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Wednesday July 18, 2018

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IRS Tips on How to Find a Qualified Tax Preparer

As tax-filing season moves into high gear, many taxpayers realize they will need professional assistance to complete their 2017 tax returns. In IR-2018-41 and FS-2018-5, the IRS offered tips on selecting a paid tax preparer.

Last year, taxpayers filed 149 million individual tax returns. Paid tax preparers completed 83 million of the total 149 million returns.

How should you select a qualified tax preparer? The Service offers several specific tips.
  1. Trustworthy - Your tax preparer should have a good reputation. You are trusting him or her with sensitive information, including your income, investments and Social Security Number. You may want to use a search engine to gather background information on the preparer's credentials.
  2. Your Tax Return - Even though a tax preparer completes your return, you are still responsible. Please carefully review the return and ask questions about the various entries.
  3. Signature - Both you and your tax preparer need to sign your return. The tax preparer also must include his or her Paid Preparer Tax Identification Number (PTIN).
  4. Blank Return - Do not sign your return until all of the entries have been completed. A reputable tax preparer will not ask you to sign a blank return.
Tax return preparers have either limited or unlimited representation rights with the IRS. Tax preparers with limited rights may represent you only if they have prepared your tax return. Preparers with unlimited rights may represent any taxpayer.

Unlimited representation is permitted for licensed attorneys, CPAs and enrolled agents. These professionals complete a bar exam (attorneys), the Uniform CPA Exam (CPAs) or a Special Enrollment Exam (enrolled agents). They also must fulfill continuing education requirements.

You can research tax preparers on www.IRS.gov/chooseataxpro. Taxpayers can look up PTIN holders through the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. You may search by name, zip code or type of credential. Although the IRS provides this list of tax preparers, it does not endorse any specific preparer.

DAF Grants by Private Foundations


In Notice 2017-73, the Service asked the philanthropy community for comments on whether grants from private foundations to donor advised funds should be regulated.

The Notice requests comments on DAF grant purposes and asks, "Whether, consistent with Sec. 4942 and its purposes, a transfer of funds by a private foundation to a DAF should be treated as a qualifying distribution only if the DAF sponsoring organization agrees to distribute the funds for Sec. 170 (c)(2)(B) purposes, or to transfer the funds to its general fund within a certain timeframe."

On March 5, Sean Parnell, Vice President for Public Policy of the Philanthropy Roundtable, responded.

The Philanthropy Roundtable represents 660 philanthropists, family foundations and community foundations. The membership of the roundtable supports a wide range of charitable causes.

Parnell offered specific examples of private foundation grants to DAFs for seven purposes.
  1. Safety and Security - Some private foundations make grants to overseas charities conducting dangerous and difficult work. These overseas charities have been targets of violence. Making private foundation grants through a DAF protects the private foundation trustees and staff from attacks and retribution.
  2. Collaboration - A large local philanthropic project may require grants from two to eight private foundations. All of these private foundations may make grants to a DAF in that community to support the specific charitable project.
  3. Grant Effectiveness - A private foundation may be interested in supporting a project in another state or region. Grants to a DAF managed by a local community foundation in that state or region ensure a higher level of grant effectiveness.
  4. Different Fields of Interest - Many community foundations have projects that involve specific types of grants. The community foundation staff may have expertise in that grant area. A private foundation may make grants to a DAF and benefit from this community foundation expertise. One private foundation normally supported post-secondary education and made grants to a DAF because the sponsoring community foundation had special expertise in economic opportunity grants to qualified recipients.
  5. Program Scheduling - Many private foundations make grants to DAFs to facilitate programs with a three to ten year duration. The DAF fund is invested and then distributed over the scheduled term of years.
  6. Grant Efficiency - Some private foundation grants could require expenditure responsibility. This can be both time consuming and costly. Gifts to a community foundation DAF permit grants to be funded by multiple private foundations. Because the community foundation may not have expenditure responsibility, there can be substantial savings in costs and staff time.
  7. Facilitating Family Philanthropy - The private foundation trustees may be children or grandchildren of the founders. Private foundation grants to a community foundation DAF enable these children and grandchildren to interact with, and acquire grant expertise from, the expert staff of the community foundation.

IRS Updates 2018 Tax Table, Exemptions and Deductions


In Rev. Proc. 2017-58; 2017-45 IRB 1 (19 Oct 2017), the IRS published tax tables, exemptions and deduction limits for 2018. With a low rate of inflation for the mid-2016 to mid-2017 base period, most changes were modest.

Following the passage of the Tax Cuts and Jobs Act (TCJA) in December of 2017, many of the earlier tables, exemptions and limits were updated. In addition, some tax numbers were indexed with the traditional consumer price index (CPI) and others with the "chained" CPI. In Rev. Proc. 2018-18; 2018-10 IRB 1 (5 Mar 2018), the IRS published updated tax tables, exemptions and deduction limits for 2018.

Two changes affect estate planning and charitable giving. The 2018 estate basic exemption amount was initially $5,600,000, but the TCJA doubled the base amount from $5 million to $10 million. Initial reports suggested a basic exemption amount of $11,200,000, but the final calculated 2018 number is $11,180,000.

The token gift numbers are also updated in Rev. Proc. 2018-18. Charities are permitted to transfer token gift premiums to donors who make gifts above a specific level. In 2018, a donor who makes a gift over $54.00 may receive a premium with the logo or other identification of the nonprofit valued at $10.80 or less. Donors who make larger gifts may receive a premium up to 2% of the value of the gift, with a limit of $108.

Applicable Federal Rate of 3.0 for March -- Rev. Rul. 2018-6; 2018-10 IRB 1 (16 Feb 2018)


The IRS has announced the Applicable Federal Rate (AFR) for March of 2018. The AFR under Section 7520 for the month of March is 3.0%. The rates for February of 2.8% or January of 2.6% 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 2018, pooled income funds in existence less than three tax years must use a 1.4% deemed rate of return. Federal rates are available by clicking here.

Published March 9, 2018

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