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Virginia Department of Taxation. Locality Training 2005. Section One. Filing Season 2005. Returns Processed. Individual Return Error Statistics As Of July 29. Refunds Issued. Refunds Issued. Section Two. Your new toolkit: IRMS Integrated Revenue Management System.

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virginia department of taxation

Virginia Departmentof Taxation

Locality Training

2005

section one

Section One

Filing Season

2005

section two
Section Two

Your new toolkit:

IRMS

Integrated Revenue

Management System

irms training user support10
OUR GOALS:

Provide quality, accessible IRMS training and on-line Help tools

Keep you informed and prepared for IRMS changes

IRMS Training & User Support
irms training
Ongoing training needs addressed through Learning Management System (LMS)

Refresh your IRMS knowledge

Train new IRMS users

Curriculums revised periodically

Expect “cut over” date prior to each new IRMS release, where training materials are updated to match new or changed functionality

IRMS Training
irms training12
Example of curriculum changes now being made:

Removing lessons comparing STARS to IRMS

Lesson content revised to include January ’06 Release functionality changes

New lessons added for Set-Off related windows available to Commissioner of Revenue office staff with the January ’06 Release

IRMS Training
irms user support
Procedures revised to reflect new processing-year changes

User Guides revised to incorporate IRMS functionality changes and enhancements

Job Aids revised and new ones published

* All these resources available on-line inTax Agency Rules and Procedures (TARP)

IRMS User Support
irms training user support14
TAX will continue to provide a comprehensive support program.

“Just-in-Time” Training through the LMS

On-line reference resources: TARP & on-line Performance Support System (PSS) Help

Help from TAX staff

IRMS Training & User Support
irms training user support16
Highlights of January ’06 Release:

Expanded Search functionality

Search by taxpayer name and/or address in addition to SSN/FEIN

Customer Address fields added to Customer Profile and Tax Account windows

Accelerated Refund keying

View address during keying

Remove need to select Payment Method radio button

IRMS Training & User Support
irms training user support17
Sales Tax distribution history information

Additional search criteria to view all businesses that have paid Sales Tax in your locality

“Pre-distribution” (entries not yet distributed) and “Distribution” (entries distributed for current month) views

Access to additional Set-Off claim and payment information

Access will be automatically granted – no access form required

IRMS Training & User Support
irms training user support18
Look for an e-mail communication with detailed information on the enhancements and changes in the January ’06 Release

Detailed description of new fields and functions

Instructions to take a new or revised lesson in the Learning Management System when IRMS changes are significant

Important that you share this information with each IRMS user in your office so they are prepared for the changes

IRMS Training & User Support
irms support
REMINDER:

Submit a System Authorization Request (SA-IRMS-E) form to TAX promptly for:

Staffing changes, including terminations

New/changed e-mail addresses

IRMS Support
slide20

Section Three

Topics for Review

  • Pass-Through Entities
  • Income Tax Provisions
  • Preparer Fraud Provisions
pass through entities
Pass-Through Entities
  • Registration for PTEs
    • How does a PTE register to file Form 502?
  • Filing requirements
    • No requirement for investment entities
    • See Tax Bulletin 05-6
  • Return issues
    • No “bottom line” for entity’s income
    • No adjustment/apportionment of separate line items on Form 502
slide22

Income Tax Provisions

  • Fixed Date Conformity
  • HB 2411 and SB 856 advance the date of conformity to federal law to Jan. 7, 2005
  • SB 897 allows Virginia to recognize federal deductions claimed for contributions made for tsunami relief efforts
slide23

Income Tax Provisions

  • Fixed Date Conformity (cont.)
  • Virginia now conforms to provisions of the Working Families Tax Relief Act of 2004 and the American Job Creation Act of 2004
  • Virginia law does not allow a 5-year carryback period for NOLs generated in 2001 or 2002, or deductions for bonus depreciation
slide24

