Special Message: With the General Assembly out of session until September, PICPA’s Legislative Update will be on hiatus for the remainder of the summer. We will return in the fall or as legislative issues arise. Thank you for your continued support of our advocacy efforts in Harrisburg.
PICPA Hosts Budget-Focused Legislative Update Webinar
The PICPA is hosting a Legislative Update Webinar on the newly enacted state budget for fiscal year 2022-2023. The 100-minute session will provide attendees with a detailed look at this year’s budget and historic tax changes, and will explain how it all impacts your clients, employers, and taxpayers. Join Peter Calcara, PICPA’s vice president of government relations, and guest speakers Drew VandenBrul, CPA, managing director at Grant Thornton, and Michael J. Semes, of counsel with BakerHostetler, on July 21. The session begins at 9:00 a.m.
Register today for this webinar you don’t want to miss.
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Multistate Tax Collaboration Meets with COST
Members of the PICPA State Taxation Steering Committee and their colleagues at the New Jersey Society of CPAs (NJCPA) and the New York State Society of CPAs (NYSSCPA) met as part of an ongoing effort to tighten connections and work collaboratively to uncover and resolve potential cross-state tax issues.
The most recent meeting included special guests Douglas L. Lindholm, president and executive director of the Council on State Taxation (COST), and Fred Nicely, senior tax counsel at COST. They provided an overview of multistate legislative items of interest and some of their recent policy positions. Topics of discussion included state business tax burdens, the false claims act and potential state tax implications, corporate income taxes, and COST’s proactive advocacy and model legislation.
Close to 30 representatives from PICPA, NJCPA, and NYSSCPA participated in the virtual meeting.
The group is tentatively scheduled to meet again in October. If you are a PICPA member and are interested in participating in future discussions, please reach out to Alex Fabian.
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IRS Backlog Remains a Concern for Practitioners
In the most recent National Taxpayer Advocate Objectives Report to Congress for fiscal year 2023, it was revealed that the backlog at the IRS, as of May 27, 2022, was 21.3 million unprocessed paper returns, up from the previous May’s reported number of 20 million. At the current processing rate, it will take nearly two years to address the backlog.
The AICPA Tax Executive Committee sent a letter to Charles P. Rettig, IRS commissioner, and Lily Batchelder, assistant secretary for tax policy at the Treasury Department, in which the AICPA recommends additional measures to address the backlog. Some of the measures are as follows:
- Continue the use of surge teams to expedite the processing of returns, and consider increasing the number of surge teams if the inventory backlog is not expected to reach healthy levels before the end of the year.
- Continue the suspension of automated compliance actions until the IRS is better prepared to devote the necessary resources for a proper and timely resolution of the matters.
- Offer a reasonable cause penalty waiver, similar to the procedures of first time abate (FTA) administrative waiver, without affecting the taxpayer’s eligibility for FTA in future tax years.
The PICPA has been in communication with Rich Furlong, IRS senior stakeholder liaison, who provided the following insight on the backlog and some tips for navigating the issue:
- The IRS is encouraging all tax professionals to redouble their efforts to educate clients on the benefits of electronic payments to address the lag between e-filed return posting to IRS master file accounts and subsequent processing of mail-delivered paper checks.
- It is not advised for practitioners or clients to mail any response to IRS at this time. See the latest updates on IRS mission-critical operations.
- IRS leadership has redeployed many service center employees, who are normally on the toll-free lines, to assist with the paper inventory. As a result, it will be a challenge to get through to Practitioner Priority Service for individual accounts. For business accounts, it may be easier to get into the queue.
The IRS issued the following statements detailing the situation: IRS Statement on Inventory and IRS Continues Work on Inventory of Tax Returns.
If PICPA members have questions on IRS guidance, please contact PICPA’s Alex Fabian, manager of government relations.
