Tuesday November 12, 2019
IRS Enhances Taxpayer Protections
In IR-2019-101, the Service explained its latest efforts to protect taxpayers from identity thieves.
Taxpayers, professional advisors and third parties (such as colleges and universities providing student assistance) have regularly requested tax transcripts from the IRS. Because identity thieves have been obtaining tax transcripts and filing fraudulent returns, the IRS announced it would "stop its tax transcript faxing service in June and will amend the Form 4506 series to end third-party mailing of tax returns and transcripts in July."
In 2018, the IRS modified the tax transcripts to remove most personally identifiable information. The Service also hopes to increase data security through new limits on the release of tax transcripts. After June 28, 2019, the IRS will no longer fax tax transcripts to taxpayers or third parties.
Taxpayers may access their tax transcripts in three ways.
Tax Incentives to Increase Charitable Giving
In a joint report, Independent Sector (IS) and the Indiana University Lilly Family School of Philanthropy (Lilly) suggested several potential options for encouraging charitable giving.
The report begins with a review of giving trends for the past two decades. Between 2000 and 2017, total giving steadily increased. Over $400 billion was donated in 2017. However, the number of donors has been declining by about 1% per year. The percentage of American households that donated to charity dropped from 67% in 2000 to 56% in 2014.
This decline occurred at the same time as the total number of public nonprofits increased. The result of fewer donors and more charities, especially for midsized and small nonprofits, has increased competition for annual fund gifts.
With the increase in the standard deduction under the Tax Cuts and Jobs Act, the number of future donor households is also likely to decline. The Joint Committee on Taxation (JCT) estimates that the 30% of taxpayers who itemized in 2017 may decline to as few as 10% of taxpayers in 2019 and future years.
IS and Lilly suggest several possible options to increase giving.
SECURE Retirement Bill on Hold in Senate
On May 23, the House passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act (H.R. 1994). Initially, the Senate hoped to bypass its own retirement bill and pass the House SECURE Act by a unanimous voice vote.
However, Senate Finance Committee Chairman Chuck Grassley (R-IA) reported this week that there are "perhaps as many as six" Senators who oppose various provisions of the House bill. A voice vote in Senate is not possible unless there is unanimous consent, so this opposition by six senators leads to a hold on the bill.
Senator Ted Cruz objects to a last-minute change in the House bill that affected Sec. 529 plans. The final House bill deleted the option that would permit $10,000 from a Sec. 529 plan to be used for homeschooling expenses each year. Cruz stated, "I think we should include the 529 language that passed unanimously out of the House Ways and Means Committee with every Democrat on the committee supporting it."
Grassley is reluctant to move forward with a retirement bill using the normal Senate process. If the SECURE Act is submitted to the Senate Finance Committee, it is marked up and then passed by the Senate, the compromise between the House and Senate and final enactment of a retirement bill could occur late in 2019.
Editor's Note: Tax planning professionals continue to discuss the impact of the SECURE Act's 10-year fixed payout provision for most children who inherit IRAs. This 10-year payout provision eliminates the current "stretch" payment option over the child's life expectancy. If the SECURE Act passes with the 10-year fixed payout provision, there will be a dramatic increase in the number of testamentary charitable remainder trusts (CRTs) funded with IRA, 403(b), 401(k) and other retirement plans. Transfer of a plan to a testamentary CRT enables a child to recieve payments over a term of 20 years or a lifetime.
Applicable Federal Rate of 2.8% for June -- Rev. Rul. 2019-14; 2019-23 IRB 1 (16 May 2018)
The IRS has announced the Applicable Federal Rate (AFR) for June of 2019. The AFR under Section 7520 for the month of June is 2.8%. The rates for May of 2.8% or April of 3.0% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2019, pooled income funds in existence less than three tax years must use a 2.2% deemed rate of return.
Published June 7, 2019