Tax Updates Late January 2020

Avoid Ghosts

The IRS warns taxpayers to avoid unethical “ghost” tax return preparers. The 2020 filing season is underway and fraudulent predators are taking every advantage. A ghost preparer is someone who prepares a tax return for someone, but does not sign it. They print it out and tell the taxpayer to sign and mail it or, if e-filing, they do not add their digital signature as a paid preparer, as required by law. You can avoid falling prey to a ghost by being aware of their tactics: They may require payment in cash and withhold a receipt; they may invent income or deductions to qualify the taxpayer for credits or refunds; they may direct the tax refund into their own bank account instead of the taxpayer’s. Using a legitimate tax preparer with a valid Preparer Tax Identification Number is a sure way to avoid falling prey to a ghost preparer.

Guidance For Student Borrowers and Creditors

The IRS and Treasury issued guidance that extends the relief for some taxpayers who had student loans discharged. The Revenue Procedure provides relief when the federal loans are discharged by the Department of Education under the Closed School or Defense to Repayment discharge process, or where the private loans are discharged based on certain legal settlements. Taxpayers within the scope of this procedure should not report the amount of discharged loan as gross income, nor should creditors issue a 1099-C to taxpayers or the IRS.

IRS Reconsiders Double Taxation

The IRS is willing to consider requests for relief from double taxation resulting from the repatriation of monies under the Tax Cuts and Jobs Act (TCJA). In a few instances where corporations have paid an unusual dividend, not because of the TCJA, it may be appropriate to provide relief from double taxation. When the same earnings and profits of foreign corporations are taxed both as dividends and under section 965, double taxation could result. Taxpayers who fit these limited circumstances may contact the Office of Associate Chief Counsel (International).

US Tackles International Tax Evasion

The Joint Chiefs of Global Tax Enforcement, known as the J5, brings together leaders of tax enforcement authorities from Australia, Canada, the UK, US and the Netherlands to lead the fight against international tax crime and money laundering. Specifically, it is believed that clients of a financial institution located in Central America may be using a sophisticated system to conceal and transfer wealth anonymously to evade their tax obligations and launder their criminal proceeds. Though this was the first meeting of its kind, the J5 plan to continue coordinating such global enforcement.