PA-NATP
NEWS
www.panatptax.com
[email protected]
Volume 28, Issue 2
Board of Directors
Executive
Committee
President
Kathy Bowman, EA
717-273-2742
[email protected]
Vice President
Patti Blum
814-968-5919
[email protected]
Treasurer
Sue E. Bure, AFSP
724-763-3049
accountingbysue@wind
stream.net
Secretary
Joyce Jones
724-924-9722
[email protected]
Contents
Chapter News
1–7
Federal News
8 – 11
Pennsylvania
News
12
Local News
13
Winter 2016-17
President’s Message
In a short while, we practitioners will be starting another
tax season. I am not sure how it will go with all the due
diligence we are required to do and all the security needed
to insure our client’s data is kept safe. It will be an
interesting year. Not to mention the probability of major
tax law changes on the horizon. Job security!
I want to thank outgoing Board Directors John Molinaro and Erica Knight for
their time serving the members. You both did a tremendous job on the Board.
The membership voted in Charles Evans, Patti Blum and Susan Bure for another
term on the Board. Also elected to the Board were Tina Pittman and Walter
Moyer. Welcome!
At our Annual Conference in Carlisle, (see photos elsewhere in this newsletter) I
was proud to announce the Award of Excellence went to Mary Jane and Drew
Stump, a most deserving couple who care deeply about the Chapter.
The Education Committee, now chaired by Dave Fleming, will be holding their
next meeting shortly to iron out the details of 2017 educational events. Please
contact Dave or myself with your suggestions.
Two dates to keep open on your calendar in 2017 are October 20 for a Farm
Seminar at Shady Maple Complex in Lancaster County and November 2/3 for
the Annual Conference in Carlisle. We are finalizing events in other locations as
well.
I hope to see you at one or all of the events. In the meantime, have a great tax
season.
Kathryn Bowman, EA
President PA-NATP
1
Notes from the Editor
This newsletter is for our membership, please feel free to submit any articles, comments, or questions
to [email protected].
Hope you find it informative and enjoyable.
We were so surprised to receive the Award of Excellence. What an honor. Thank you for all your
support and contributions to help make the newsletter a success. It is gratifying to have our efforts
noticed and appreciated.
Thank you! Mary Jane & Drew
**********************************************************************
2017 Calendar of Events
PA Chapter events in bold type
National events in italics
Education is ongoing and will be updated periodically, check our website for updated calendar.
May 19
Board of Directors Meeting, State College
September 7 or 8*
Form 1041 Seminar, State College
September 28 & 29
Basic Education Training, Erie
September 30
State & Local Education Training, Erie
October 20
Farm Succession Planning Seminar, East Earl Twp.
November 1
Board of Directors Meeting, Carlisle
November 2 & 3
Annual State Conference & Membership Meeting, Carlisle
August 7-10, 2017
NATP National Conference, Washington, DC
August 7-10, 2018
NATP National Conference, Anaheim, CA
July 21-25, 2019
NATP National Conference, Chicago, IL
*Tentative
2
2017 PA-NATP Board of Directors
Kathryn Bowman, EA (18)
President
Susan E. Bure, AFSP (19)
Lebanon, PA 17042
Treasurer
Manorville, PA 16238
Patti Blum (19)
Vice President
Joyce Jones, EA (17)
Sheffield, PA 16347
New Castle, PA 16101
Rebecca Mangold, EA (17)
Paul J. Pascuzzi, EA, MBA (17)
Lancaster, PA 17601
717-285-4181
Clarendon, PA 16313
[email protected]
[email protected]
Troy Clawson (18)
David Fleming, EA (18)
Youngsville, PA 16371
814-563-7047
Fairmount City, PA 16224
[email protected]
[email protected]
Mary Jane Stump, AFSP (18)
Holly Whiteside, EA (18)
Kutztown, PA 19530
610-683-9319
Warfordsburg, PA 17267
[email protected]
[email protected]
Charles C. Evans, Jr (19)
Tina Pitman, CPA (19)
Downingtown, PA 19335
Secretary
610-873-2073
Chambersburg, PA 17202
[email protected]
[email protected]
Walter M. Moyer (19)
(xx) indicates year term will expire
Philadelphia, PA 19144-3348
814-723-1088
814-764-3371
717-294-6659
717-504-8808
717-294-6659
[email protected]
Welcome New Members
The Pennsylvania Chapter is honored to welcome these new members
August 2016
Becker, Daniel, EA, CFP
Easton
Garvey, Joseph X, CPA
Scranton
Gregg, Victoria l, EA
Washington
Hanscom, Michael
York
Heron, Carolyn
Upper Chichester
Hershman, Marian
Pittsburgh
Horn, Cheryl Ann
Carlisle
Langianese, Candace
Bradford
Leskin, Bridget M
Brockton
Litman, Barbara Jean
Eighty Four
Marion, George Jr, CPA, EA Exton
Marion, Michael, CPA, EA
Exton
Perez, Julie
Philadelphia
Reifsnyder, Jessica
Richland
Williams, Harriet E
Philadelphia
Williams, Linda
Philadelphia
September 2016
Barnes, Khristina
Philadelphia
Cline, Rosanna
Steelton
Coyne, Teresa R
Pittsburgh
Free, Dorothy
Philadelphia
3
Furl, Kae A
Mill Hall
Haupt, Krys M
Lehighton
High, James A, CPA
Springfield
Johnson, Keith Ernest
Erie
Lyons, Robin
Homestead
Rahman, Md Mushahidur
Philadelphia
October 2016
Dechant, Elizabeth
Lucinda
Leasure, Angela, EA
Erie
Lemmon, Mary Lynn
Rochester Mills
Stansbury, Greg
Beaver
November 2016
Camp, Montrae Renie
Cranberry Twp
Casel, Sidney, EA
Linwood
Clott, Steve, CPA, EA
Havertown
Disantis, Frank, CPA
Broomall
Filipova, Zhanna
Philadelphia
Johansson, Timothy R, EA Conshohocken
O’Conner, Fabian
Pittsburgh
O’Donnell, Janis
Pittsburgh
Rest, Kevin S
Reading
Smith, William
Glenside
Chapter News
The Pennsylvania Chapter of the NATP provides a member benefit of ordering tax and
related books and information at a discount from Tax Materials, Inc. and Thomson Reuters
Checkpoint. Every tax office should have these various informative tools to help in the
planning and preparation of tax returns. By ordering through us, these companies help
