Author: Max

For the last 36 years, Inc. has recognized the fastest-growing private companies in the United States.  Inc. has acknowledged companies that have proven to achieve not only strong, but consistent growth as well.  On average, companies that have been admitted onto the Inc. 5000 list in 2018 have established growth of over 500% since 2014.  Some companies recognized by Inc. over the years include Microsoft, Oracle, GoPro, Under Armour, and many other prominent businesses.  Sigma Tax Pro, a pioneering service bureau that supports tax professionals, has now joined the ranks of the prestigious companies being honored on this list.

Since its launch in 2013, Sigma Tax Pro has successfully demonstrated its ability to provide innovative professional tax preparer solutions to tax offices of all sizes.  The company’s mission statement is simple: “…to enable tax preparers to maximize their revenue and increase client satisfaction.” With over one hundred Google Verified Reviews at a 5-star rating and becoming one of America’s fastest-growing companies, it is apparent that Sigma Tax Pro clients are quite content to say the least.

On the company’s induction to the Inc. 5000 list, CEO of Sigma Tax Pro, Mitch Elbarki states, “Our recognition by Inc. is attributed to our remarkable team and their deep and expansive understanding of our clients’ needs.  Our team has continuously raised the bar in providing valuable solutions to tax professionals, while surpassing expectations.  We are humbled by the acknowledgment from Inc. and will continue to strive for further growth by powering tax professionals for many years to come.”

There were originally going to be five schedules attached to the new Form 1040, but as of last week, it became six schedules after the IRS provided a draft version of the new form for the public to review.  Although the draft Form 1040 itself has become the size of a postcard, the number of schedules has increased, not even including the original schedules A, B, and C. With the newly constructed draft Form 1040, Sigma Tax Pro suggests that tax professionals get well acquainted with the new draft schedules (1-6).

The draft Schedule 1 is for “Additional Income and Adjustments to Income”.  Lines for business income/losses are also shown on the Schedule 1, where a Schedule C/C-EZ should also be attached along with capital gain/loss information on a Schedule D. Depending on each individual taxpayer’s situation, a Schedule E or F may be required as well.

Draft Schedule 2 is less lengthy than the previous schedule with different lines for Tax information such as child income tax, alternative minimum tax and excess advance premium tax credit.  With these lines may come the requirement to attach other forms needed.

Draft Schedule 3 is also comparatively condensed, with the section being for “Nonrefundable Credits”, including:  foreign tax credit, credit for child and dependent care, education credit, retirement savings credit, and others. These lines will may also require separate forms to be attached.

Draft Schedule 4 is for “Other Taxes”, including:  self-employment tax, Social Security & Medicare tax on tip income not reported to employer, etc.  This schedule also has many Obamacare taxes, namely the health care individual responsibility payment, additional Medicare tax, and net investment income tax.

Draft Schedule 5 handles “Other Payments and Refundable Credits”, including lines that may be used in the future.  Lines here include 2018 estimated tax payments as well as amounts added from the 2017 return.

The unexpectedly developed draft Schedule 6 is devoted to “Foreign Address and 3rd Party Designee”, and is the least lengthy of all the previous schedules.  It has a small number of fields devoted to simply the foreign address and the 3rd party designee information.

Mitch Elbarki of Sigma Tax Pro comments, “Although the new Form 1040 has been recently publicized to be in postcard size, the increased number of schedules and required attachments of several other forms suggest that tax preparation is not going to be any less complex in the coming seasons…tax pros should definitely visit the IRS website and get well acquainted with the new changes as they develop.”

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.

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.

The new Tax Cuts and Jobs Act will affect tax returns that taxpayers will file in 2019.  This new law is responsible for several significant changes, including the exclusion of deductions for employee business expenses, investment expenses, investment management fees, and tax prep fees.  The new law also limits deductions for state and local taxes as well as home mortgage interest deductions in specific situations.
It is important that professional tax preparers recommend that their clients review their paycheck withholding amounts as soon as possible so that they can adjust if necessary, giving more time for the withholding to spread out evenly throughout the year.  Mitch Elbarki of Sigma Tax Pro gives fair warning, “…if taxpayers procrastinate in reviewing their paychecks with a professional to make needed adjustments, then fewer pay periods will be left to make any changes, resulting in a much more serious outcome with every unadjusted paycheck, leading to a potentially a larger tax bill or penalty by tax time in 2019.”
The Withholding Calculator, available on the IRS website, is the tool for the job.  Using this calculator, tax professionals should urge their clients to collect their most recent pay stubs and most recent income tax return (Form 1040) to begin the review.  Tax professionals should also advise their clients that if any other changes to their financial circumstances occur during the year, they need to contact them to assure the withholding amounts are still appropriate.

The criminals are typically sending faxes or letters to prospects requiring them to fill out Form W-8BEN, “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting”. The taxpayer is then told to fax the form back to the scammers pretending to be IRS employees.The letter they receive tells them the are exempt from withholding income tax but have to verify their details with the Internal Revenue Service.

While the Form W-8BEN is a legitimate IRS document that can be viewed at the above link it can only be handled by a withholding agent. There are also stories of scammers attacking non US residents as a means to get passport details and other pertinent personal information. Mitch Elbarki of Sigma Tax Pro points out, “An original form W-8BEN does not require the taxpayer to provide personal information.”

These kind of criminals will always find new means to prey on unsuspecting taxpayers, thousands of people have lost millions of dollars and their personal information to tax scams in recent times. As usual scammers take advantage of the regular mail, telephone, or email to contact their victims and the IRS never initiates contact with taxpayers by email, text messages to request personal or financial information. Tax pros should advise their clients to contact them directly anytime they receive a call from someone sayng they represent the IRS.