Ok, first off, there’s a good chance your organization does some form of risk assessment without necessarily calling it that or even realizing that’s what it is, but is it enough? A risk assessment means essentially: where could things go wrong and what are we doing about it?

Another way to think about it – blind optimism that things will always work out and that you can trust everyone, is the opposite of a risk assessment. Management, those with the authority to contract, and anyone who is involved in the chain of financial transactions should at some point look around and think about where the weak spots are. Brainstorm together.

I took a self-defense class and the instructor gave us homework: next time we were out in public, look around and notice who is most vulnerable if a purse snatcher was to come by. We each came back to the next class and reported the same thing. It was us. Each of us was the one sitting at a cafe, not paying attention, with our purses sitting where they would be easily accessible if someone felt inclined to take it. That’s a risk assessment. Awareness is key. Moving your purse is addressing the risk. It doesn’t have to be complicated but it does take thinking about it.

Where is your organization most vulnerable? Think about it from different perspectives. Here are some questions every organization should ask and they tend to follow the What Would Happen If format. Answers tend to be If That/Then This. Also, it isn’t just management that should ask these questions.

• What would happen if our largest funding source stopped funding us?
• What would happen if our founder/chair were suddenly no longer around? (it’s hard not to be morbid but you have to think about it at least once – it’s call succession planning)
• What would happen if our main accounting person was hit by a bus? (again with the morbid, sorry)
• What would happen if our building burned down and our records were destroyed?
• What would happen if the one person that knows the passwords or has the keys ran off to Vegas and isn’t answering their phone? (trying to be less morbid here, it could happen)
• What would happen if the IT server crashed and data was lost?
• What would happen if one of our vendors or subcontractors is operating a fraudulent enterprise?
• What would happen if someone in the organization wanted to take a blank check? Of course you think they wouldn’t but walk through the question – are the checks easily accessible? is the signature stamp sitting right on top of your desk?
• What would happen if someone put through an expense reimbursement or an invoice twice?
• What would happen if something were stolen – are all fingers going to be pointed at me because no one reviews what I’m doing? Could I prove it wasn’t me?

Some questions range in the catastrophic/highly improbable zone but many are potentially damaging/could happen zone. There is an understood difference between a heart attack and a hang nail and the way to address them doesn’t take the same approach. If you have one person who inputs checks received, makes the deposit at the bank, and has access to the sub-ledgers – are you at least aware that opens the door to risk? Do you leave your car unlocked when you park downtown?

Think in terms of whether incentives and pressures are present that would push someone to step over that line. Most people that have committed crimes, particularly white collar crimes, see the action as an aberration of their character. They would normally never do this but…

People have amazing powers of rationalization if they are in some sort of trouble or there is perceived inequity at play.

Is management, the economy or someone’s personal life you know nothing about creating that pressure? Regardless of who started it, what can you do to address it? How can you lessen opportunities for someone to do something, lessen the impact, or at least lessen the time before you find out?

Risk assessment just means think about what if. Think about it when something new comes into the scenario: new people, new system, new procedures. Where are you vulnerable? Now then, what do you do about it?

The it Award is open to any United States-based nonprofit with 10 or more employees and there is no fee to enter. You just need to tell them why your organization should be it.

You can apply here.

If you’ve looked at the application and have questions, join C.Fox Communications for a conference call Thursday, February 23, at 3 p.m. They’ll be answering questions and giving advice about completing the application. Please RSVP to Julia@cfoxcommunications.com.

Do you know an organization worthy of the award?  Pass along these details, and feel free to reach out to C.Fox Communications at itaward@cfoxcommunications.com with any questions during the application process.

No allegations have been made against D.C. Children and Youth Investment Trust Corp. but the situation is in the news again, cited as an example of lack of oversight of D.C. agencies. The D.C. Council Committee on Government Operations lacks the authority to enforce any correction of problems found by its inspectors and auditors although they do conduct follow-ups on recommendations made.

