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- Written by: CPA Magazine
The IRS is owed $138 billion and private collection agencies, or PCAs, are now actively trying to collect some of it. As a part of the Fixing America’s Surface Transportation Act of 2015, or FAST Act, it is hoped $2.4 billion owed to the IRS can be collected over the next 10 years.
140,000 accounts with balances of up to $50,000 have been placed with four private firms: CBE, ConServe, Performant and Pioneer. These PCAs receive the taxpayer’s mailing address, a phone number and the balance due. They receive no other confidential financial data.
These firms earn up to 25% of their receipts. They are governed by the Fair Debt Collection Practices Act which spells out when they can call, whom they can call, and what they can and cannot say. They will not use robocalls to contact taxpayers. All phone calls are recorded and PCAs undergo quality and customer satisfaction reviews.
These companies must clearly identify themselves as working for the IRS in all communications. When the IRS issues collection Notice CP40, it identifies the PCA and provides a unique authentication code. The PCA sends a separate letter to the taxpayer confirming the assignment and code. When the PCA calls, the taxpayer provides the code’s first five digits and the PCA confirms the last five digits.
The collectors ask the taxpayer to pay the IRS in full or enter into an installment agreement of up to five years. If the taxpayer can’t do either, the PCA refers the account back to the IRS. A PCA will instruct a taxpayer to send a check made out to the U.S. Treasury directly to the IRS. A PCA has no authority to negotiate, take enforcement action, charge a user fee or accept a payment for the IRS. The taxpayer can opt out of the collection program by written notification.
If the taxpayer has a valid power of attorney is on file for the unpaid tax year(s), the IRS and PCA will contact the taxpayer’s representative instead. If the taxpayer fears the caller is an imposter the taxpayer should contact the IRS.
Only individual accounts are affected for now; business account collections begin in 2019.
See the following for more details:
www.irs.gov/businesses/small-businesses-self-employed/private-debt-collection
www.irs.gov/pub/irs-pdf/p4518.pdf
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- Written by: T. Steel Rose, CPA
According to a recent article by CPA J. Carlton Collins in the Journal of Accountancy, your Windows 10 software could be recording your every keystroke and word spoken within earshot. This recording of activity was initially an attempt to troubleshoot glitches. However, the feature was maintained for the software’s final release.
To check if Microsoft is tracking your computing activity and disable this feature, go to the Windows 10 Start menu, select Settings, Privacy, and then select the Speech, Inking, & Typing option. If the option reads “Stop getting to know me,” click this option to disable recording. If the option reads “Get to know me,” the recording feature is already disabled on your computer.
Disabling this function clears any keystroke, voice, and handwriting data files recorded on your computer and prevents future recording activities.
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- Written by: Peter J. Scalise
A Proactive Methodology to Accelerated Depreciation Planning
A properly designed and implemented Construction Tax Planning analysis will proactively identify additional tax savings related to new and / or planned construction projects. It should be duly noted that a Construction Tax Planning analysis should not be confused with a Cost Segregation analysis as there are several notable differences between a Cost Segregation analysis and a Construction Tax Planning analysis.
A Cost Segregation analysis will methodically review property, plant and equipment and properly reclassify real property (e.g., property that is generally depreciated for tax return purposes over a period of either 27.5 years in the case of a commercial residential apartment buildings or 39 years in the case of a commercial office buildings) into personal property (e.g., property that is generally depreciated for tax return purposes over a period of either 3, 5, or 7 years) and land improvements (e.g., property that is generally depreciated for tax return purposes over a period of 15 years) by reviewing all of the structural components within the building structure (e.g., exterior walls, roof, windows, doors, etc.) and the building systems (e.g., lighting, HVAC, plumbing, electrical, escalators, elevators, fire-protection and alarm systems, security systems, gas distribution systems, etc.). In general, floor plans and blueprints are meticulously reviewed and site inspections are conducted to review the building envelope as part of an engineering based Cost Segregation analysis to ensure sustainable tax return filing positions per Circular 230.
