Professional Tax Articles

Tax reform supporting resources

The IRS plans to renovate over one hundred of its computer systems as well as produce hundreds of new forms, instructional guides and publications to help with the administration of the new tax law, as per the spending plan published by the Wall Street Journal.  The new plan will require over 500 extra hours of work to integrate the many changes needed to establish the new system.

The new plan comes as the IRS has estimated an additional inflow of over 4 million phone calls to assist taxpayers with the new tax law, an increase of 17% from the prior fiscal year. The training of taxpayer-facing IRS employees will require about 40,000 hours, representing a cost of roughly $1.8 million, including the cost of training materials, review and interpretative advice for the IRS Chief Counsel.

For small businesses and professional tax preparers, the IRS plans to proactively reach out to provide a helping hand.  On any given year, the Internal Revenue Service may hold upwards of 1000 events to help educate the tax community.  As a result of the new tax reform, the agency expects a spike in the frequency of these outreach events.

CEO of Sigma Tax Pro, Mitch Elbarki adds “It is crucial that professional tax preparers register and participate in forums and educational events held by the IRS to become more active and responsible members of their tax community…this will only help tax offices be more prepared in answering any client or taxpayer questions, further differentiating themselves from less involved and less qualified tax preparation agencies.”  The IRS anticipates a 25-30% increase from the prior year in requests for in-person events.

Professional Tax Articles

Relief from transition tax on foreign earnings

Earlier this week, the IRS confirmed that it will be foregoing late payment penalties as per section 965 of the new tax code.  Section 965 was implemented as a part of the Tax Cuts and Jobs Act in December of 2017, calling for a transition tax on untaxed foreign income of offshore companies owned by US shareholders.  The agency further explained the relief in an FAQ section placed on the tax reform section of its website.

With this new tax law in effect, foreign cash earnings and cash equivalents are to be taxed at a rate of 15.5%, with remaining earnings taxed at 8%.  If a taxpayer chooses to file an election in good time under section 965 (h), the transition tax can then be paid in eight yearly installments.

By allowing US corporations to pay less taxes on profits, the Tax Cuts and Jobs act encourages the repatriation of trillions of dollars of deferred taxes that may have otherwise been held for several more years abroad.  Mitch Elbarki, CEO of Sigma Tax Pro comments, “With the incentive to repatriate these dollars comes other complexities for taxpayers requiring extra guidance not just from the IRS, but from tax professionals as well…tax pros are more in tune with the overall financial picture of any given client, whereas the IRS can only provide general information.”

To gather more information, concerned taxpayers and tax professionals alike should visit the IRS website for continuously updated information.