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The Triple Tax Check: Sales, Property, and Income Tax Considerations When Relocating

Are you thinking about relocating to a new city or state? Whether it’s for a career change, a better quality of life, or simply a fresh start, moving to a new place is an exciting adventure. However, it’s crucial to consider the financial aspects of your move. When relocating, don’t forget to factor in the sales tax, property tax, and income tax rates of your prospective destination. These three tax types can significantly impact your overall financial well-being.

The article below was provided by Shelley Girardin-Klatz with Johnson CPA

The Triple Tax Check

Final and proposed regulations issued on retirement plan RMDs

Please se the July 18, 2024, article in the Journal of Accountancy.

 

IRS Statement on balance due notices (CP14)
June 12, 2024

The IRS is aware that some taxpayers are receiving CP14 (Balance Due, No Math Error) notices indicating a balance due even though payments were made with their 2023 tax return.

Who is affected: Taxpayers who paid electronically or by check with their 2023 tax return, may show their accounts as pending, although the IRS has received and processed payment through their banking institution. The notice may have been initiated before the payment was processed on the account, or the payment may have been processed but contained errors and requires additional handling to address the error before updating the tax account.

No immediate action or phone call needed: Taxpayers who receive a notice but paid the tax they owed in full and on time, electronically or by check, should not respond to the notice at this time. The IRS is researching the matter and will provide an update as soon as possible.

Note that any assessed penalties and interest will be automatically adjusted when the payment(s) are applied correctly by the IRS.

Taxpayers who paid only part of the tax reported due on their 2023 return should pay the remaining balance or follow instructions on the notice to enter into an installment agreement or request additional collection alternatives.

For affected taxpayers, the IRS apologizes for the inconvenience this delay in processing your payment has caused.


Employee Retention Credit Claims

The IRS this week announced plans to reject thousands of improper high-risk Employee Retention Credit claims while starting a new round of processing lower-risk claims to help qualified taxpayers. The IRS recognized between 10% and 20% of claims fall into what the agency has determined to be the highest-risk group, which show clear signs of being erroneous claims for the pandemic-era credit. Tens of thousands of these will be denied in the weeks ahead. This high-risk group includes filings with warning indications that clearly fall outside the guidelines established by Congress.

AICPA Small Firm Interest News

The AICPA semi-annual Top Issues Survey went live. It is open until May 17th and results should be published in June, probably at the Engage Conference.

Link on website: https://www.aicpa-cima.com/resources/article/2024-cpa-firm-top-issues-survey



IRS warns tax professionals to be aware of EFIN scam email



The Internal Revenue Service and Security Summit partners today alerted tax professionals of a scam email impersonating various software companies in an attempt to steal Electronic Filing Identification Numbers (EFINs).

IR-2024-36, Feb. 8, 2024



Tax professionals: Watch out for “new client” email scam

Tax professionals should watch out for a “new client” scam – an email scheme where cyber-criminals pose as potential clients. This scam peaks during the busy tax filing season.

How the new client scam works:  The scammer emails a tax professional to ask for help with their taxes.

"New client" email scam
A Brief Legislative History of the Texas Public Accountancy Act

In 2015, the Texas State Board of Public Accountancy produced a brochure marking the 100th anniversary of the Public Accountancy Act.  If you would like to see a digital copy of this brochure, click on the link below.


Texas Public Accountancy Act

Tax planning for the TCJA's sunset

Because most individual tax provisions of the law known as the Tax Cuts and Jobs Act were temporary, now is a good time for taxpayers to incorporate into their tax planning strategies those provisions’ scheduled sunset at the end of 2025. The Tax Adviser (12/2023)


The Tax Advisor

Congratulations

Frank Sands, CPA, former TACPA President and current NCCPAP President, was recently named to Accounting Today's 2023 Top 100 Most Influential People.

Members of other NCCPAP chapters making the Top 100 list are
Steve Mankoski and Carl Peterson

Congratulations!
Accounting Today

Are you or your clients hiring new employees? 

New Form I-9, Employment Eligibility Verification

Employers must use new Form I-9 the  starting 11/1/23. The new form will provide updated processes and fewer pages and the List of Acceptable Documents has been revised.


There will be a new Form I-9 effective November 1, 2023

  • USCIS will release a revised Form I-9 on August 1, 2023.
  • Employers may use the current Form I-9 until 10/31/23.
  • The new form will provide updated processes and fewer pages.
  • The List of Acceptable Documents has been revised.


For additional information and accessing the new forms, see the  U.S. Citizenship and Immigration Services website.



Child Dependency Claims By Noncustodial Parents

By Wei-Chih Chiang, CPA, DBA; Karen Pierce, CPA, DBA; and Jianjun Du, Ph.D.
September 23, 2019


From The Tax Adviser - Journal of Accountancy

Tax Credits
Photo credit - USA Today


When a couple divorce, the divorce decree may grant the noncustodial parent the right to claim a child or children as dependents for tax purposes. While the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, reduced the personal exemption for taxpayers, spouses, and dependents to zero for tax years 2018 through 2025, the special rule of Sec. 152(e) allowing a noncustodial parent to claim a child as a dependent is still important because it also allows the noncustodial parent to claim a child tax credit, which the TCJA increased and expanded. To claim this tax benefit, however, the noncustodial taxpayer should closely follow the special rule's statutory and regulatory requirements, about which taxpayers often have misperceptions.

Sec. 152(e) applies to parents who are divorced, legally separated, or living apart during the last six months of the calendar year and provide more than one-half of the child's support for the calendar year. The child must be in the custody of one or the other parent for more than half of the year (Sec. 152(e)(1)). If these requirements are met, the custodial parent may then release the right to claim a dependency exemption under Sec. 152(e)(2) to the noncustodial parent. To release his or her claim to the dependency exemption, the custodial parent must sign a written declaration for the years that he or she is not claiming the child as a dependent, which must be attached to the noncustodial parent's tax return.