A fellow Council member, Tommy Wells, spoke out that disbanding D.C. Children and Youth Investment Trust Corp. would be losing a valuable D.C. institution. His suggestion is that a leadership change is in order with mayoral oversight of future appointees to the board. The political pressure on the board is going to be intense and constant and having stringent reporting and competitive bidding  requirements as well as increased oversight is called for in order for the organization to function responsibly.

Thomas’s sentencing will take place in May.

Read more about the case here, Councilman Well’s statement here and oversight here.

If you find yourself owing the IRS, or having unfiled or erroneous tax returns, the time to act is now. The IRS continues to step up collection enforcement on existing debts, and is getting very creative and resourceful at uncovering transactions that have been underreported or not reported at all. We can help you resolve any tax compliance or controversy issues you may have. Please contact Laurence C. Rubin, CPA, Aronson’s Tax Controversy Practice Leader, at 301.222.8212 to confidentially discuss your situation and the solutions available.

While identity theft and phishing top the listing, of particular interest are these two items:

• Abuse of Charitable Organizations and Deductions, and
• Misuse of Trusts

Intentional abuse of 501(c)(3) organizations includes: arrangements that improperly shield income or assets; attempts to maintain control over donated assets or the income from donated assets; over-valuing non-cash assets; arrangements to buy back the donated asset at a time and price set by the donor; and inaccurate appraisals.

Misuse of trusts include: questionable deductions of personal expenses, and promises of reduced income, estate, and/or gift tax.

IRS personnel have witnessed an increase in the abuse and misuse of these entities. Organizations should be aware of the possible motives behind some donor objectives and strive to not be complicit in such activities. Penalties and the damage to the organization’s reputation might not be worth whatever temporary benefit received.

See the full listing here.

• Require long-term unemployed to volunteer for 20 hours a week in order to continue receiving unemployment benefits,
• Those drawing six months or longer must search for work at least 20 hours a week,
• Allowing states to conduct their own drug testing of applicants.

The last point is an explosive political issue with intense arguments on both sides so let’s steer clear of that one entirely and just deal with the first point. The concept behind the first point, according to the senator, is that being involved in volunteer service helps workers maintain job skills, marketability, and a sense of self-worth.

Similar proposals have been shuffling around for a few years now about the possibilities of different types of mandatory volunteerism: college students receiving federal education tax credits, or having a high-school volunteer requirement (also here). The arguments for such requirements tend to cite the personal growth of the volunteer and the benefit to the community. Both are true. Arguments against tend to point to that if people are forced, they will resent it, that is time that could be spent looking for work, and that “mandatory volunteer” is an oxymoron.  Also true.

Only a few have mentioned what the impact on the nonprofit community could be. Yes, volunteers are needed but a sudden influx of volunteers that don’t want to be there? Hmmm… There are certainly organizations that need help but many might prefer to cultivate and train their volunteers. Many organizations are concerned with and work hard to increase volunteer longevity, which is at odds with the idea of short-term placement in order to push back into the work force. Ultimately, organizations may not be cut out to care-take a mob of volunteers as well as their clientele. Having peace officers supervise clean-up efforts and similar low-training tasks might be a better fit, and then you have arrived at what this actually is, which is community service. Community service is a great thing and many organizations have structures in place for that, but whether they could manage a sudden influx is still a possible issue. There’s also the possible issue of it feeling punitive. But sticking to the nonprofit’s point of view, organizations have to be able to conduct their mission without getting overwhelmed with supervising. Supervision takes resources and funding that many organizations don’t have room for in the budget right now. There’s such a thing as a kind of help that hurts more than it helps.

Read more about the proposed bill here and here.

A contractor can be debarred for poor performance or ethical issues, including fraud or misrepresentation. Delinquent tax payments and violations of the Drug-Free Workplace Act are particularly frowned upon. An indictment of criminal activity will set the process for suspension rolling. Each agency has a debarring official who will determine if debarment is appropriate and the period of suspension.

It isn’t just contractors that can be debarred, however, individuals can also be debarred. A suspended or debarred individual may not bid on or receive any federal funding including: contracts, subcontracts, grants, subgrants, cooperative agreements, scholarships, fellowships, loans, or subsidies.