Income Tax Provisions

  • Extensions (cont.)
  • 90% payment requirement still applies
  • Extension penalty increases from 0.5% to 2% per month
  • Penalty on returns filed without an extension is 2% per month for first six months, IF the return is filed within six months from the original due date
    • e.g., calendar year return filed by Nov. 1
slide25

Income Tax Provisions

  • Extensions (cont.)
  • HB 2325 – applies to individual and corporate income tax filers (including fiduciaries and PTEs)
  • Six-month FILING extension allowed – no paper extension request needed
slide26

Income Tax Provisions

  • Extensions (cont.)
  • Extension invalid for returns filed more than six months after the due date – normal late filing penalty (30%) will apply
  • New Extension Payment Forms:
    • Form 760IP replaces Form 760E
    • Form 500CP replaces Form 500E
    • Form 502E for pass-through entities discontinued (no payment required for Form 502)
slide27

Income Tax Provisions

  • Credits
  • Conservation Tillage Equipment
    • Equipment for reduction of soil compaction now included
    • Maximum annual credit increased from $2,500 to $4,000
  • Land Preservation
    • Certain pre-2002 credits eligible for transfer
    • New valuation and appraisal requirements
slide28
Credits (cont.)

Neighborhood Assistance Act

Maximum annual credit for individuals increased to $50,000

Rent Reduction

Credit provisions extended through 12/31/10

Restrictions on new credits

Income Tax Provisions

slide29
Credits (cont.)

Enterprise Zones

Enterprise Zone Act expired 7/1/05; replaced with a grant program

Zones in effect as of 6/30/05 will continue until the end of their 20-year designation period

Business tax credit and real property investment tax credit will continue for certain businesses

Major Business Facility Job Tax

Form 304 must now be filed 90 days before the return due date

Due date for Form 304 for businesses in severely economically distressed areas is April 1, 2006

Income Tax Provisions

slide30
Credits (cont.)

Qualified Equity and Subordinated Debt Investment Tax

Lower annual revenue required to qualify

Credit no longer available to professional/institutional investors

Penalty provisions adjusted to align with other states and avoid disincentives

Income Tax Provisions

slide31
Individual Income:

2004 Provisions Effective for 2005

Standard Deduction

Single filers $3,000 (no change)

Married filing jointly $6,000 (formerly $5,000)

Married filing separately $3,000 (formerly $2,500)

Filing Threshold

Single filers $7,000 (formerly $5,000)

Married filing jointly $14,000 (formerly $8,000)

Married filing separately $7,000 (formerly $4,000)

Income Tax Provisions

slide32
Individual Income:

2004 Provisions Effective for 2005

Personal Exemptions

2005 legislation moved effective date up to 2005

Yourself $900

Your Spouse $900

Dependents $900

Exemptions for age and blindness remain at $800

Income Tax Provisions

slide33
Subtraction for Federal & Virginia Government Employees

SB 866 clarifies the salary requirements for the subtraction

The subtraction is available only to employees of the federal and Virginia governments whose total salary from ALL employment is $15,000 or less

Income Tax Provisions

slide34
Subtraction for Federal & Virginia Government Employees (cont.)

For example, an individual who earned $10,000 in a federal government job and $15,000 in a private-sector job in 2005 would NOT be eligible for the subtraction

The subtraction amount for eligible individuals is the amount of government salary up to $15,000

Income Tax Provisions

slide35
Refund Check-offs: Process Changes

HB 2303 creates a new process for limiting voluntary contributions (refund check-offs)

Only 25 contributions may be made on the return forms (provision from 2004 legislation)

Income Tax Provisions

slide36
Refund Check-offs:

Process Changes (cont.)

An entity must receive at least $10,000 for each of the three preceding tax years in which it was listed on the return

TAX will make an annual report on voluntary contributions to the Chairs of the House and Senate Finance Committees

Income Tax Provisions

slide37
Refund Check-offs:

Process Changes (cont.)

