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Tax news: August ’15

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in Small Business Tax

Top court speaks. The Affordable Care Act (aka Obamacare) lives for another day. In a new decision, the U.S. Supreme Court preserved the use of premium tax credits in states where eligible taxpayers buy health insurance through the federal exchange. (King v. Burwell, S. Ct. No. 14-114, 6/25/15) Without this decision, Obamacare might have collapsed, yet the law will still likely face future challenges.

Confess your tax sins. Following the lead of other jurisdictions that have signed intergovernmental pacts with the United States under FATCA (the Foreign Account Tax Compliance Act), the Holy See of the Catholic Church recently agreed to report banking information about account holders in the Vatican Bank. The bank itself has been plagued by charges of corruption in recent years and Pope Francis has cited its cleanup as one of his top priorities. To improve compliance with the federal tax law, FATCA requires foreign financial institutions to provide information about U.S. taxpayers directly to the IRS.

Note: FATCA doesn’t relieve taxpayers of their obligations to file an FBAR (Report of Foreign Bank and Financial Accounts) for each foreign account exceeding $10,000.

Ready, willing, ABLE. The IRS has issued new proposed regulations defining key terms in the Achieving a Better Life Experience Act (ABLE). (Reg-102837-15, 6/19/15)  The law authorizes use of tax-free accounts set up for individuals who were disabled before age 26. Also, the IRS will create two new forms that will be used for reporting ABLE account information. 

Help for taxpayers? New legislation introduced in Congress by two members of the Senate Finance Committee (SFC)—Sena­­­tors John Thune (R-S.D.) and Chuck Grassley (R-Iowa)—would strengthen taxpayer rights. Among other provisions, the “Taxpayer Bill of Rights Enhancement Act of 2015” increases damages and penalties for unauthorized disclosure or inspection of tax return information and improper collection activities by the IRS.

According to Thune and Grassley, the IRS’ reputation has deteriorated in recent years and service has plummeted to an all-time low. “The IRS might talk about good customer service. Too often, talk is all there is,” said Grassley in a prepared statement. “The IRS needs to walk the walk. Congress needs to act. This bill will help swing the pendulum away from agency self-preservation and back to taxpayer service.”

Thwarting ID theft. A joint summit will help improve procedures for identifying fraudulent tax returns. In collaboration with major tax preparation firms, tax software companies and state tax authorities, the IRS will initiate new procedures in the 2016 tax filing season. The news follows a report by the Treasury Inspector General for Tax Administration (TIGTA) that the IRS is doing a better job on ID theft. (TIGTA Ref. No. 015-40-026, 4/24/15)

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