If an organization knowingly does business with a suspended or debarred person or company, the federal agency may disallow costs or cancel the agreement. If you receive government funding,  protect your organization and check your vendors and subgrantees on the Federal Excluded Parties List System (EPLS). D.C. has its own list here. Virginia’s list is here. Maryland’s is here. Don’t assume you would know if any of your vendors were on the list!

For more on debarment technicalities go here and for ultra-technical go here. See the Money News article here.

Many nonprofits are re-assessing their valuations with the results being a drastic change, in some cases what was previously valued at $10.64 per pill adjusted down to $1.54 per pill. The impact of decreasing the value of the donation is a significant drop in income. The watchdog group, Charity Navigator is taking a closer look at the potential fall-out for organizations in this position.

Charity Navigator gives rankings to charitable organizations based on their financial health, accountability, and transparency. Typically, an organization with sizeable decreases in revenue get points taken off but in this case, the group is trying to determine if that’s a fair assessment or if these organizations deserve special consideration. The group is soliciting feedback from humanitarian membership groups, gauging the interest in giving the organizations a chance to file restated financials for the past four years, using the reassessed pill values, thereby not having to show a sudden drop in income for the current year.

Arguments are being made for and against allowing the amended reporting. One argument against it being that it would be difficult for an auditor to reassess the fair value four years back. Others note that it wouldn’t be fair to organizations that hadn’t hyper-inflated their medical donation values in the first place. Those arguing in favor are likely the same parties that have needed to make the valuation adjustments.

Read more about the case here. See Charity Navigator here.

• Any organization must file Form 990, 990EZ or 990-N, even if an exemption application has not been filed or approved yet.  (The exemption for churches and certain religious organizations still exists.)
• If you had foreign investments valued at $100,000 or more, you must complete Schedule F, Part I and IV.
• Clarification on when to complete the parts of Schedule F providing grants or assistance made to organizations or individuals outside the United States.
• Clarification with examples for when a board member is considered independent.
• If the governing body allowed an executive committee to act on its behalf, it must provide an explanation in Schedule O.
• The governance section now asks if any governance decisions of the organization reserved to (or subject to approval by) members, stockholder, or persons other than the governing body.
• Instructions added that an organization cannot say “yes” to the governance area question (line 11a) about providing the 990 to the voting governing body before filing with the IRS if it merely notifies them that the 990 is available upon request for review.  It is satisfactory, though, to provide a link to a password-protected web site on which the entire Form 990 can be viewed.

The 2011 form can be found at: http://www.irs.gov/pub/irs-pdf/f990.pdf.

The 2011 990 instructions can be found at: http://www.irs.gov/pub/irs-pdf/i990.pdf.

Undoubtedly, you’ve noticed you no longer get paper checks back with your bank statement every month. It’s a good step forward in terms of lessening all the paper transported around and speeding the transaction process, but the system has a weak spot. If a vendor processes a check electronically, they still retain a paper check – and while certainly no one we know would ever do this (er…right) – I’m required to remain professionally skeptical – one could present the paper check at a bank branch. The check itself bears no indication of having been previously processed electronically.

According to Fraud magazine, duplicate check processing has bloomed into a $500 million problem, making up about half of all the check fraud in the U.S.

The banks are liable for accepting fraudulent checks and are working to reduce the risks but most only catch it after the duplicate has already p0sted to your account. If the paper check is additionally manipulated it slows the detection process down further.  Organizations need to do their part to reduce impact. Things you can do:

• Reconcile your bank statement as soon as feasible. I know you are busy but don’t keep doing it 6 months late – there’s a real risk involved.
• Ask your bank to at least provide images of the checks in your bank statement. Actually review these to check for any alteration or deviation from the original check as processed.
• Ask your bank what system they have in place to prevent duplicates and what the time lag is in catching duplicates posted in error or fraudulently.
• Stay skeptical. This doesn’t just involve your inside people that you know and trust but anyone that might have access to the paper check, authorized or not. Ask your vendors if they are submitting electronic scans, what is their system for taking care of the paper check afterwards? They need to deal with it securely in a way that protects your information.

