Washington Hotline – December 13, 2016


Washington Hotline

IRS Advice on Phishing Scams

In IR-2016-160 the IRS explained the best taxpayer defenses against phishing scams. During the 2016 filing season, the IRS reported a 400% increase in malware or phishing.

A primary strategy from scammers is to appear to be from the Department of Treasury or the IRS. A common IRS phishing scam asks you to confirm information about your tax refund, filing status or other personal information such as your PIN.

A new scammer approach is to claim to be from your tax software company. The scammer will ask you to verify your tax software account.

The IRS urges all taxpayers during the 2017 tax filing season to be on the lookout for several specific strategies.

1. Link to Website – A scammer will claim that you need to confirm your account status. Do not click on the link. It will take you to a scammer site and download malware on your computer.

2. Attachment – If you do not know the sender of the email, do not click on the attachment. It is likely to be infected with malware. If you click on the attachment and load the malware on your computer, it may send information to the tax scammer. This information could include your login account names and passwords for various financial accounts.

3. From “Treasury or IRS” – A scammer may attempt to represent a government agency. Be cautious of any email that appears to come from a government agency but may have an unusual web address.

4. From a “Friend” – Some scammers start by hacking into email accounts. After they discover the friends or family that you are regularly emailing, they send an email to you that appears to be from that friend or family member. If you are uncertain about any email, do not click on any links or attachments.

5. False “Lookalike” URL – The email web address may look like an official uniform resource locator (URL). A scammer may use www.irs.gov.falseaddress.com. The falseaddress.com URL may be from a site overseas. With most browsers, you can hold your curser over a web address to see the actual web name.

As the tax filing season in 2017 approaches, everyone should understand the best practices to protect themselves against tax scammers.

Government Funding Continuing Resolution

With a vote of 326 to 96, the House of Representatives passed a continuing resolution to fund the Federal Government until April 28, 2017. Following the vote, the House adjourned and members traveled home for the winter holiday in their districts. At publication time, the Senate had not yet voted on the bill. If the Senate were to reject the bill, the Members of the House would be required to return to Washington to pass a new continuing resolution.

The continuing resolution was initially scheduled to last until March, but was extended to April 30 of 2017. This will permit the Senate sufficient time to conduct confirmation hearings on the new cabinet members.

The continuing resolution does not include any provisions for the energy tax extenders. There are over $1.4 billion in renewable energy provisions that will lapse on December 31.

Minority Leader Nancy Pelosi (D-CA) was unhappy that the renewal provisions will lapse. She stated, “I was disappointed that in the CR we did not have an extender for some renewable alternatives, but we were told by the Speakers Office that, ‘Our guys are fossil guys. They are not interested in their renewables.'”

The continuing resolution does not contain any major tax provisions. Members of the House and Senate plan to address the renewables and all other tax provisions in a 2017 tax reform bill.

Sens. Hatch and Grassley meet Mnuchin

On December 8, Senate Finance Committee Chairman Orrin Hatch (R-UT) and former Senate Finance Committee Chairman Chuck Grassley (R-IA) met with Treasury Secretary Nominee Steven Mnuchin. Both Senators discussed 2017 tax reform plans with Mnuchin.

Senator Hatch is very hopeful that there will be tax reform. He issued a press release and stated, “Over the last eight years, hard-working middle-class families and even businesses on Main Street have been squeezed by the Obama Administration’s failed economic policies. Bigger government, higher taxes and rising debt has left our great nation in the lurch, and it is past time we act to right our economic ship. Through his private sector background, Steven will have to untangle the web of red tape found in our mammoth tax code and navigate a minefield of heavy-handed regulations that have stifled opportunity and growth.”

Senator Grassley also expressed the hope that 2017 would result in tax reform. He discussed their meeting and noted, “We covered the importance of comprehensive tax reform on both the corporate and individual levels and how tax fairness is critical to economic growth and job creation. I have often said that a major undertaking like tax reform requires the President’s use of his bully pulpit to rally support behind a plan from Congress and the American people. There is an opportunity to do that with a new administration.”

Editor’s Note: The Senate confirmation process for Secretary of the Treasury will probably occur in February or March. However, Mnuchin is planning to meet with both Hatch and House Ways and Means Chairman Kevin Brady (R-TX). While tax reform is possible in 2017, Senate Finance Committee staff counsel caution that use of the Senate reconciliation process is quite complex. If tax reform does occur in 2017, the general pattern for large tax bills is passage in late July or early August.

Applicable Federal Rate of 1.8% for December — Rev. Rul. 2016-27; 2016-47 IRB 1 (18 Nov 2016)

The IRS has announced the Applicable Federal Rate (AFR) for December of 2016. The AFR under Section 7520 for the month of December will be 1.8%. The rates for November of 1.6% or October of 1.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2016, pooled income funds in existence less than three tax years must use a 1.2% deemed rate of return. Federal rates are available by clicking here.