New check-off: Office of Commonwealth Preparedness

Check-offs removed from return:

UVA Center for Politics

George Mason Law & Economics Center

Virginia Foundation for the Humanities

Income Tax Provisions

preparer fraud provisions
Senate Bill 1225

Adds definition of “income tax preparer” to

§58.1-302

Key elements = compensation, return, claim for refund

Definition excludes:

Typists, copy persons, other mechanicals

Tasks done for employer or as a fiduciary

Appeals and protective claims in response to assessments

Response to waiver request after audit

Preparer Fraud Provisions
preparer fraud provisions39
New Code Section: §58.1-348.1

Class 6 Felony (1-5 Years and/or $2,500 fine) if preparer:

Knowingly and willfully aids, assists, counsels or advises preparation or presentation of a return, affidavit, claim or other document that he knows is fraudulent or false in any material matter

Preparer Fraud Provisions
preparer fraud provisions40
New Code Section: §58.1-348.2: Injunctive Relief

Civil action in Circuit Court:

Enjoin further engaging in the prohibited conduct, OR

Enjoin practicing livelihood as a tax preparer if:

Continually or repeatedly engages in prohibited conduct

Injunction against prohibited conduct would not be sufficient to prevent interference with proper tax administration

Preparer Fraud Provisions
preparer fraud provisions41
New Code Section: §58.1-348.2

Prohibited Conduct:

Any conduct subject to IRC §§6694 or 6695, or to criminal penalties under IRC or under Title 58.1 of the Code of Virginia

Any other fraudulent or deceptive conduct that substantially interferes with proper tax administration

Preparer Fraud Provisions
preparer fraud provisions42
What’s covered under IRC §6694?

Understatement due to unrealistic positions

No realistic possibility of being sustained on merits

Knew or should have known of such position

Did not disclose such position

Frivolous claims

Willful or reckless conduct

Willful attempt to understate the liability

Reckless or intentional disregard of rules or regulations

Preparer Fraud Provisions
preparer fraud provisions43
What’s Covered Under IRC §6695?

Failure to furnish copy to taxpayer

Failure to sign return

Failure to furnish identifying number

Failure to retain a copy or list of returns

Failure to file correct information returns

Failure to be diligent in determining eligibility for EITC

Endorsing or negotiating a taxpayer’s check

Preparer Fraud Provisions
preparer fraud provisions44
What’s Covered Under IRC and Virginia Criminal Provisions?

Fraud & false statements (IRC §7206 & VA Code §58.1-348.1)

Fraudulent execution of bonds, permits or entries, or other documents

Concealment of property

Withholding, falsifying, or destroying records

Preparer Fraud Provisions
preparer fraud provisions45
§58.1-348.2: Injunctive Relief

Injunctive relief regarding livelihood – prima facie case if:

Previously enjoined from preparing US income tax returns

Previously enjoined from preparing another state’s income tax returns

Must have been enjoined within five years preceding the petition for injunction

Preparer Fraud Provisions
r eturn processing
General Theme - Use TARP

TARP Processes and Tasks are dynamic–revised as soon as necessary

Howard Overbey will send e-mail when TARP changes are published

TARP includes Processes and Tasks, Forms, Job Aids and User Guides

Tasks may contain links to related Forms or Job Aids

ReturnProcessing
amount you owe
IRMS processes the “bottom line” differently than STARS

The “Amount You Owe” line is the amount the locality is taking responsibility for assessing/collecting

Incorrect handling of this line will result in duplicate billing

“Amount You Owe” job aid available in TARP

Amount You Owe
2d barcode concerns
When printed data is altered on a 2D Barcode return:

Write the word “ALTERED” directly above the 2D Barcode

Draw 4 heavy black lines horizontally through the Barcode

REMEMBER, this is true of any change:

By customer – ex.: address or SSN changes

By you – ex: “Amount You Owe” line changes

If the 2D Barcode is not marked through, TAX’s automated data capture system will read the return data from the barcode and fail to capture the altered data.