In sharp contrast, a Construction Tax Planning analysis utilizes a proactive “Pre-Design Phase” methodology to identifying, gathering, and documenting additional tax savings related to new and / or planned construction projects whether in connection to:
• Constructing a New Building;
• Adding a New Wing to an Existing Building; or
• Renovating a Single Floor within an Existing Building.
Construction Tax Planning enables accelerated depreciation deductions through the recommendation of select materials and supplies to be utilized in the “Construction Phase” to ensure that the structural components will be classified as personal property as opposed to real property (e.g., requesting a design-build contractor to utilize modular internal walls to bifurcate office and / or conference room space in a commercial office building as opposed to permanently affixing these said internal walls to bifurcate office and / or conference room space within the floor configuration layout will enable the said structural components to be classified as personal property with a 5 year depreciable class life as opposed to real property with a 39 year depreciable class life).
In addition, Form 3115 is never filed as Construction Tax Planning is proactive planning and not reactive planning. Noting, there is no need to reclassify asset classifications as all of the structural components of the building envelope are properly classified when they are initially placed into service on a timely filed tax return. This mitigates IRS audit risk as an accounting method change never occurred and consequently Form 3115 is not filed. It should be duly recalled that Accounting Method changes only occur when a transaction is treated a certain way on a tax return (i.e., regardless of correctly or incorrectly) for a period of two years or more.
Finally, and as applicable, by combining Cost Segregation analysis with both the principles of Construction Tax Planning and Abandonment Deduction Planning per the Final Treasury Regulations governing Tangible Property (e.g., the retirement or abandonment of structural components within the building envelope before they have been fully depreciated over their asset class life for tax return purposes) you can optimize the true value of a comprehensive fixed asset analysis.
Please contact Peter J. Scalise, Federal Tax Credits & Incentives Practice Leader for the Americas at Prager Metis CPAs, and his team of Registered Architects and Professional Engineers for a complimentary consultation if you are contemplating a planned construction project and would like to consider a comprehensive fixed asset analysis to optimally accelerate component depreciation. Peter can be reached at (212) 835-2211 or at
Peter J. Scalise serves as the Federal Tax Credits & Incentives Practice Leader for Prager Metis CPAs, a member of The Prager Metis International Group. Peter is a highly distinguished BIG 4 Alumni Tax Practice Leader and has approximately twenty-five years of progressive public accounting experience developing, managing and leading multi-million dollar tax advisory practices on a regional, national, and global level.
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- Written by: CPA Magazine
With bitcoin prices recently surging over $2,500 it’s time explain what you need to know about bitcoin as a CPA. The reason it is important is you can transact with it online with almost no transaction fees. However, its value is volatile.
The future of bitcoin is important because of the blockchain technology behind it. Blockchain is a ledger of every transaction documented by distributed computers all over the world.
The main thing you need to know is while bitcoin is used as a currency, it is not recognized as a currency in the United States. Therefore every transaction is a capital transaction. The IRS requires gain or loss recognition on the new value of the asset at the time of each transaction.
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- Written by: CPA Magazine
CPA Magazine’s T. Steel Rose recently sat down with Patti Newcomer, vice president of marketing for the Intuit ProConnect Group, to discuss challenges for CPAs in today’s tax environment as well as her thoughts on the future of tax and tax technology. Newcomer spoke of the difficulty some CPAs may face with new technology.
“I think there are three key challenges,” said Newcomer. “The first is firms adopting new technologies to get more efficient and the changes to the workflow as a result of that. The second is hiring and retaining talent that they need for their firm. The third is managing their reputation, especially online. As well as the social channels so that their customers will be advocates and recommend them to their friends and family.”
Newcomer predicted CPAs would play more of an advisor role to clients in the future.
“There are a couple things in the future that I think are really going to happen,” said Newcomer. “One is I think more firms will adopt technology and move to the cloud. I think that technology will automate more of the manual tasks that are done today in books and tax. I think that accountants will spend more time advising and being in that trusted advisor role.
“What we've learned in our research with accountants is the thing that's most important to them is making a difference in their clients’ lives. So getting out of the back office, getting out of the manual tasks. Not doing the number-crunching and the data entry will allow them to spend more time advising their clients and helping them run their business and make good financial decisions that will increase the likelihood that their businesses will succeed.”
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