Read more about it here and here. Click here for FAQs on Check 21.

SBA establishes small business size definitions (referred to as size standards) for private sector industries using two primary measures of business size—receipts and number of employees. Over the years, SBA has received comments that its size standards have not kept up with changes in the economy – particularly that they do not reflect changes in the federal contracting marketplace and industry structure. The last comprehensive review of size standards occurred during the late 1970s and early 1980s.

SBA recognizes that changes in industry structure and the federal marketplace since the last overall review have rendered existing size standards for some industries no longer supportable by current data. As part of SBA’s ongoing comprehensive review of size standards, the Agency reviewed all receipts based small business size standards in NAICS Sector 54, Professional, Technical, and Scientific Services, and one size standard in NAICS Sector 81, Other Services, to determine whether they should be retained or revised.

Based on the reevaluations of relevant industry and program data and the Agency’s assessments of public comments it received on the proposed rule, SBA has decided to increase small business size standards for 34 industries and three sub-industries in NAICS Sector 54 and one industry in NAICS sector 81. SBA has decided to maintain 11 receipts based size standards in NAICS Sector 54 at their current levels. Some of the NAICS increased included:

To read the final rule and see the complete list of NAICS changes please visit http://www.gpo.gov/fdsys/pkg/FR-2012-02-10/pdf/2012-2659.pdf

1. Reducing the lifetime gift exemption back to $1M (the 2009 level)
2. Reducing the overall estate tax exemption to $3.5M (the 2009 level)
3. Increasing the top estate tax rate back to 45% (the 2009 level)
4. Making the trust assets in the IDGTs (Intentionally Defective Grantor Trusts) includible in the grantor’s estate
5. Modifying the rules on valuation discounts
6. Requiring a minimum 10-year term on GRATs (Grantor Retained Annuity Trusts)
7. Making permanent the portability (carryover) of unused estate tax exemption amounts between spouses.
8. Limiting the duration of the GST exemption to 90 years

Among the Administration’s various proposals on estate tax law changes, the most damaging one is the proposed reduction of the current lifetime gift exemption of $5M to $1M starting in 2013. Since the beginning of 2011, many wealthy taxpayers have taken advantage of the $5M lifetime gift exemption ($10M per married couple) to make tax-free transfers of wealth downstream to family members, including gifts of cash, securities, real property, and interests in family businesses, using a variety of available estate/gift tax planning techniques that involve trusts. All these major wealth transfers may come to a halt if the Obama proposal gets it way or if Congress does nothing and lets the current law on the $5M lifetime gift exemption expire on December 31, 2012.

Included in the Administration’s 2013 budget, there is also another important estate tax proposal that could be as damaging as the reduction in lifetime gift exemption. The new proposal would change the current estate and gift tax rules as applied to IDGTs – a commonly used estate tax planning technique – and require the trust assets in the IDGTs be includible in the grantor’s estate. Estate planning professionals have been using this technique successfully for many years to help wealthy clients transfer substantial assets out of their estates at a very low transfer tax costs using a combination of low asset valuations, available discounts, and low interest rates. If this proposal gets passed by Congress, it would significantly change the existing approach to estate tax planning.

Individuals who have not taken advantage of the current gifting environment may want to consider doing so before the end of 2012.

For further information, please contact your Aronson tax professional or Michael Yuen of our Estate/Gift/Trust Tax Practice at 301.222.8209.

If you find yourself owing the IRS, or having unfiled or erroneous tax returns, the time to act is now. The IRS continues to step up collection enforcement on existing debts, and is getting very creative and resourceful at uncovering transactions that have been underreported or not reported at all. We can help you resolve any tax compliance or controversy issues you may have. Please contact Laurence C. Rubin, CPA, Aronson’s Tax Controversy Practice Leader, at 301.222.8212 to confidentially discuss your situation and the solutions available.

One reason for the increase is that the Small Business Administration is increasing its effort to catch firms that misrepresent their size or ownership status.  Previously, the SBA only reviewed contracts that the SBA itself was awarding.  Now, the SBA may act even if the misrepresentation occurred on a proposal submitted to another agency.

