Tax Update – April 2023
Inherited Individual Retirement Accounts (IRAs)
There are some notable, but mostly beneficial, rule changes related to IRAs and RMDs. Beginning in 2023, the SECURE 2.0 Act raised the required age that you must begin taking RMDs, to 73. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025. If you reach age 73 in 2023, you were 72 in 2022 and therefore subject to the age 72 RMD rule in effect for 2022. If you reached age 72 in 2022, your first RMD was due April 1, 2023, and your second RMD is due by December 31, 2023. If the taxpayer opts to take their first two RMDs in the same calendar year, they need to be sure that this does not inadvertently put them into a higher tax bracket.
For IRA owners, who die after December 31, 2019, the SECURE Act requires the entire balance of the participant's account be distributed within ten years. This 10-year rule has many exceptions—for a surviving spouse, a child who has not reached the age of majority, a disabled or chronically ill person, or a person not more than ten years younger than the account owner. This 10-year rule applies regardless of whether the participant dies before, on, or after, the required first RMD date. The IRS interpretation somewhat differs from the original Act; NCCPAP is advocating for clarity and will update our report once we know more.
CP14 Notices for unpaid taxes include “caller id” that will allow the Voice Bot to access the proper account quickly and easily. Payment coupons are still included in notices, as well as a QR code that takes the taxpayer to the Office of Professional Responsibility (OPR) website for payment plans and arrangements. Penalties and interest sections have been expanded to include better definitions, interest rates, and other information, including a help section with a QR code to the Taxpayer Advocate Service (TAS). The new CP14 Notice is also available in Spanish, as CP14SP.
IRS Dirty Dozen
The Dirty Dozen represents the worst of the worst tax scams. Compiled annually, the Dirty Dozen lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes. Don’t fall prey. The IRS actively tries to get these to as many outlets as possible to ensure that the public is aware. For example, regarding the Employers Retention Credit (ERC), the IRS has received 100K+ claims, many of which are fraudulent. Abusive Trust Tax Evasion Schemes Form 14242 is used to make referrals on abusive promoters and preparers. This form is found on irs.gov and can be attached to any emails sent to the Lead Development Center mailbox.
Overview of the Transformation & Strategy Office & Strategic Operating Plan
In April, the IRS unveiled its Strategic Operating Plan. This ambitious effort details a decade of change including 42 key initiatives and 190 key projects designed to help taxpayers, the tax community, and the nation. This office and the program were made possible by the Inflation Reduction Act. The IRS collects 96% of the funds required to run the Government. The U.S. Department of the Treasury and the IRS collaborated to develop the plan, based on areas to modify over the next decade.
At a high level, the plan objectives include improving the taxpayer experience, faster resolution, high-dollar non-compliance, cutting edge technology & analytics, and attracting, retaining, & empowering IRS employees.
Introduction to the Tax Pro Account
Tax Pro Account lets you submit an authorization request to an individual taxpayer’s IRS online account. The vision is to enhance the way tax professionals interact with the IRS by creating a ‘phygital’ (yes, a real word) experience, meaning a unique interactive experience for the user that blends innovation and integrated digital technologies to deliver seamless immersive experiences that achieve silent utility. This is expected to be available in late summer or early fall with a virtual assistant live chat & secure messaging. By September, there will be an Act on Behalf (AoB) payment bundle, and by FY 2024 a mobile version.
We’re excited to report that our next tax update will be reported based on a live meeting, after three years of remote meetings!
Please watch for our next NCCPAP Tax Update next month!