2D Barcode Concerns
screening codes
No new screening codes for tax year 2005

There are fewer codes for IRMS than for STARS

Refer to the TARP Process: Screen Local Filed Returns – Processing Year 2006

See the General Screening Task for screening and codes common to all forms

See the Detailed Screening Tasks for screening and codes for each specific form

Tarp Job aid available – IRMS Screening Codes

Screening Codes
available in tarp
Forms

LOCAL AR

LOCAL TD

LOCAL DENIED

LAP Sort 1 and 2

Locality Shipment Form

And many more

Job Aids

Where to find help with IRMS

And many more

Sample Letters

Return Forms to Taxpayer

Request for Fiduciary FEIN

Bad Check Letter

Return Estimated Payment Check to Taxpayer

User Guides

IRMS User Guide for Localities

External Entity Secure Messaging Center (EESMC) Guide

Available in TARP
tarp at your service
http:/www.tax.virginia.gov/external

Procedures, By Process

Home

PROCESS: CALCULATE PENALTY AND INTERESTTASK: Calculate Penalty and Interest on Individual Income

PROCESS: CUSTOMER ASSISTANCE IN THE LOCALITYTASK: Assist a Customer Who has Received a Refund Issued to a Deceased Customer

TASK: Assist a Customer Whose Refund Check has been Lost, Stolen, Misdirected, or Issued in an Incorrect Name

PROCESS: HANDLE LOCAL BAD CHECK PAYMENTSTASK: Handle Bad Checks from the Taxpayer

TASK: Handle Bad Checks for which a Replacement Payment is Not Received

TASK: Create and Send the Treasurer\'s Report of Estimated Payment Bad Checks to TAX

TARP at Your Service
slide55

PROCESS: HANDLE LOCAL ESTIMATED PAYMENTSTASK: Prepare Form 559, Memorandum of Assessment for Local Estimated Payments

TASK: Submit Local Estimated Payment Information to TAX - Electronic Submission

TASK: Receive, Screen and Sort Forms 760ES

TASK: Submit Local Estimated Payment Information to TAX - Paper Submission

PROCESS: IRMS EXTERNAL ACCESS SECURITYTASK: Reset an External Representative\'s Password

TASK: Request System Access, Change or Termination

TASK: Update Your Personal Password

TASK: Review an External Representative\'s Profile Information

PROCESS: IRMS LOCALITY ACCESS ADMINISTRATIVE ACTIVITIESTASK: Complete and Submit Access MOU to TAX

PROCESS: MONITOR LOCALITY AND SALES TAX DISTRIBUTIONS TASK: Review My Locality\'s Transfers in Progress

TASK: Request Reports

slide56

TASK: Screen Schedule CR, Tax year 2004

TASK: Screen Form 760

TASK: Screen Form 760PY

TASK: Screen Form 763-S

TASK: General Screening of Individual Tax Returns

TASK: Screen Form 763

PROCESS: TRANSMIT LOCAL FILED RETURNS TO TAXTASK: Prepare Returns for Transmittal to TAX

TASK: Transmit Returns to TAX

PROCESS: UNCOLLECTIBLE PROCESSTASK: Submit the Local Uncollectible Information to TAX

TASK: Maintain the Local Uncollectible Information

TASK: Enter the Local Uncollectible List Information

TASK: Forward Uncollectible Payments to TAX After January 31

slide57

PROCESS: OPEN AND SORT MAIL IN THE LOCALITYTASK: Open and Sort Mail

PROCESS: PROCESS REFUND RETURNS IN THE LOCALITYTASK: Process Accelerated Refund Information

TASK: Report an Incorrectly Keyed Accelerated Refund - DIRECT DEPOSIT

TASK: Report an Incorrectly Keyed Accelerated Refund - CHECK

PROCESS: PROCESS TAX DUE RETURNS IN THE LOCALITY TASK: Prepare a Recapitulation Sheet (Form 759-C) or Facsimile Recapitulation Sheet

TASK: Process Accelerated Tax Due Information

TASK: Prepare and Submit a Transmittal Form 759-A

TASK: Prepare an Assessment Sheet (Form 759-B)

TASK: Prepare a Memorandum Assessment (Form 759)

