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What’s Hot These Days in AICPA Tax Advocacy?

Tax formsWhile you are working late preparing tax returns, the AICPA is also keeping busy, evaluating proposed regulations and interpretations of current law that could affect your practice. What are some of the hot topics on our advocacy to-do list?  

Let’s start with information reporting.  Businesses that accept credit or debit cards are starting to receive the new Form 1099-K from their merchant card processing company that reports the gross amount they received during the prior year.  The form was created to ensure that businesses report their credit and debit card income, especially from online sales. (The IRS just posted more information on its website about the requirements.) 

In 2012, businesses will need to reconcile the 1099-K amount with their own records in order to properly report merchant card and third-party payments separately from other sales. Some of our members have expressed concerns about the new reconciliation rule as many factors could make this a huge administrative challenge.  We are studying this issue and will make sure our members’ concerns are heard once we have completed developing a formal position.

Foreign asset reporting is also a critical issue for many taxpayers. One part of FATCA (Foreign Account Tax Compliance Act) now requires some individuals to report foreign accounts and assets totaling over $50,000. FATCA is much broader than the FBAR (Foreign Bank Account Reporting) and may apply to individuals who are exempt from FBAR. For example, FATCA requires taxpayers to disclose investments in entities such as foreign hedge funds and private equity funds, but FBAR does not. Through its advocacy, the AICPA succeeded in obtaining extensions and influencing guidance; significant concerns about both requirements remain, however. We are currently drafting comments on the draft instructions for filing under FATCA, FBAR definitions, and related issues.

Transaction reporting is also on the list.  (As you probably noticed by now, reporting is a growing area of concern.)  For 2012, if your corporation engages in an “organizational action” (e.g., mergers, payments of stock dividend to shareholders, or stock splits) that affects the basis of the stock owned by the shareholders, the business must disclose this information by either: (1) posting this information online or (2) filing a Form 8937. We have received many questions about the scope of reporting, especially the types of corporate transactions that constitute “organizational actions” so we will be asking the IRS to publish lists of specific common organizational actions that require reporting.

Finally, the IRS and Treasury Department announced they are studying the tax consequences of transfers by a trustee from one irrevocable trust to another (known as “decanting”). They are asking the public to suggest a definition for decanting and to comment on the tax consequences of such transfers in the context of domestic trusts, the domestication of foreign trusts, and transfers to foreign trusts. As we anticipate guidance, the AICPA is forming a task force to develop comments.

However, this is by no means a complete list of everything (check out our homepage for other hot advocacy topics).  In addition to a whole slew of regulatory and administrative advocacy items, we are monitoring congressional action on any major tax bills. Also, the President’s budget will have many tax provisions that could affect individual taxpayers and businesses of all sizes. The AICPA Tax Division will closely review the budget to determine our next advocacy steps, if any.

Melissa M. Labant, JD, CPA/PFS, CFP, Director - Tax Advocacy and Professional Standards, American Institute of CPAs. Melissa assists in the development and implementation of the AICPA’s tax advocacy strategy which centers on the review, formulation and submission to Congress, the Department of Treasury and the Internal Revenue Service of technical and policy recommendations. Melissa obtained her law degree and B.S. in Business Administration (with an emphasis in accounting) from St. Louis University.

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