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On December 31, 2013, 53 tax provisions expired, some of which have been around for a number of years. While there has been some talk in Congress about some of these provisions being extended and/or increased to their previous benefit amounts, currently none of them have been extended.
The Department of Treasury has announced that it is providing an "offer in compromise" program beginning Jan. 1, 2015. The program allows for a taxpayer to submit an offer to lower the amount of a tax liability for less than the full amount due. A tax liability includes the tax and any related interest and penalty.
A few months ago, the Ohio Supreme Court ruled that Cleveland's jock taxing system ("game day" method) was illegal. If the law suit trend continues, it could spell the end of the jock tax.
On June 29, President Obama signed into law two major trade bills: (1) the Trade Preference Extension Act of 2015 (TPE); and (2) and the Trade Priorities and Accountability Act of 2015 (TPA).
U.S. persons with a financial interest or signature authority over a foreign financial account(s) for which the total of all foreign accounts is greater than $10,000 at any time during 2014 must file a Report of Foreign Bank and Financial Accounts (Form 114 - FBAR) by June 30, 2015.
The Michigan Department of Treasury now provides an "offer in compromise" program that allows individual or business taxpayers with a tax liability to submit an offer to settle with the state for less than the full amount due.
Identity thieves seek taxpayer identification numbers (TINs) for many purposes. During 2014, the Department of Justice reported that from 2008 through May 2012, over 550,000 taxpayers had their identities stolen by thieves claiming false tax refunds. In 2009, the IRS has tested the use of truncated social security numbers on certain payee statements. The IRS issued final regulations in July 2014, to make this program permanent. On a recent 60 Minutes airing, it has been predicted that the IRS will issue over $21 billion in fraudulent tax refunds from the filing of electronic income tax returns for the 2015 tax year.
With the New Year upon us and tax season kicking into full gear, there have been lots of questions as to how the Affordable Care Act (ACA) will affect your 2014 tax filings.
On March 20, 2014, the IRS quickly responded to the Tax Court decision in Bobrow v.Commissioner stating that it anticipates following the Bobrow decision on IRA Rollovers. The IRS intends to clarify that the rules limiting IRA rollovers to one during a 12 month period should be applied on an aggregate basis.
The US Senate approved legislation, which the House already passed, to extend for one year more than 50 tax provisions that had expired at the end of 2013. The pending retroactive enactment of this legislation will impact the 2014 taxes for many individuals and businesses.
The Department of Treasury has notified taxpayers in a recent letter about the new online method for filing sales, use and withholding taxes. For those who may not have received the notification, beginning in January 2015, all sales, use and withholding taxpayers will be required to register online in order to e-file returns and electronically pay taxes.
An increasing amount of complaints have been made regarding emails informing a taxpayer that their federal tax payment is being returned by their financial institution.
Part of the dissension in this great country revolves around who is financing our government spending, coupled with the redistribution of wealth theory.
In order to deduct charitable contributions on your personal return, you must adhere to the following guidelines.
Now that another tax filing season is behind us, is it possible that Congress will jumpstart reviewing the numerous expired tax provisions or the much talked about tax reform?
As the year comes to an end, this would be the best time to plan for your annual tax bill. Many wait to complete their tax planning in April, right before they foot the bill but by then it is too late. We all know this is not the best planning strategy, but then again neither is waiting for tax reform.
Medical and dental practitioners are currently the target of choice for identity thieves. Recent articles in The Journal of the American Medical Association, Businessweek, and The Washington Post highlight the alarming increase of health care professionals that have been victimized this year by identity theft used to fraudulently obtain federal and state tax refunds.
Generally, when one thinks of Social Security, they tend to look at it as a government-run savings program. While many of the characteristics of Social Security are very similar to a pension, one aspect, survivor benefits, has a few wrinkles that need to be carefully evaluated to maximize the benefit.
The IRS is warning individuals and businesses to steer clear of the following popular tax scams in 2014.
According to the US Governmental Accountability Office, more than $5 billion of your hard earned dollars were mistakenly paid out to tax identity thieves in 2013. An IRS-estimated $24.2 billion (based on what it could detect) of fraudulent refunds were prevented from being mistakenly paid out.
Beginning in 2013, the state of Ohio created a new deduction for individuals owning a business, including interests in pass-through entities, such as partnerships, S corporations and limited liability companies. The Small Business Investor Income Deduction allows an individual to deduct 50% of the taxpayer's small business income subject to certain limitations and increases to 75% in 2014.
Macomb, Oakland and Wayne counties have been declared as federal disaster areas due to the damage caused by the severe storms and flooding in August. The declaration permits the IRS to postpone certain deadlines for affected taxpayers of the covered disaster areas.