FORM 8332 OR WRITTEN DECLARATION

The IRS issued Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, for parents to use to satisfy the written-declaration requirement. Form 8332 requires the custodial parent to furnish the name or names of the child or children for whom the claims are released, the year or years for which the claims are released, the custodial parent's Social Security number (SSN), and the name and SSN of the noncustodial parent. The custodial parent must also sign and date the form. Use of Form 8332 is not mandatory, though, and parents may satisfy the written-declaration requirement by attaching a document conforming to the substance of the form and executed for the sole purpose of serving as a written declaration under Sec. 152 (Regs. Sec. 1.152-4(e)(1)(ii)).

A court order, decree, or separation agreement executed in a tax year beginning after July 2, 2008, may not serve as a written declaration. Additionally, the written declaration must be unconditional. That is, the custodial parent's release cannot require satisfaction of any condition such as the noncustodial parent's fulfillment of a child support obligation (Regs. Sec. 1.152-4(e)(1)(i)). The custodial parent may revoke a written declaration by providing a written notice of revocation to the noncustodial parent (Regs. Sec. 1.152-4(e)(3)(i)).

Even if the noncustodial parent may claim the child as a dependent under Sec. 152(e), this does not entitle him or her to head-of-household filing status, the earned income tax credit, the child and dependent care credit, or the exclusion from income for dependent care assistance, any or all of which only may be claimed by the custodial parent (Notice 2006-86).

COMMON MISTAKES

A review of numerous court cases involving the release of claim suggests the following practical advice to noncustodial taxpayers.

Noncustodial parents often have a misperception that they may claim a child as a dependent merely by paying child support. However, this is irrelevant for the release of claim (see, e.g., Allred, T.C. Memo. 2014-54). Moreover, noncustodial parents commonly think that once the divorce decree, separation agreement, mediation agreement, or court order grants them the dependency exemption, they can claim it even if the custodial parent violates the agreement by refusing to sign a release. Again, this is a misunderstanding. If a custodial parent violates the agreement, the noncustodial parent must go to the state court for a remedy, not the IRS (see Armstrong, 139 T.C. 468 (2012), aff'd, 745 F.3d 890 (8th Cir. 2014)).

Sec. 152(e)(2) requires Form 8332 or other sufficient written declaration to be attached to the noncustodial parent's tax return. Regardless of this requirement, in many court cases, noncustodial parents did not attach Form 8332 or any other written declaration to their tax returns.

A written declaration should specify the children and tax years for which a custodial parent releases the claim (see Loffer, T.C. Memo. 2002-298). Specifically, if there are several children, and a custodial parent does not release all of them, a written declaration should clearly identify the ones the custodial parent will not claim as dependents. Likewise, if the custodial and noncustodial parents agree to claim a child as a dependent in alternate years, the years assigned to the noncustodial parent should be identifiable. A written declaration specifying "all future years" is treated as specifying the first tax year after the execution year and all subsequent years.

Taxpayers should carefully maintain a copy of the original Form 8332 or other written declaration. If the claim to the dependency exemption is released for more than one year, the noncustodial parent must attach the original release to the tax return for the immediate tax year and attach a copy of the release to subsequent tax returns. The Tax Court has held that the failure to attach a copy of a Form 8332 because the form was destroyed in a fire (Chamberlain, T.C. Memo. 2007-178) or irretrievable from previously filed tax returns (Vokovan, T.C. Memo. 2013-37) was not a legitimate excuse for the lack of a Form 8332.

Be aware that the release of a claim to the dependency exemption can be revoked by the custodial parent and, regardless of a prior valid Form 8332 or conforming document, the noncustodial parent will lose the right to claim a dependency exemption. If this happens, and the custodial parent is required to provide a release, the noncustodial parent may pursue a remedy in state court for the custodial parent's failure to provide the release.

EVEN MORE IMPORTANT UNDER TCJA

The ability to claim a child as a dependent and thus claim a dependency exemption for the child remains important even after the TCJA repealed the exemption for tax years 2018 through 2025. To take the child tax credit for a child, a taxpayer must be able to claim the child as a dependent. Under Sec. 151(d)(5)(B) and Notice 2018-84, the reduction of the exemption to zero under the TCJA does not affect whether the exemption is allowed or allowable for purposes of other provisions of the Code. Under the TCJA, the amount of the child tax credit is doubled to $2,000 per qualifying child, and the phaseout threshold has increased dramatically. These changes make the child tax credit more valuable and available to middle-income noncustodial taxpayers. Therefore, careful compliance with the requirements of the special rule in Sec. 152(e) can be even more important to CPAs' clients.

Wei-Chih Chiang, CPA, DBA, and Jianjun Du, Ph.D., are associate professors of accounting at the University of Houston—Victoria in Katy, Texas. Karen Pierce, CPA, DBA, is an associate professor of accounting at Morehead State University in Morehead, Ky.




 


DUE DILIGENCE CHECKLIST

IRC Sec 6695
EITC, CTC, ACTC,AOTC, and HOH Filing Status



The following checklist is intended for use in compliance with the due diligence requirements when claiming earned income tax credits, child tax credits, additional child tax credits, American Opportunity Tax Credit, and Head of Household filinq status. Preparers are encouraged to use professional judgement in final determination of qualification for tax credits or Head of Household filing status.

Thanks to Frank Sands, CPA, President TACPA for preparing this checklist.

Please CLICK HERE to download the checklist.


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