A few weeks ago, I was able to attend the annual National Tax Conference held in Washington DC for tax practitioners sponsored by the National CPA Association (AICPA). It is always a great conference with helpful information for us to better able to service you as our client.
Here are a few take-aways I had from attending:
The IRS Commissioner spoke to us for about 30 minutes giving an overview of the new initiative to modernize the IRS. Congress has allocated money over the next 6 years to upgrade their computer systems to provide a better taxpayer experience. This will be done in three 2-year phases. By the end of the of 2025, the IRS will have a way to communicate with us securely through the internet much like your bank, doctor, and other service professionals do today. You will be able to go to IRS.gov and log into your account and resolve any tax matters you have, view your tax returns, etc. This will make the only option now, waiting on the phone, less inconvenient with these new options.
Audits are becoming increasingly more common as the technology at the IRS is upgraded. While the headcount is down at the IRS, the amount of audits will increase thru letters from the IRS. The commissioner is making a big push to begin to use artificial intelligence to perform audits and increase compliance. A 1% in compliance results in an additional $36 billion dollars into the treasury each year. We are developing tools in the coming year to help you stay update with the ever changing landscape at the IRS and new regulations. Learn more about the Storen Plus Program, our audit protection service.
For S-Corp owners, the big takeaway is the requirement now to have a basis statement attached to your 1040. This statement should be provided to you when you receive your K-1. The Revenue Agent in the class I took said that a campaign is being launched for the 2019 filing season beginning in January 2020 to begin auditing all S-Corps that do not have a basis statement with your 1040. For S-Corps, this is a BIG deal. This requires you to have an accurate balance sheet as well as other workpapers to calculate your debt and stock basis. We are currently preparing a more detailed action plan for all our S-Corp owners of how to become compliant with this new IRS requirement. Stay Tuned!
Partnerships also will now need to begin to track their capital accounts in an annual schedule attached to the 1065 return. Just like S-Corp owners, this will require a balance sheet as well. The action plan we are developing will be a little different but still just as necessary to remain compliant with this new IRS requirement.
Cryptocurrency is a hot button with the IRS now. They have added a question on the 2019 1040 tax return concerning cryptocurrency. They are requesting documents from cryptocurrency brokers to see who is holding cryptocurrency as well. If you have invested or even dabbled in cryptocurrency, please call us as soon as possible. We have information that you will need to avoid an audit in this emerging area of compliance by the IRS.
Rental properties were included in the new 20% deduction given to business owners in 2018. However, the IRS has had a hard time providing guidance to tax practitioners and taxpayers on how to go about claiming this deduction. Especially for taxpayers that own one rental that may have previously been their primary residence. Some clarification came out of this conference and this year we have a better idea of how to treat these properties for the deduction. As a rental property owner, make sure you are keeping expense records, revenue receipts, travel logs, etc. These are some of the items needed to claim this deduction. During this upcoming season, your tax preparer will discuss more with you about this potential deduction.