The Social Security Administration (SSA) recently issued a cost-of-living adjustment for the Social Security taxable wage limit. For tax year 2015, the maximum amount of earnings subject to the Social Security tax will increase to $118,500 ($1,500 increase from 2014). The employee and employer tax rate will remain unchanged at 6.2%. Due to the increase in the wage limit, the maximum Social Security tax payable by an employee will be $7,347 ($93 increase from 2014).
As we move into the new 2015 tax year, there are some important tax numbers that will increase due to the inflation adjustments required by law.
On December 19, 2014 President Obama signed the Tax Increase Prevention Act of 2014 ("TIPA" or "the Act") into law, which included a tax-advantaged savings program for persons with disabilities.The program, known as the Achieving a Better Life Experience Act of 2014, provides for the following:
In the past several years, the IRS has been vigorously pursuing taxpayers who fail to comply with foreign reporting requirements, imposing severe penalties for noncompliance. Therefore, as we begin a new year in 2015, it is important taxpayers are reminded of the forms they are required to file, and informed of foreign reporting requirements they may be unaware of.
The IRS recently announced the 2016 retirement limits. These limits are adjusted each year based on the cost of living index and, due to low inflation, most retirement limits will remain the same as 2015.
People always say there are two guarantees in life - death and taxes. While that may be true, you can escape a lot of tax when you pass away. The "portability" rules provide for the transfer of a deceased spouse's unused estate tax exemption (deceased spousal unused exclusion or "DSUE"). In 2015 the exemption amount is $5,430,000; therefore if the decedent's taxable estate is not more than the exemption amount, the DSUE can be used by the surviving spouse with respect to both gift taxes and estate taxes.
In September 2015, the IRS issued a proposed regulation that would have provided charitable organizations an alternative method for substantiating charitable donations. The proposed regulation was going to permit, but not require, charitable organizations to complete and file a new, optional form in order for a donor to receive a deduction.
President Obama sent his final annual budget proposal for the 2017 fiscal year to Congress. The new proposals in the budget include dramatic changes to the world of tax.
As tax-related identity theft has become more prevalent over the past five years, the IRS is taking steps to stop these fraudulent returns. Once the IRS confirms you are a victim, they will issue an Identity Protection PIN (IP PIN) for the taxpayer to use when filing their return, whether they file electronically or on paper.
As filing deadlines draw closer, the IRS and taxpayers continue to be a vulnerable target of several cyber-attacks. The tactics range from phone calls attempting to verify personal information, to fake emails, to network attacks. In a recent attack, hackers used previously obtained social security numbers to generate E-File Personal Identification Numbers (PINs).
Do you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, or other type of foreign financial account? If you do, and certain thresholds are met, then filing of FinCEN Form 114 Report of Foreign Bank and Financial Accounts will be required to avoid substantial penalties.
The IRS has reported that there have been many recent claims of fake CP2000 notices being sent to taxpayers indicating an amount due related to the Affordable Care Act. A CP2000 notice is normally sent to taxpayers when the income on their tax return does not match what has been reported by the third-party (such as an employer). In many cases, these fraudulent notices are being sent as an attachment to an email message.
If you are required to file partnership tax returns, C corporation tax returns, or foreign information reporting (FinCen 114/FBAR), the Surface Transportation Act of 2015 ("the Highway Act") brings some actionable news regarding revised filing deadlines effective for 2016 tax returns. The current partnership return deadline imposes a problem for many partners to timely file their returns by April 15. The partnership due date change may give more time for partners to include any Schedule(s) K-1 income and/or loss on their personal income tax returns and file by April 15.
According to the Treasury Inspector General for Tax Administration (TIGTA) report No. 2016-40-065, during the period February 2011 to December 2015, the Internal Revenue Service (IRS) identified almost 1.1 million taxpayers who were victims of employment-related identity theft. Employment-related identity theft is when an identity thief uses a stolen social security number of a taxpayer when applying for employment.
The Social Security Administration (SSA) recently announced a 2017 cost-of-living adjustment for the Social Security taxable wage limit. The maximum amount of earnings subject to Social Security tax for 2017 will increase by 7% to $127,200 from $118,500 in 2016.
Every year the IRS will announce annual inflation adjustments on various tax provisions and rates.
After the most significant election in our nation's history, the votes are in and Republican nominee, Donald Trump has been elected to become the 45th president of the United States. President-elect Trump's tax plan looks to reduce taxes across the board, including making the business tax rate more competitive and creating new opportunities to grow our economy. Before any proposed changes can be made, they must be approved by Congress.
As employers move into their second year of reporting under the Affordable Care Act (ACA), the IRS has extended penalty relief and the due dates for ACA information reporting. Employers with 50 or more full-time employees will now have until March 2, 2017 (instead of Jan. 31, 2017) to issue their 2016 Form 1095-B or 1095-C to their employees and covered individuals. This extension does NOT apply to the employer reporting to the IRS with Form 1094 transmittal, which will remain at February 28 (March 31 if filing electronically).