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Volunteer Opportunities Available on PICPA Thought Leadership Committees
We are gearing up for a busy fall in which we plan to continue pushing lawmakers to pass legislation creating an elective pass-through entity (PTE) tax and clarifying the statutory language under which the Department of Revenue currently penalizes Pennsylvania resident partners who elect to pay similar PTE taxes in other states. PICPA member volunteers are needed to join our efforts.
In fact, we are always looking for more volunteers to join our committees and provide valuable input on tax policies being considered in the state legislature. If you would like to join us on any of the following thought leadership committees, please reach out to Annette Knapp:
Thought leadership committee members frequently engage with representatives from the Department of Revenue. We have our next quarterly meeting approaching, and we need your questions. Please submit your DOR-related systemic or procedural questions to Annette Knapp. For reference, check out our portal of transcripts from previous Q&A sessions.
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Reconciliation Bill Deadline Looms in Congress – Potential Impact on Corporations
As negotiations continue on the fast-approaching federal reconciliation bill, the AICPA is pushing back on the implementation of a minimum book income tax on corporations. As negotiations continue, major components of the reconciliation package could change or be dropped, or new provisions could be added. The deadline to pass a reconciliation bill is Sept. 30.
Read more about the likely provisions and the profession’s advocacy in this Journal of Accountancy article.
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Fraudsters Impersonating DOR in Letters Targeting Pa. Businesses
Criminals are impersonating the Department of Revenue by sending fraudulent letters to Pennsylvania business owners that direct them to turn over their accounting records. This ploy is being used to trick unsuspecting taxpayers into providing sensitive financial information.
The letters intend to unsettle the recipient by making them believe they are being investigated for an "alleged violation of delinquent sales tax liability." The letter threatens that penalties will be imposed and urges the business to provide accounting records.
Although these counterfeits bear the department's name and logo, the notices include suspicious and inaccurate details that can help differentiate them from a legitimate notice sent by the Department of Revenue. Here are a few tips:
- The bogus notice does not include a return address. The Department of Revenue will always include an official return address.
- The recipient is addressed as "Dear Business Owner." A Department of Revenue notice typically addresses the business owner or business name.
- The counterfeit is sent by the "Pennsylvania Department of Revenue Tax Investigation & Enforcement Unit" and claims the business is under investigation by the "Pennsylvania State Revenue and Cash Disbursement Unit." The units listed are phony. Reach out to the department directly, as advised below, to determine if a unit exists.
The Department of Revenue is encouraging Pennsylvanians to keep the following in mind to help safeguard against this scam:
- Ensure you are speaking with legitimate representatives. If you have any doubt at all about the legitimacy of a notice from the department, reach out to a department representative by using the Online Customer Service Center. This allows the taxpayer to securely submit a question through a process similar to sending an email.
- Examine the notice. Vague language is often used to cast a wide net and lure in as many victims as possible. Look for identifying information that can be verified as well as for blatant factual errors and inconsistencies. If a notice is unexpected and demands immediate action, take a moment to verify its legitimacy.
- Use the information provided in a potentially counterfeit notice (such as a name, address, or telephone number) to conduct a search online. The Department of Revenue's website is the best source to verify information contained in a legitimate notice from the department.
If you are concerned about a potentially fraudulent notice, please visit the department's Verifying Contact by the Department of Revenue webpage.
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IFO: Where Did the Workers Go?
The Independent Fiscal Office (IFO) published a new brief that examines the factors that have caused the state’s labor force to contract by 120,000 workers since the start of the pandemic.
For Pennsylvania, the latest data (May 2022) show an unemployment rate of 4.6% and roughly 300,000 unemployed residents seeking work. The data show that the unemployment rate and number of unemployed are relatively low, not only due to strong labor demand but also because many workers left the labor force and are no longer working or actively seeking employment.
According to the report, identified factors contributing to the totals include long-term demographic trends, care for elderly parents, cyber-charter and home schooling, wealth accumulation, and the elimination of the income-based phase out for SNAP benefits that creates a punitive cliff for benefits that are twice the pre-COVID level.
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