debt collectors didn’t necessarily explain all the available payment options to taxpayers facing economic hardships. Those options include alternatives to full payment, such as installment agreements and penalty abatement. Many taxpayers were also concerned that private debt collectors would share their tax information.

Ultimately, the government scrapped both programs because they weren’t cost-effective and were fraught with potential risks to taxpayer rights and privacy.
Suspicions raised

Enter the third wave of private debt collectors, set to begin in the next few months. This time, the IRS faces new challenges in implementing the program, because the information security landscape has changed a great deal since 2009.

Today, taxpayers are increasingly wary of IRS imposter phone schemes that are prevalent during tax season and all year long. When private debt collectors call taxpayers this year, collectors will face skeptical individuals, wary of IRS imposters trying to scam them into paying “taxes” over the phone.
Seven facts you need to know

  1. It’s coming soon. The IRS plans to select its authorized private debt collectors in the next two months and then begin using them in early 2017. The IRS will publish the names of these collectors on
  2. Private debt collectors will try to pursue the old, uncollectible accounts. The IRS wants private debt collectors to go after cases the IRS would never pursue – that is, outstanding, inactive receivables. The case criteria for private debt collectors are:
  • More than one-third of the 10-year collection statute has expired;
  • No IRS employee is assigned to collect the debt; and,
  • The IRS hasn’t contacted the taxpayer in a year, and the taxpayer isn’t requesting a payment alternative or relief (such as innocent spouse relief, a collection due process hearing, an offer in compromise, an installment agreement, etc).

Private debt collectors won’t pursue taxpayers younger than 18, those who have been a victim of tax identity theft, or taxpayers in a federally declared disaster area or combat zone.

  1. The private debt collectors will try to locate “missing” taxpayers. When the IRS can’t locate taxpayers, it removes them from active collection. In the FAST Act, private debt collectors will pursue those accounts. As the National Taxpayer Advocate has pointed out, the methods these collectors might use to find and collect from these taxpayers could conjure up fears about how the IRS will protect taxpayer rights, information, and privacy.
  2. Private debt collectors won’t have enforcement authority. Private debt collectors won’t be able to file liens or issue levies. Keep in mind, however, that the IRS may have already filed a tax lien on some taxpayers before the private debt collector ever calls. Collectors also won’t be able to help taxpayers get liens removed. To address enforcement actions, taxpayers or their advisors will need to contact the IRS directly.
  3. Collection alternatives are still available through the IRS. If taxpayers need a payment alternative, such as an installment agreement, currently not collectible status, or an offer in compromise, they should contact the IRS.
  4. The IRS will notify taxpayers if a private debt collector is assigned to their case. Before starting the private collection process, the IRS and the collector will send two letters:
  • First, the IRS will send a letter notifying the taxpayer that the IRS has assigned their case to a private debt collector.
  • Second, after assignment and before contacting the taxpayer, the private debt collector will send a letter.

According to the IRS, these notices will also go to the taxpayer’s representative on file, if any. The IRS hopes that these steps will notify taxpayers of the impending collection and relieve their fears about IRS imposter schemes.

  1. Taxpayers experiencing economic hardship aren’t included. Taxpayers who are experiencing severe economic hardship and have an outstanding tax debt can apply for a special status that suspends their obligation to pay (referred to as currently not collectible status). Taxpayers who have negotiated this status with the IRS appear to be excluded from the private debt collection program. The IRS has not finalized this exclusion, but it appears likely that these taxpayers would be treated similarly to those who have requested a payment agreement with the IRS on their outstanding debt.

Third time’s a charm?

Navigating the IRS can be difficult. With imposter schemes running rampant, adding a third-party collector to the mix could add to taxpayer confusion.

According to IRS plans, taxpayers and their advisors should expect two letters to come before a private debt collector calls. And if a legitimate collector calls for payment, taxpayers and their advisors should first consider whether the client qualifies for a payment alternative with the IRS.

Congress hopes that the third private debt collector program will work better than the previous two initiatives. Time will tell, because the third round starts soon.

Jim Buttonow, CPA/CITP, directs tax practice and procedure product development for H&R Block. He has more than 28 years of experience in IRS practice and procedure.