support our chapter with a donation for each purchase.
To order The Taxbook™ or WebLibrary products, click HERE and use promo code 488.
To Order Quickfinder tax preparation tools, click HERE and use promo code Q680.
New Education Chairman
Dave Fleming is our new Education Committee Chair for
2017. Dave has been a member of NATP since 2002. He
served on the PA-NATP board of directors from 2005
through 2014. After a year off, he was elected to the
board again at the 2015 PA Chapter Annual Meeting.
Dave retired from a full-time accounting position in May
2016. After several months, he starting missing the
“excitement” of tax preparation and will be working with a
regional firm this coming tax season reviewing tax returns
for other preparers.
Dave also has farmed all his life, full-time for about 11 years, and part-time for the past 29 years.
He has been married to his wife, Cindy, for 41 years and they have 2 children and 4 grandchildren.
They enjoy motorcycling and traveling in their spare time.
Dave appreciates all the excellent live education that PA-NATP has provided over the years. He also
appreciates all the work of Patty Turner, the outgoing education chair. The committee has been
busy planning our 2017 live education and they all would like to see a large number of our members
take advantage of the education opportunities.
Dave would like to remind all of us that Pennsylvania treats income from “retirement accounts”
differently than the Federal Government. Pennsylvania taxes contributions to qualified retirement
accounts while a citizen is working, but then does not tax normal distributions from “qualified plans.”
Code 3 distributions are due to disability and generally are not subject to PA income tax.
Code 4 distributions are due to death and they are not subject to PA income tax regardless of the
age of the recipient, unless included with a Code D (see Annuities).
Code 7 is a normal distribution from an eligible employer-sponsored and is NOT taxable IF the
recipient has met the age and/or the years of service requirements of the plan. Code 7 also includes
qualified IRA distributions.
Annuities reported as Codes 3D, 4D, or 7D pose a different set of circumstances. The code D
denotes distributions from a commercial insurance or mutual company and are taxable as PA interest
income on Schedule A to the extent that they are included in Federal taxable gross income.
4
If you buy an annuity, including retirement annuities that are not part of a qualified employersponsored plan, any gain must also be reported as taxable income for PA. Code D amounts may
also have to be included in Schedule SP and PA-1000.
As we have clients approach retirement age, we need to be advising them to be careful in choosing
what type of investments they make with qualified retirement rollover monies.
Photos from Annual Conference
New Board of Directors taking oath
of office
David Braden teaching PA updates
Toys for Tots certificate presentation
to President Kath Bowman
Greg Skotnicki, PA Dept. of Revenue,
teaching Closing a Business & RCT-101
Deluxe
Edition
Federal
Taxbook
Winner!
Certificate to
NATP National
Conference in
Washington DC
Winner!
5
Let’s Make Pennsylvania Strong!
2017 NATP National Conference
Historic Washington, DC
Washington Marriott Wardman Park
August 7 – 10, 2017
DEADLINE FOR REGISTRATION IS JUNE 1, 2017
Our chapter is looking to get as many of our members as possible to attend this conference.
We are planning to offer bus transportation from different regions of the state depending
upon interest in each area. The bus would leave on Sunday August 6 and return Thursday
evening August 10. The approximate cost of the round trip will be between $65.00 - $75.00
per person. Please contact me at [email protected] as soon as possible so we
may start making arrangements with the bus companies. Check our chapter website for
frequent updates regarding the availability of this transportation.
Get ready for fun times and the best tax education in this beautiful, historic city!
Washington Marriott Wardman Park – Landmark historic charm in a
modern sophistication setting.
Charming
Harry’s
Pub – a
local
favorite!
Attractions just
steps away from
the hotel plus all
the historic sites in
Washington DC.
Bring the family!
Marriott Convention
Room
Absolutely stunning,
30,000 square foot
space; largest event
space in
Washington, DC.
Smithsonian National Zoo
Thurgood
Marshall Ballroom
Elegantly
appointed event
space for training
sessions.6
Woodly Park Restaurants
Woodley Park Restaurants
vibrant restaurants and nightlife
Save The Date!
October 20, 2017
8:00 am – 3:00 pm
Farm Succession Planning Seminar
Shady Maple Complex
129 Toddy Drive East Earl, Lancaster County
Come for the education and stay for the fun!
Explore beautiful Lancaster County in the fall.
Look for more details in the next newsletter.
For Tax Professionals (CPE) and the Farming Community
Speakers and Topics:
Dave Fleming, NATP – Schedules F & J, Related Farming Topics
Darlene Livingston, PA Farm Link – Farm Succession Planning
Gary Heim, Attorney – Succession Tax Law
Coffee, Donuts and Smorgasbord Lunch Included
Bring Your Clients!
Sponsored by the PA Chapter of the National Association of Tax Professionals
7
Federal News
IRS Warns of a New Wave of Attacks Focused on Tax Professionals
Thieves are able to access tax professionals’ computers and use remote technology to take
control, accessing client data and completing and e-filing tax returns but directing refunds to
criminals’ own accounts.
Victims in the tax community learned of these thefts while reconciling e-file acknowledgements.
In addition to activating security measures for tax software products, IRS urges all tax preparers
to take the following steps:










Security Scan. Run a security “deep scan” to search for viruses and malware.
Be alert for phishing scams. Do not click on links or open attachments from unknown
senders.
Educate all staff members. About the dangers of phishing scams in the form of emails,
texts and calls.
Secure Data. Make sure that taxpayer data, including data left on hardware and media,
is never left unsecured; use security software on all digital devices.
Shred Documents and Destroy Media. Securely dispose of taxpayer information.
Use Strong Passwords. Require strong passwords with a minimum of eight characters
(more is better) containing numbers, symbols, upper and lowercase on all computers, tax
software programs and Wi-Fi.
Change Passwords. Require periodic password changes every 60 – 90 days. Consider
using password managers like LastPass, Dashlane, etc.
Safely Store Data. Store taxpayer data in secure systems and encrypt information when
transmitting across networks.
Encrypt Email. Encrypt email that contains taxpayer data.
IRS PTIN System. Check periodically the number of 1040 returns filed under your PTIN
to look for suspicious activity.
Due Dates for 2016 Tax Season
Tax season will begin on Monday, Jan. 23, 2017 and the final filing day will be April 18. The IRS
will start accepting electronic tax returns on January 23 and it anticipates more than 153 million
individual tax returns to be filed.
However, even with the January 23 start date, many software companies and tax professionals
will begin accepting tax returns before that date and then submit the returns when the IRS
systems open. The IRS will also start processing paper tax returns on January 23.
A new law will require the agency to hold back tax refunds claiming the Earned Income Tax
Credit, the Child Tax Credit/Additional Child Tax Credit and the American Opportunity Tax Credit
until February 15. Be aware it will take several days for these tax refunds to be released and
processed through financial institutions. Factoring in weekends and the President’s Day
holiday, the IRS is warning many affected taxpayers may not have actual access to their tax
refunds until the week of February 27.
8
Highlights & Tips for the Coming Tax Season

