In June, the AICPA’s Tax Policy and Advocacy team advocated for tax policies to help future-proof the tax system and the accounting profession while assisting taxpayers navigate the COVID-19 pandemic. In conjunction the AICPA Tax Executive Committee, the team produced seven comment letters.
Implementation Guidance Needed on IRA and Trust Issues
The IRS provided guidance on taking coronavirus-related distributions and announced rollover relief for required minimum distributions (RMDs) from retirement accounts that were waived under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, in Notice 2020-50 and Notice 2020-51. The rollover relief came one week after the AICPA recommended the IRS allow taxpayers who already withdrew RMDs in 2020 (including from inherited IRAs) to return the RMD into the account.
In mid-June, the AICPA requested that Treasury and IRS issue guidance on the COVID-19-related distributions provision (Section 2202 of the CARES Act), the RMD waiver provision (Section 2203), and provisions in the Setting Every Community Up for Retirement Enhancement Act (SECURE) Act contained in the Further Consolidated Appropriations Act, 2020, P.L. 116-94, pertaining to the rule requiring most beneficiaries of inherited IRAs to withdraw the money within 10 years, the timing of IRA distributions to trusts, and the definition of a child who has not reached majority. The letter provided recommendations on the 2020 RMD waiver, the 10-year rule, other trust issues, coronavirus-related distributions from an inherited IRA, age of majority, and reporting requirements. Read the full comment letter.
S. 3995, Remote and Mobile Worker Relief Act of 2020
The AICPA wrote a letter in support of the bipartisan legislation, S. 3995, the Remote and Mobile Worker Relief Act of 2020, which advocates for tax simplification. The AICPA believes the bill reaches a reasonable balance between the states’ rights to tax income from work performed within their borders, and the needs of individuals and businesses, especially small businesses, to operate efficiently in this economic climate. The AICPA believes the bill is critically important to CPA firms and many of their business clients because the myriad state income tax withholding laws and varying de minimis exceptions make compliance difficult and time-consuming. Read the full letter.
IRS Guidance for Electronic Signature Program
The AICPA requested the IRS immediately update its electronic signature guidance and authentication requirements in the interest of the health and safety of taxpayers, tax professionals, and IRS employees during this filing season. The AICPA is also advocating for a permanent solution to allow taxpayers and their representatives to better embrace the digital and global environment by moving away from manual, paper-based processing. In June, the JofA discussed the e-signature comment letter in greater detail. Read the full comment letter.
Comments on Proposed Regulations (REG-113295-18) Regarding a Beneficiary’s Ability to Claim Excess Deductions Pursuant to Sec. 642(h)
Treasury and the IRS issued proposed regulations providing guidance related to Secs. 67(e), 67(g), and 642(h)(2) as a result of changes to miscellaneous itemized deductions enacted under the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, and the beneficiaries’ treatment of excess deductions of trusts and estates. Comments address the provisions concerning excess deductions of a terminating trust or estate and supplement previously submitted comments in response to Notice 2018-61. Read the full comment letter.
IRS Memorandum on Interim Guidance on Sec. 6695A Penalty Case Reviews
The AICPA Tax Executive and Forensic & Valuation Services Executive Committees produced a comment letter on a Treasury and IRS Memorandum that eliminated the previously existing multitiered review process set forth in Internal Revenue Manual (IRM) Section 18.104.22.168.4 for Internal Revenue Code Sec. 6695A penalty case reviews. Under this section of the IRM, the review process included at least two qualified knowledgeable IRS appraisers. The AICPA suggested that the IRS return to the prior review process requiring at least two qualified knowledgeable IRS appraisers. Read the full comment letter.
Request for Additional Guidance and Relief Regarding Sec. 461(l) — Limitations on Excess Business Losses of Noncorporate Taxpayers
The AICPA is addressing the need for guidance and relief related to Sec. 461(l) as enacted under the CARES Act. Sec. 461(l) imposes a limitation on the deductible loss related to a trade or business in the tax year in which the loss is incurred, or the excess business loss, for each applicable taxpayer. The CARES Act retroactively amended legislation related to Sec. 461(l), as enacted in the TCJA. In the letter, the AICPA submitted recommendations to address the treatment of previously reported excess business losses and relief for underpayment of estimated taxes within Sec. 461(l). Read the comment letter.
Notice 2020-26, Extension of Time to File Application for Tentative Carryback Adjustment
The AICPA submitted comments related to the deadline provided in Notice 2020-26, Extension of Time to File Application for Tentative Carryback Adjustment, to claim a tentative refund and the option for partnerships to file an amended return provided for in Rev. Proc. 2020-23. Taxpayers need additional time to determine whether they will have 2018 net operating losses upon receipt of amended 2018 partnership Schedules K-1 received through Sept. 30, 2020. The AICPA recommends that the IRS issue guidance extending the June 30, 2020, deadline to file Form 1045, Application for Tentative Refund, or Form 1139, Corporation Application for Tentative Refund. Read the comment letter. On June 29, the IRS indicated in FAQs that it is extending the deadline to July 15.
In other advocacy news
The AICPA has been listening to comments from CPAs all over the country in small firms, large firms, and individual practices. The AICPA is aware of the challenges represented by this tax filing season. The realities of COVID-19 uncertainty, coupled with the lack of state conformity, among other issues, led to their conclusion not to request additional postponement of the July 15 tax filing and payment date. Read the blog on the topic.
UAA Model Rule changes proposed in support of CPA Evolution. The AICPA board of directors unanimously endorsed proposed changes to the UAA Model Rules around educational requirements for licensure. As part of the CPA Evolution initiative, the leadership of the National Association of State Boards of Accountancy (NASBA), in collaboration with the AICPA, determined that these changes were necessary to create more consistency and flexibility. The proposed changes are currently exposed for public comment. Comments can be submitted to firstname.lastname@example.org by Aug. 31, 2020.
CPA Conversations podcast with Skip Braziel and Veronica Meadows. Alliance for Responsible Professional Licensing (ARPL) members Skip Braziel, AICPA vice president–State Regulatory and Legislative Affairs, and Veronica Meadows, senior director of Strategy at the Council of Landscape Architectural Registration Boards, joined the CPA Conversations podcast to discuss the impact COVID-19 has had on state government regulations.
AICPA tackles artificial intelligence. Two publications explore the change in mindset required for auditors to meet the challenges, and take advantage of the opportunities, associated with artificial intelligence (AI). A CPA’s Introduction to AI: From Algorithms to Deep Learning, What You Need to Know and The Data-Driven Audit: How Automation and AI Are Changing the Audit and the Role of the Auditor are aimed at audit professionals and others seeking information on how AI will evolve the role of the auditor as well as the audit itself.
— Nekose Wills is a manager–Advocacy Communications for the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com), the JofA’s editorial director.