Updates from the IRS

Identity Theft—IRS Clarifies Procedures on Responding to Identity Theft:  In a recent Fact Sheet, the IRS clarified that in the vast majority of tax-related identity theft cases, there is no need to file Form 14039 (Identity Theft Affidavit). This is because the IRS uses hundreds of processing filters to identify suspicious tax returns. When a return is found to be suspicious, the taxpayer will receive Letter 5071C, which instructs them to use an online tool to verify their identity. The IRS also may send Letter 4883C, which asks the taxpayer to call the IRS to verify their identity and confirm whether they filed the return in question. Form 14039 should be filed if the taxpayer attempts to electronically file a tax return and the IRS rejects it because a return bearing the taxpayer's Social Security number has already been filed. Also, Form 14039 should be filed if the IRS instructs the taxpayer to do so. The Fact Sheet may be accessed at www.irs.gov/newsroom/when-to-file-a-form-14039-identity-theft-affidavit

Income Tax—IRS Issues Interim Guidance on New Business Interest Expense Limit:  For tax years beginning after 2017, the deduction for net business interest for the year is limited to 30% of adjusted taxable income plus any floor plan financing interest paid by vehicle dealers [IRC Sec. 163(j)(1)]. However, this limit doesn't apply to taxpayers whose average annual gross receipts for the three-tax-year period ending with the prior tax year are $25 million or less. In a recent Notice, the IRS announced that it plans to issue proposed regulations on the new business interest expense limit. Among other things, the proposed regulations will (1) clarify that taxpayers may carry forward disqualified interest disallowed under former IRC Sec. 163(j)(1)(A) to the first tax year beginning after 12/31/17; (2) provide that all interest paid or accrued by a C corporation will be business interest under IRC Sec. 163(j)(5); and (3) clarify that the business interest expense limit applies at the consolidated group level. Taxpayers may rely on the Notice until proposed regulations are issued. Notice 2018-28, 2018-16 IRB .

IRS Urges Paycheck Checkup:  In a recent News Release, the IRS urged taxpayers to perform a "paycheck checkup," an initiative to help taxpayers check if they are having the correct amount of tax withheld after changes enacted by the Tax Cuts and Jobs Act (TCJA). To assist taxpayers with TCJA's implications, the IRS has introduced several new features, including the updated "Withholding Calculator" available at www.irs.gov. Taxpayers can estimate their 2018 income tax by using the Withholding Calculator and will need their completed 2017 tax return and most recent paystubs to use this calculator. Results from the calculator can be used to complete and submit a new Form W-4. The IRS has identified several key groups likely to be affected by the TCJA and urged taxpayers particularly in those groups to review their tax withholding and tax situation. News Release IR 2018-80.


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