Changes for 1098-T – PATH Act requires educational institutions to only include
amounts ACTUALLY PAID. However, the IRS granted an option to the institutions for
2016 to continue as in the past showing amounts billed or paid with no penalty.
A taxpayer may not claim an education tax credit or deduction unless they possess a
valid Form 1098-T. Wait to file returns until you see the form.

Form I-9 – Mandatory starting 1/21/2017, the new form with date 11/14/2016 in the
lower left corner must be used.

Form 1098 – After 12/31/2016 all forms will be required to include the following
information:
- Amount of outstanding principal on the mortgage as of the beginning of the
year
- Date of the origination of the mortgage
- Address of the property that secures the mortgage

Critical Changes to W2/1099-MISC Due Dates – E-Filing W2/1099-MISC to the IRS is
January 31, 2017 – NOT February 28 or March 31 as in the past, specifically for 1099MISC with Box 7 amounts over $600.00. Physical delivery of W2/1099-MISC to the
recipient is January 31, 2017. Electronic version is allowed only if you capture
electronic “consent” from the recipient in order to send digitally.
Penalty Changes Per Form
- Within 30 days of deadline - $50.00
- After 30 days from deadline - $100.00
- Missing or incorrect Name/TIN combo - $260.00
- These fines double if you do not send to recipient or IRS

First Baby Boomers Must Start Taking RMDs – 3.4 million born in 1946 and turning 70
½ during 2016. This may be the year for their first RMD. There will be a tidal wave of
people turning 70 ½ in the next few years. Be sure to capture age information in your
system to alert your clients.

The following are some of the credits or items extended to December 31, 2016
- $500.00 Credit for non-business Energy Property
- Tuition Deductions
- Exclusion for Personal Residence Cancellation of Debt Income
- Mortgage Insurance Premium Deduction

The following are some of the credits or items made permanent
- Enhanced American Opportunity Act
- Enhanced Child Tax Credit
- Enhanced Earned Income Tax Credit
- $250.00 Teacher Supply Deduction
- Sales Tax Deduction
- Contribution of Real Property for Qualified Conservation Purposes
- IRA Transfer to Charity
- SIMPLE IRA held 2 years can be rolled over to other plans
- 5 year Holding Period for S Corp Built-in Gains Tax
- $500.00 Section 179 Expensing Limit (beginning in 2106 this provision is
subject to COLA) Some states including PA & NJ do not conform to this.
9

W-2 Verification Code – IRS to expand the program started last year. Approximately 50
million W-2’s will contain the 16-digit code, up from 2 million last year. Make sure you
look for it on all W-2’s and include in the return.

Have all taxpayers bring end-of-year pay stub receipt to compare to W-2 for accuracy.
Also, other deductions such as LST, UC, dependent care credit, HSA, etc. may be helpful.

Form 1095-A – All Social Security numbers shown on the Form MUST be included on the
tax return or it will be rejected.

Form 8867 – Must complete for all EITC, CTC/ACTC, & AOTC. The four due diligence
requirements are; 1. Complete and submit Form 8867, 2. Compute the credits, 3.
Knowledge of the client, 4. Keep records for statute of limitations. Failure to do so could
be costly. If you are uncomfortable asking the probing, sometimes sensitive questions
necessary to meet the requirements, consider using the IRS Form 886-H-EIC or other
versions to show your clients what documents and information the IRS needs to meet the
requirements.

Paid Preparer Due Diligence Penalties – The $500.00 penalty is adjusted for inflation and
is now $530.00. The penalty will apply to each credit incorrectly submitted on a tax
return. If due diligence is not met for all three credits on one return the penalty would be
$1590.00.

Crypto Currencies – A federal court ruled the IRS can serve digital-currency-service
companies summons requesting detailed information on its customers’ transactions.
Suggestion – strengthen your engagement letter to protect you from clients who do not
report income from crypto-currencies, consumer-to-consumer sales, and barter activities.
Add a statement such as “You agree that you have reported all 2016 income you received
including barter, crypto-currency, consumer-to-consumer activity, cash based revenues
and all other income whether received in-person, in-kind, or electronically.”