PROCESS: REQUEST AN EXONERATIONTASK: Create and Submit an Exoneration

PROCESS: REQUEST CUSTOMER INFORMATION UPDATESTASK: Request Updates to Customer Information

PROCESS: SCREEN LOCAL FILED RETURNSTASK: Screen Form 770

local estimated payments
There are two methods for transmitting Estimated Payment data to TAX

Refer to the TARP Process: Handle Local Estimated Payments and the associated Tasks

Task: Receive, Screen and Sort Forms 760ES

Task: Prepare Form 559, Memorandum of Assessment for Local Estimated Payments

Task: Submit Local Estimated Payment Information to TAX - Paper Submission

Task: Submit Local Estimated Payment Information to TAX - Electronic Submission

Local Estimated Payments
l ocal estimated method one electronic submission
Use the TAX-provided file names and file layouts. EESMC User Guide is in TARP

Prepare an Estimated Payment Transmittal Form. Transmittal Form is in TARP

Fax the Transmittal Form after successful EESMC transfer of the electronic file to Local Estimated Payment Team at (804) 367-0539

Local Estimated Method One: Electronic Submission
slide60

Local Estimated Method One: Electronic Submission (cont.)

  • Your file will not be processed unless the Transmittal Form is received by the Local Estimated Payment Team
  • Maintain your electronic files and associated Transmittal Forms in a safe, backed-up location
local estimated method two paper submission
Reminders:

Do not mix other vouchers with 760ES

Do Not submit “zero” vouchers

Cut envelope front to voucher size – with handwritten postmark on the front (mmddyy)

Local Estimated Method Two: Paper Submission
slide62

Local Estimated Method Two: Paper Submission (cont.)

  • Reminders:
    • Use a Late Card any time instead of the envelope
    • Place Late Cards and envelopes BEHIND the voucher
    • Use the correct voucher for the period. Refer to instructions for Form 760ES – available on TAX Web site.
uncollectable list processing
There are only two methods for submitting the Uncollectable List:

Electronic file submitted via EESMC (External Entity Secure Messaging Center)

On-line entry and submission in IRMS

DO NOT submit your Uncollectable list in 2006 until you receive the OK from Howard Overbey

TAX will ensure that all system requirements for processing the Uncollectable List are met before giving the OK

Uncollectable List Processing
uncollectable list processing64
Refer to the TARP Process: Uncollectable Process and associated Tasks

Tasks for on-line submission

Task: Enter the Uncollectable List Information - IRMS

Task: Maintain the Uncollectable List Information - IRMS

Task: Submit the Uncollectable List - IRMS

Uncollectable List Processing
slide65

Uncollectable List Processing (cont.)

  • Task for EESMC submission
    • Task: Submit the Uncollectable List - EESMC
  • Task for handling payments received after the list is submitted
    • Task: Forward Uncollectable Payments to TAX after the Uncollectable List is submitted
uncollectable list processing method one eesmc
You must have tested this method with TAX

Create the electronic file according to TAX specifications

Create the Uncollectable Transmittal Form to summarize list data

DO NOT submit the list until you receive word that it is OK to submit

Uncollectable List Processing Method One: EESMC
slide67

Uncollectable List Processing Method One: EESMC (cont.)

  • Fax the Transmittal Form as soon as you successfully submit the list via EESMC to: Local Uncollectable Team at (804) 367-0539
  • Your file will not be processed unless the Transmittal Form is received by the Local Uncollectable Team
uncollectable list processing method two enter data on line
On-line Uncollectable list may be started whenever you are ready to begin compiling the list

List may be closed and reopened for maintenance (adding or deleting data) until the list is submitted

Create the Uncollectable Transmittal Form to summarize list data when the list is complete

Uncollectable List ProcessingMethod Two: Enter Data On-Line
slide69

Uncollectable List ProcessingMethod Two: Enter Data On-Line (cont.)

