With tax and accounting professionals heading into the beginning of the TY 2009 income tax filing season, the IRS has announced significant new changes that it plans to implement starting in Jan. 2011, along with enhanced enforcement measures that will start this season. The changes are geared toward providing regulation of the thousands of unlicensed and uncredentialed tax preparers across the country who offer filing services.

The most notable of the proposed changes schedule to start in 2011 (for 2010 income tax reporting) includes requiring paid preparers to register with the IRS, receive a “preparer tax identification number (PTIN), take an initial competency test and take at least 15 hours or continuing professional education (CPE) courses per year. Ethics rules found in Circular 230 would also be extended to this new group of paid preparers. The changes in licensing and CPE would not affect professionals already recognized by the IRS, such as CPAs, enrolled agents and attorneys, so long as they are in good standing with their respective licensing agencies.

“As tax season begins, most Americans will turn to tax return preparers to help with one of their biggest financial transactions of the year. The decisions announced today represent a monumental shift in the way the IRS will oversee tax preparers,” said IRS Commissioner Doug Shulman. “Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation’s tax system. In addition, we are taking immediate action to step up oversight of tax preparers this filing season.”

Changes for 2010
In addition to the changes proposed for next year, the IRS has started sending notices to to approximately 10,000 preparers across the country who handle “large volumes of specific tax returns where the IRS typically sees frequent errors.”

These include reminding the professionals to practice due diligence when handling Schedule C income and expenses, Schedule A deductions and qualification for the EITC and homebuyer credits. Agents may also visit many of these preparers and, under a separate enforcement program, the IRS is also planning to conduct compliance investigations of paid preparers that may include agents posing as taxpayers.

Do you suppose the IRS has an ulterior motive for making these changes – like increasing revenue? The global recession has resulted in less Americans working and that means less tax revenue for the IRS. By implementing these measures, the IRS can make up some of the difference by dissuading tax preparers and tax advisors from taking chances on questionable deductions. If you are a tax preparer or tax advisor – beware!

source: cpatechnologyadvisor.com

Are you one of the lucky ones who were able to contribute to your IRA in 2009? If so, you should be aware of the federal income tax changes as it pertains to traditional IRA contributions and Roth IRA contributions for 2009. They are as follows:

Modified AGI (Adjusted Gross Income) limit for traditional IRA contributions increased.
For 2009, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:

• More than $89,000 but less than $109,000 for a married couple filing a joint return or a qualifying widow(er),
• More than $55,000 but less than $65,000 for a single individual or head of household, or
• Less than $10,000 for a married individual filing a separate return

If you either live with your spouse or file a joint return and your spouse is covered by a retirement plan at work, modified AGI is more than $166,000 but less than $176,000. If your modified AGI is $176,000 or more, you cannot take a deduction for contributions to a traditional IRA.

Modified AGI limit for Roth IRA contributions increased.
For 2009, your Roth IRA contribution limit is reduced (phased out) in the following situations.

• Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $166,000. You cannot make a Roth IRA contribution if your modified AGI is $176,000 or more.
• Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2009 and your modified AGI is at least $105,000. You cannot make a Roth IRA contribution if your modified AGI is $120,000 or more.
• Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

  Modified AGI limit for retirement savings contributions
  For 2009, you may be able to claim the the retirement savings contributions credit if your modified AGI is not more than:

  • $55,500 if your filing status is married filing jointly,
  • $41,625 if your filing status is head of household, or
  • $27,750 if your filing status is single, married filing separately, or qualifying widow(er).

  Temporary Waiver of required minimum distribution rules.
  No minimum distribution is required from your traditional or Roth IRA for 2009

  source: irs.gov