Tax Preparation Fees – What fee amounts are appropriate and what are unconscionable?
At a recent seminar this question was asked and here are two comments: It depends – if
it is not embarrassing, it ain’t high enough!; If the customer thinks your fee is too high,
let them pay what they think is fair, but you don’t do them again.

E-Help Desk for Tax Pros – Toll free 866-255-0654 Monday thru Friday 7:30 am to 7 pm
EST. This phone number is NOT meant to be shared with the general public.

Form 706 – Part 6:Portability of Deceased Spousal Unused Exclusion (DSUE) – Many
preparers do not prepare Estate Tax Returns and many clients do not have estates valued
over $5,250,000 dollars, however, there is a provision in this Form that needs to be
considered. A timely-filled (9 months after decedent’s date of date) Form 706 is required
to elect portability of the DSUE amount to the surviving spouse. The filling requirement
applies to all estates regardless of the size of the estate. While this may seem
unnecessary, one never knows what the future may hold. Suppose the surviving spouse
wins the lottery, inherits a large sum of money, is awarded a large damage settlement,
etc. that totals over the $5,250,000, then they could use the DSUE to avoid paying estate
tax. Our purpose here is to alert preparers and clients of this benefit. Put a clause in
your letter of engagement referencing the DSUE for your client to pursue to limit your
liability in the future should it be needed but was not elected to use.
10
11
Pennsylvania News
NJ & PA Reciprocal Agreement
New Jersey Gov. Chris Christie announced on November 22, 2016 that he would leave the
Agreement in place for 2017 and beyond. New Jersey and Pennsylvania residents working
in the opposite state will continue to pay state income taxes only in the state where they
live. Any planning that was done should be undone. PA residents working in NJ should file
Form 165 to prevent NJ withholding. NJ residents working in PA should file Form REV-419
to prevent PA withholding.
Tax on PA Lottery Cash Prizes
Act 84 of 2016 applies the commonwealth’s 3.07 percent personal income tax to cash
prizes paid by the PA Lottery on or after January 1, 2016.

Noncash prizes are not subject to PA personal income tax.

Lottery annuity payments won prior to 2016 were not taxable; payments received
in 2016 and after will now be taxed.

Both residents and nonresidents are subject to the tax.

All gambling and lottery winnings from out-of-state are subject to the tax.

PA Lottery will automatically withhold personal income tax on prizes greater than
$5000.00 paid after July 12, 2016.

Winners of an individual prize valued at greater than $600.00 will receive a federal
Form W2-G by mail.

Report your PA-taxable winnings on PA Schedule T, Line 8 “Gambling and Lottery
Winnings”. Spouses must report their winnings separately.

Losses from PA Lottery tickets purchased on or after January 1, 2016 may now be
used to offset gambling and lottery winnings.

You must be able to substantiate gambling losses used to offset winnings.

You are permitted to donate, split, and assign lottery proceeds, in whole or in part,
the winnings are taxable to each recipient.

If you sell your annuity, you are no longer liable for the tax on future payments;
but you are liable for the tax on the payment you receive from the sale.
12
Local News
Great News! Act 150 was signed into law this year by Governor Tom Wolf. It now permits farmers
to not be subject to quarterly filing of income tax for local purposes. Farmers must now follow
state rules that say the returns must be filed by March 1 of the year following the tax year end.
They can make a one-time payment on January 31 to file their taxes by April 15 or they can file
the tax return by March 1 and pay their taxes at that date. But, remember, this is effective
beginning January 1, 2017. The 2016 filing year is still under the old rules that require quarterly
estimated payments by everyone.
Also, persons with no income will not be required to file a local tax return.
This information was provided by Berkheimer local taxing authority: Ministers and clergy are not
required to pay local wage tax on their housing allowance. This means that the amounts in Box 16
State Wages should reflect the housing allowance plus the wages. Box 18 Local wages should only
include the wages and no housing allowance.
There has been a major change at the local level concerning Active Duty pay. Effective January 1,
2016, Active Duty pay is exempted from tax. That was a component left out of Act 32 when it was
signed. So for 2012, 2013, 2014, and 2015, Active Duty pay is taxable; not so for 2016.
There is an Interactive Voice Response at Berkheimer to assist customers. This permits the phone
keypad to enter information to help resolve your problems. That number is 610-599-3136.
Submitted by Joyce Jones, EA
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Please send your ad and check, made payable to PA-NATP, to the newsletter editor:
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13
National Association of Tax
Professionals – PA Chapter