While compliance with all federal laws and regulations is important, all businesses claiming to be small and qualified for a specific category (such as HUB Zone or Veteran Owned) should be sure that they understand and meet all SBA requirements prior to certifying to their status.   For a more extensive review of the current suspension and debarment statistics please see this informative article published by Money News.

Deltek’s FY2013 Federal Budget Request: Insights and Implications report profiles the spending priorities and policy initiatives in the Obama Administration’s fiscal year 2013 budget request. It examines the information technology investments, trends, and drivers that offer insight into areas of growing emphasis and potential growth in the coming fiscal year.

The analysis covers the following areas:

• Discretionary and information technology budget reviews
• Budgetary trends in technology purchasing, program performance and acquisition policy
• Federal department and agency budget priorities and programs

Each new budget request reveals new and evolving program priorities as well as major course changes for the current administration. Although some multi-year programs will be familiar, an administration often uses the new budget request to make the case for major new proposals. In addition, any number of current and growing challenges is often reflected in how departments plan to spend their funding.

Presenters:

The webinar will be presented by Ray Bjorklund, Vice President and Chief Knowledge Officer, Kevin Plexico, Vice President, Federal Information Solutions and Deniece Peterson , Manager, Industry Analysis, at Deltek.

Put your business on the fast track; get the market intelligence you need to boost your opportunities through GovWin webinars.

Online registrations are now closed, but walk-in registrations will be accepted!  Click here for more information.

If you have any questions about how these changes affect your business or about invoicing in general, please contact Aronson Partner Nicole Mitchell at nmitchell@aronsoncompany.com.

Last year, the Howard County Circuit Court ruled that Maryland’s current application of the credit for taxes paid to other states is unconstitutional in so far as the credit is not allowed to offset the Maryland local personal income tax. That decision is still working its way through the appeal process and is unlikely to get to a final determination anytime soon. Nonetheless, the decision presents an opportunity for Maryland taxpayers to amend prior years’ tax returns and claim credits, against their local taxes, for taxes paid to other states. For affected taxpayers, the returns requiring immediate amendments are those filed for the 2008 tax year because the opportunity to file refund claims for that year will expire either on April 15 or October 15, 2012.

Aronson’s tax professionals can assist you with both: (1) the evaluation of whether your prior years’ tax returns should be amended; and (2) the actual amendment of those tax returns. To get more information concerning these potential amendments, please call either your Aronson tax professional or Henry Chiwaya of our State and Local Tax Practice at 301.222.8215.

• 2011 Industry Reflection
• Notable M&A Transactions of 2011
• Recent Trend: Spinoffs by Diversified Conglomerates
• 2012 Government Services M&A Outlook

Click here for a copy of ACP’s January Market Update.

See IRS Notice 2012-9 for more information.

Contact Mark Gossart, Partner, at 301.231.6278 email Mgossart@aronsonllc.com or Ryan Ham, Tax Manager, at 301.231.6295 or RHam@aronsonllc.com if you have any further questions.

The Maryland personal income tax is composed of an amount payable to the state and another portion payable to a locality. Both the state portion and the local portion of the tax are collected by the Maryland Comptroller. As do most states, Maryland allows residents a credit against personal income for taxes paid to other states. However, the Maryland credit for taxes paid to other states is not allowed against the local portion of the income tax.

A Maryland couple challenged this credit scheme, which disallowed a credit against their county income tax, as a violation of the Commerce Clause of the U.S. Constitution. In a lengthy opinion issued on June 29, 2011, Judge Becker of the Howard County Circuit Court agreed. The state is certain to appeal and the final determination of the case is not likely to be known until 2012 or 2013. 

In the meantime, the period for filing refund claims is generally three years from the date a timely Maryland return (including extensions) was filed.  Therefore, refund claims are foreclosed for all tax years before 2007 and for any return that was filed without extension for 2007 (i.e., filed on or before April 15, 2008).  However, taxpayers who extended the 2007 return may still have time to file protective refund claims. Consequently, immediate action is required to file timely amended Maryland returns for such protective claims. 