  • DO NOT submit the list until you receive word that it is OK to submit
  • As soon as you submit the list in IRMS, fax the Uncollectable Transmittal Form to TAX’s Local Uncollectable Team at (804) 367-0539
  • Your file will not be processed unless the Transmittal Form is received by the Local Uncollectable Team
farmer fisherman or merchant seaman
Batch Farmer, Fisherman, & Merchant Seaman separately and sort by postmark date, i.e., on or before and after March 1st!

760CG returns may have a pre-printed “FJ” code. This code is to prompt you to screen for Farmer, Fisherman, & Merchant Seaman. Cross through the FJ code and write in the IX or UX code, as applicable

Farmer, Fisherman, or Merchant Seaman
slide71

Farmer, Fisherman, or Merchant Seaman (cont.)

  • If postmarked on or before March 1, write screening code IX on return
  • If postmarked after March 1, write screening code UX on return
  • Bundle these returns separately and label as Farmer, Fisherman, & Merchant Seaman returns to assist TAX in processing correctly
bottom of the form
“Late date” exact positioning

For 760 Handprint forms, use the boxes located bottom middle of the form – ALWAYS write as MMDDYY ** USE a DARK PEN!

For 760CG Forms, WRITE THE LATE ON THE LINE located bottom middle of the form – ALWAYS record as MMDDYY with NO dashes or slashes! This is CRITICAL!

LAR - Accepted Accelerated Refund

DLAR - Denied Accelerated Refund

Bottom of the Form
slide73

Bottom of the Form

  • LTD – Check the LTD indicator if you collected and deposited payment or if you are going to assess the taxpayer for missing payment or the difference due if partial payment was received
    • If you are not going to assess, send in as direct even if you’re a “local file” locality – and send any payment received with the return to TAX also! (Do NOT check LTD or write in money amount when sending direct)
    • Prevents double billing
    • Prevents not billing at all!
shipping information
Fill out one locality shipment form per shipment

Label each container of the shipment (one of three, two of three, etc.)

Several bundles of various work may be enclosed in one container

Shipping Information
slide75

Shipping Information

  • Ship to one of the same addresses as previous years:
    • Department of Taxation, Channel Processing, PO Box 1336, Richmond 23218-1336
    • Department of Taxation, Channel Processing, 3600 W. Broad St, Richmond 23230-4915
treasurer s receipt of sales tax payments
Treasurers may accept Sales Tax payments from customers

The Sales Tax return and the check should be forwarded to TAX for processing

This ensures payment is properly included in the Sales Tax distribution

Mail to:Department of Taxation

Sales and Use Tax

PO Box 26626

Richmond, VA 23261-6626

Treasurer’s Receiptof Sales Tax Payments
december build
A December IRMS release is planned for various changes and enhancements, including:

Accelerated Refund window

Current IRMS address can be displayed

Faster selection of Checking or Saving option for direct deposit

Commissioners of the Revenue receive access to Set-Off information

December Build
slide78

December Build

  • A December IRMS release is planned for various changes and enhancements, including:
  • Expanded search criteria to include name and address searches
  • Distribution History and Summary windows for sales tax distribution data
  • Legislative updates
automatic extension
The automatic extension applies to returns, not to payment. There is no form to apply for an extension this year. It is automatic.

Payments to meet the 90% requirement at filing deadline can be made with one of three new forms:

760 IP

770 IP

500CP

Automatic Extension
760ip
This form is a voucher to accompany payments. It includes instructions on the new automatic extension, and late payment and filing penalties.760IP
770ip
This form accommodates all fiduciary filers. In your order package, you will receive some 770IPs since this is, in part, a replacement for 760E.770IP
500cp
The automatic extension applies to corporate income tax returns also and if any payment is due in order to comply with the 90% payment requirement, the payment must be made with the 500CP.500CP
760es for 2006
The 2006 760ES form, used to make the estimated individual income tax payments, is printed in pages of four perforated coupons.760ES for 2006
770es for 2006
The 2006 770ES is the new form for fiduciary payment of estimated taxes. Some copies will be automatically forwarded to you because this, in part, replaces the 760ES.770ES for 2006
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