The Internal Revenue Service and its Security Summit partners late last week warned taxpayers and tax professionals about a new IRS impersonation scam campaign spreading nationally on email. Remember: the IRS does not send unsolicited emails and never emails taxpayers about the status of refunds.
The IRS this week detected this new scam as taxpayers began notifying phishing@irs.gov about unsolicited emails from IRS imposters. The email subject line may vary, but recent examples use the phrase “Automatic Income Tax Reminder” or “Electronic Tax Return Reminder.”
“The IRS does not send emails about your tax refund or sensitive financial information,” said IRS Commissioner Chuck Rettig. “This latest scheme is yet another reminder that tax scams are a year-round business for thieves. We urge you to be on-guard at all times.”
Tax pros should review new checklist with steps to protect data
Despite major progress against identity and data theft, these threats
still happen. They continue to put tax professionals and their clients
at risk. To help combat this, the IRS and its Security Summit partners
created a new Taxes-Security-Together Checklist. The checklist includes
things tax pros can do now to prevent and recognize data theft. It also
gives steps tax preparers can follow if they do experience a data
breach
Following this checklist is a great starting point for tax
professionals who want to protect their offices, computers and data.
This tax tip is the first in a series highlighting the items in this
checklist.
Here’s a rundown of the Taxes-Security-Together checklist:
Follow these steps, known as the “Security Six” measures
Activate anti-virus software.
Use a firewall.
Use two-factor authentication.
Use backup software or services.
Use drive encryption.
Create and secure virtual private networks.
Create a data security plan
Federal law requires all professional tax preparers to create and maintain an information security plan for client data.
The security plan requirement is flexible enough to fit any size of tax preparation firm.
Tax professionals should focus on risk areas. These include employee management and training, information systems, and detection and management of system failures.
Deductions for business meals are back on the table.
Allaying initial fears, the IRS recently provided clarification concerning food and beverage deductions under the Tax Cuts and Jobs Act (TCJA) in Notice 2018-76. Based on this guidance, many of your business clients may still qualify for some write-offs.
Significantly, the TCJA eliminated the traditional 50% deduction for business entertainment and meals, effective in 2018. Therefore, clients can no longer write off expenses relating to entertainment, recreation or amusement like the cost of a play or concert tickets following a substantial business discussion. However, the TCJA generally preserved the other rules for food and beverage expenses under Section 274, including the strict substantiation requirements.
This led to arguments in the tax community as to whether certain business meal expenses would remain deductible. (Clearly, deductions for meals are still available for taxpayers traveling away from home on business.) Under the interim guidance provided in Notice 2018-76, the IRS says that a 50% deduction is allowed for food and beverage expenses if the following conditions are met:
Under the interim guidance provided in Notice 2018-76, the IRS says that a 50% deduction is allowed for food and beverage expenses if the following conditions are met: • The expense is an ordinary and necessary business expense under Section 162(a) paid or incurred during the tax year when carrying on any trade or business; • The expense isn’t lavish or extravagant under the circumstances; • The taxpayer, or an employee of the taxpayer, is present when the food or beverages are furnished; • The food and beverages are provided to a current or potential business customer, client, consultant or similar business contact; and • For food and beverages provided during or at an entertainment activity, they are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices or receipts.
Furthermore, the IRS indicated it won’t allow the crackdown on entertainment and meal deductions to be circumvented by inflating the amount charged for food and beverages.
Notice 2018-76 contains three examples illustrating how the IRS intends to interpret these rules. All three examples involve attending a sporting event with a business client and having food and drink while attending the game.
Taxpayer A takes a customer to a baseball game and buy the hot dogs and drinks. The tickets are nondeductible entertainment, but Taxpayer A can deduct 50% of the cost of the hot dogs and drinks purchased separately.
Taxpayer B takes a customer to a basketball game in a luxury suite. During the game, they have access to food and beverages, which are included in the cost of the tickets. Both the cost of the tickets and the food and beverages are nondeductible entertainment.
The facts involving Taxpayer C are the same as they are for Taxpayer B, except that the invoice for the basketball game tickets separately states the cost of the food and beverages. As a result, Taxpayer C can deduct 50% of the cost of the food and beverages.
The IRS has announced it plans to issue proposed regulations on this issue. It is requesting comments by December 2, 2019.
With thanks to: Sanford Zinman, CPA National Tax Chair, NCCPAP sandy@zinmantax.com
