Weekly Report from Washington, D.C.

The Senate approved a bill that includes an increase in the penalty for failure to file a return. The Treasury Department announced a revised U.S. Model income Tax Convention for 2016. The IRS finalized regulations relating to information reporting by brokers for transactions involving debt instruments and options, and issued guidance on disaster relief, pension plans and covered compensation.

Congress

House. House Ways and Means Committee Chairman Kevin Brady, R-Tex., reported that although some international tax changes are possible in 2016, members of the committee “understand the reality that comprehensive tax reform will not happen until we have a new president” in 2017 (TAXDAY, 2016/02/15, C.1). Brady announced a hearing, set for Wednesday, February 24, on the global tax environment in 2016 and how recent developments are escalating the need to reform and modernize the U.S. international tax system (TAXDAY, 2016/02/18, C.1).

Senate. The Senate on February 11 approved the Trade Facilitation and Trade Enforcement Act of 2015 (HR 644), which includes an increase in the penalty for failure to file a return and a permanent moratorium on state and local taxation of Internet access (TAXDAY, 2016/02/15, C.2). President Obama is expected to sign the bill.

Treasury

Model Income Tax Convention. The Treasury Department has announced the release of a revised 2016 U.S. Model Income Tax Convention (TDNR JL-10356; TAXDAY, 2016/02/19, T.1). Treasury has stated that it intends to provide a technical explanation of the 2016 Model Income Tax Convention this spring.

IRS

Broker Reporting. The IRS has issued final regulations relating to information reporting by brokers for transactions involving debt instruments and options (T.D. 9750; TAXDAY, 2016/02/18, I.1). The regulations address: (1) the reporting of original issue discount (OID) on tax-exempt obligations; (2) the treatment of certain holder elections for reporting a taxpayer’s adjusted basis in a debt instrument; and (3) transfer reporting for Code Sec. 1256 options and debt instruments.

Type I and III Supporting Organizations. The IRS has issued proposed regulations regarding Types I and III supporting organizations (NPRM REG-118867-10; TAXDAY, 2016/02/19, I.1). The proposed regulations amend current law to clarify notification and responsiveness provisions.

Email Scams. The IRS has renewed its warnings against email scams designed to trick taxpayers into disclosing personal information (IR-2016-28; TAXDAY, 2016/02/19, I.2). The Service has reported that phishing and malware incidents have jumped 400 percent so far during the 2016 filing season. The emails direct taxpayers to websites that ask for Social Security numbers and other personal information, and might carry malware that could infect computers and allow criminals access to personal files.

Disaster Relief. Victims of severe storms, tornadoes, straight-line winds and flooding that took place beginning on December 26, 2015 in parts of Arkansas, may qualify for tax relief from the IRS (ARK-2016-04; TAXDAY, 2016/02/16, I.1). Taxpayers in the covered disaster area can claim disaster-related casualty losses on their federal income tax return for 2014 or 2015. Additionally, taxpayers in FEMA disaster areas throughout Arkansas, Texas, Oklahoma, Mississippi and Missouri who sustained losses as a result of severe winter storms, tornadoes, straight-line winds and flooding during the period of December 26, 2015 to January 21, 2016 may deduct the losses on their returns (TAXDAY, 2016/02/19, I.3).

Interest Rates. For pension plan years beginning in February 2016, the IRS has released the 30-year Treasury bond weighted average interest rate, the unadjusted segment rates, the adjusted rates and the minimum present value of segment rates (Notice 2016-18; TAXDAY, 2016/02/15, I.2). The IRS also released the applicable federal rates for March 2016 (Rev. Rul. 2016-7; TAXDAY, 2016/02/18, I.4).

Qualified Zone Academy Bonds. The IRS has provided the maximum face amount of qualified academy bonds that may be issued for each state for calendar year 2015 and 2016 (Notice 2016-20; TAXDAY, 2016/02/15, I.1). The amount also includes allocations to the District of Columbia and other U.S. possessions.

EITC Compliance. The IRS will begin conducting on-site audits of preparers who received pre-filing season warning letters and whose 2015 Earned Income Tax Credit returns appear not to have improved (TAXDAY, 2016/02/16, I.2).

Taxpayer Service Public Forum. National Taxpayer Advocate Nina E. Olson will convene a public forum on taxpayer service on February 23 at 10:00 a.m. (IR-2016-26; TAXDAY, 2016/02/18, I.2). The forum is meant to solicit comments from taxpayers and tax professionals so that the “Future State” plan will better reflect taxpayers’ needs and preferences as they seek to comply with the tax code.

Filing Season Alerts. Falsifying income to claim tax credits is on the annual list of tax scams known as the “Dirty Dozen” again for the 2016 filing season. (TAXDAY, 2016/02/15, I.3). The list also includes the use of frivolous tax arguments to avoid paying taxes on the list of tax scams for the 2016 filing season (IR-2016-27; TAXDAY, 2016/02/18, I.3).

Taxpayer Bill of Rights. Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly (FS-2016-11; TAXDAY, 2016/02/17, I.1). The IRS continues to highlight the Taxpayer Bill of Rights, which provides taxpayers with fundamental rights when dealing with the Service, this tax season.

By Jalisa Mathis, Wolters Kluwer News Staff

 

 

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