Aronson LLC can assist in filing these protective claims or with answers to questions concerning the Court’s decision. Please contact Horace Lamb, Jack Koniszewski or Henry Chiwaya at 301.231.6200.

To read full article with additional quotations from Aronson’s Partner, Laurence C. Rubin click here

Of course the shutdown could still be averted. Or it could be of such a short duration that it is only a minor inconvenience. But with so much at stake, it would be foolhardy for Government contractors to assume a shutdown won’t happen.

The ramifications faced by contractors during a Government shutdown are widespread and vary in degree from annoying to the catastrophic. Download our whitepaper, written by Tom Marcinko, The Government Shutdown – Contractor Perspective Likely Impacts and Possible Actions, to build your action plan.

The goal is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers. Specifically, the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens.

The announcement centers on the IRS making important changes to its lien filing practices that will lessen the negative impact on taxpayers. The changes include:

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
• Creating easier access to Installment Agreements for more struggling small businesses.
• Expanding a streamlined Offer in Compromise program to cover more taxpayers.

Tax Lien Thresholds

The IRS will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances.

The IRS plans to review the results and impact of the lien threshold change in about a year.

Tax Lien Withdrawals

The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.

Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.

In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.

Direct Debit Installment Agreements and Liens

The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:

• Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.
• The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.
• The IRS will also withdraw liens on existing Direct Debit Installment greements upon taxpayer request.

Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.

In addition, this lowers user fees and saves the government money from mailing monthly payment notices. Taxpayers can use the Online Payment Agreement application on IRS.gov to set-up with Direct Debit Installment Agreements.

Installment Agreements and Small Businesses

The IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate.

Small businesses with $25,000 or less in unpaid tax can participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses will have 24 months to pay.

The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less.

Small businesses will need to enroll in a Direct Debit Installment Agreement to participate.

Offers in Compromise

The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.

This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.

OICs are subject to acceptance based on legal requirements. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Go to: The Economist Online

Earlier this month the Senate passed the repeal of the expanded 1099 reporting rules that require businesses to report all purchases greater than $600 of goods and services from vendors during a year beginning in 2012, but not the new reporting requirement for owners of rental properties.  The Senate repeal was added to a broader FAA authorization bill.

Although the momentum is building for repeal, the outcome is uncertain.  Current law requires individuals who receive rental income to issue Forms 1099 to service providers for payments of $600 or more during the year, starting with payments in 2011. Repeal of this new reporting requirement may not have as much support as the general business requirement.  Until the repeal ultimately passes you should plan to file your return under the current law.

We will keep you advised of any further developments in this area.

On Monday, IRS systems began to accept and process both e-file and paper tax returns claiming itemized deductions on Form 1040, Schedule A, as well as deductions for state and local sales tax, higher education tuition and fees and educator expenses.

In late December 2010, the IRS announced it would delay processing of some tax returns in order to update processing systems to accommodate the late tax law changes. These tax law provisions were extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which became law on Dec. 17.

For the vast majority of taxpayers, the filing season this year began on time in January. Most taxpayers claiming itemized deductions and the other delayed forms file later in the year.

The IRS urged taxpayers who haven’t filed yet to use e-file instead of paper tax forms to ensure accuracy and to get refunds fast. Taxpayers can do their taxes for free through Free File, which is brand-name software or online fillable forms. Free File is available exclusively at www.irs.gov/freefile. Anyone who makes $58,000 or less can use Free File software. There are no income limits to online fillable forms. Both Free File software and Free File Fillable Forms allow taxpayers to prepare and e-file their federal returns for free.

The IRS worked closely with the tax software industry and the tax professional community during the reprogramming process to minimize disruptions for taxpayers and ensure a smooth tax season.

As a result of these efforts, many major software providers and paid tax preparers started accepting impacted returns before the Feb. 14 start date, which they held and started submitting after the IRS systems opened.

Due to the expected increase in tax return volumes being transmitted this week, the IRS cautioned a small number of taxpayers may experience a brief delay in receiving their e-file acknowledgement, which is normally provided within 24-48 hours. The IRS continues working with the software industry to minimize any impact to taxpayers.

Business taxpayers who use the 1040 series can file now as well. However, the Feb. 14 start date does not apply to non-1040 business tax forms  affected by the recent tax law changes. The IRS will announce a specific date in the near future when it can begin processing those impacted business tax forms.

Updated information has been posted on IRS.gov, including Schedule A and updated state and local sales tax tables. For a complete list of affected individual tax forms and business tax forms visit http://www.irs.gov/.

Two members of the House of Representatives created the Bipartisan Congressional CPA Caucus with a goal of harnessing their unique professional skills to develop innovative policy approaches to issues that affect CPAs, including tax administration and compliance, and accounting and auditing standards.

Reps. Brad Sherman, D-Calif., and Michael Conaway, R-Texas, the caucus’s inaugural co-chairs, announced the group’s creation on Wednesday. The representatives said another main goal of the caucus is to provide input on issues being debated by Congress on which CPAs have particular expertise, including budgeting and fiscal issues.

Eight CPAs are members of the House in the 112th Congress.

“Establishing the CPA Caucus allows us to educate our colleagues about the importance of the accounting profession to American business, and to share our expertise on tax administration and compliance,” Sherman, a senior member of the House Financial Services Committee, said in a news release. “We also hope to bring a bipartisan CPA perspective to the fiscal and budgeting issues facing Congress.”

Before his election to the House in 1996, Sherman was a tax law specialist. He audited large business and government entities, provided tax counsel, and advised small businesses on tax issues. 

Conaway, an advocate for a simpler tax system, has sponsored legislation that would bring more accountability in government spending. Before his election to the House in 2004, he worked for Price Waterhouse & Co.

“Taxpayer dollars should be spent wisely, or not at all. It is our responsibility to re-evaluate the spending process in Congress,” Conaway said in the news release. “I look forward to working with our fellow CPAs in Congress to ensure a platform through which we can share our perspective, informed by our unique education and experience, with the rest of our colleagues.”

The other CPAs in the House are Reps. John Campbell, R-Calif.; Bill Flores, R-Texas; Lynn Jenkins, R-Kan.; Steven Palazzo, R-Miss.; Collin Peterson, D-Minn.; and James Renacci, R-Ohio.

Virginia’s due date for calendar year filers will remain April 15, 2011.  Virginia does not change the due date of returns because of holidays in other cities, states, or countries.  Virginia law extends the due date only when the due date falls on a Saturday, Sunday or legal holiday and Emancipation Day is not among the Virginia legal holidays.

The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. The first special voluntary disclosure program closed with 15,000 voluntary disclosures on Oct. 15, 2009. Since that time, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world. These taxpayers will also be eligible to take advantage of the special provisions of the new initiative.

The new initiative announced yesterday – called the 2011 Offshore Voluntary Disclosure Initiative (OVDI) — includes several changes from the 2009 Offshore Voluntary Disclosure Program (OVDP). The overall penalty structure for 2011 is higher, meaning that people who did not come in through the 2009 voluntary disclosure program will not be rewarded for waiting. However, the 2011 initiative does add new features.

For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties. Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Taxpayers participating in the new initiative must file all original and amended tax returns and include payment for taxes, interest and accuracy-related penalties by the Aug. 31 deadline.

The IRS is also making other modifications to the 2011 disclosure initiative.

The 2011 initiative offers clear benefits to encourage taxpayers to come in now rather than risk IRS detection. Taxpayers hiding assets offshore who do not come forward will face far higher penalty scenarios as well as the possibility of criminal prosecution.

The IRS has launched a new section on www.IRS.gov that includes the full terms and conditions on the 2011 Offshore Voluntary Disclosure Initiative, including an extensive set of questions and answers to help taxpayers and tax professionals. The web site also includes details on how people can make a voluntary disclosure.

In the first voluntary disclosure program in 2009, taxpayers faced up to a 20 percent penalty covering up to a six-year period. Taxpayers came forward with about 15,000 voluntary disclosures in that effort covering banks in more than 60 countries.

Shulman said IRS efforts in the international arena will only increase as time goes on.