Although the end of the year is quickly approaching, there is still time to implement some tax strategies that can improve your tax circumstances for 2016 and beyond.
There have been a lot of questions lately surrounding the 1095 reporting requirements for the 2016 reporting period. Read more to review some bullet points from frequently asked questions.
The IRS has proposed several rule changes that could bode well for taxpayers. The biggest proposed change would affect the earned income tax credit that has been in effect since 1994.With the proposed changes both taxpayers are eligible to claim the earned income tax credit; one can claim the full portion of the credit and the other can claim the reduced credit for childless taxpayers if certain requirements are met.
If you do not participate in your employer's retirement plan, you have up until April 18, 2017 to make a traditional IRA contribution which would be fully deductible on your 2016 income tax return.
Yesterday, the House of Representatives passed the American Health Care Act (AHCA) in a narrow vote of 217 to 213 after the bill had been amended from its previous version proposed a few weeks earlier. The AHCA is new proposed legislation that will repeal and replace parts of the Affordable Care Act (ACA) which is currently the law of the land. While this is only the first step of the new legislation, here are a few of the highlights of the bill.
Yesterday, the White House released President Donald Trump's tax reform plan to the public. The proposal aims to drastically cut corporate taxes as well as provide tax relief for individuals, with middle-income families as the primary target. The goal of the tax reform is to create economic growth, and American jobs, and to lower the business tax rate to one of the lowest in the world. The proposed tax reform plan is being touted as one of the biggest individual and business tax cuts in American history.
Now that the initial April 18 personal income tax deadline has passed, the Internal Revenue Service has released six major changes to collection policies. Taxpayers that have outstanding balances due to the IRS can expect to be impacted in more ways than the traditional paper notices that arrive by mail every few weeks. The changes are designed to be motivation for delinquent taxpayers to settle all tax debts sooner rather than later.
Many years ago you started to put some money aside to provide a comfortable retirement. Maybe it was a pension plan, possibly a 401K plan or even an IRA. Do you have more than one of these accounts because of job or investment advisor changes? Have you gotten married since you opened your account? Have you had children, got divorced, had grandchildren or had a death in the family? Chances are one or more of these life events will apply to you. When you set your retirement account up you made a beneficiary election. Do you remember who you selected...or have a copy of the election you made? Your retirement account is just that, for retirement. However, in most cases these funds are never totally exhausted before the account owner dies so your beneficiary election is vital to proper retirement planning. Your beneficiary election will determine who inherits your retirement account, but more importantly, how and when it will be taxed to them.
Inheriting an IRA means different things to different people. Everyone shares in the grief of a departed loved one, but the options available to those beneficiaries are very different. Spousal beneficiaries have options to treat the IRA as their own or can keep the account in the original owner's name. Non-spousal beneficiaries must keep the account in the original owner's name and are subject to different distribution rules that depend on the age of the original owner.
2018 inflation-adjusted figures for contributions to HSAs have been released by the IRS.
Recent court decisions and the Internal Revenue Service (IRS) Chief Counsel Memorandum (CCM) reinforce the need to keep accurate records and adequately disclose all charitable contributions as well as gifts made to others.
With ever-growing globalization, wealthy families have taken the opportunity to live and maintain homes all across the world, including in the United States. One of the potential challenges facing such individuals is planning their estates in an effort to maximize tax efficiencies and to retain their hard-earned wealth.
A Roth IRA can be an attractive investment over a traditional IRA in a couple of different ways: it gives taxpayers the opportunity to avoid tax on their IRA distributions and a Roth is not subject to required minimum distribution rules. When converting a traditional IRA to a Roth IRA, a taxable event occurs and taxpayers must pay tax on their conversion amount as if it were ordinary income.
The Social Security Administration (SSA) has announced that the maximum amount of wages subject to the 6.2 percent Social Security tax (old age, survivor and disability insurance) for 2018 will rise from $127,200 to $128,700. The increase of just over one percent is a lot less than the seven percent jump from 2016 to 2017.
Unforeseen events are just that...unexpected. You started out your career on the right path and began the process of saving for your retirement. Then life throws you a curveball and you realize you will need to access those funds much sooner than you expected. If you have not reached the age of 59½, you will be subject to taxation on withdrawal of those funds and get hit with a 10 percent early distribution penalty.
Each year, the IRS sends millions of letters to taxpayers for many different reasons. Here some useful tips for taxpayers on how to handle receiving one of these letters.
The Tax Cuts and Jobs Act significantly limits the amount an individual can deduct as an itemized deduction for state and local taxes. The maximum amount a taxpayer may claim as an itemized deduction is $10,000 ($5,000 for a married taxpayer filing a separate return) for the aggregate of (i) state and local property taxes and (ii) state and local income taxes (or sales taxes in lieu of income taxes).
With the impending decrease of the corporate tax rate to 21 percent, is it time to change your entity structure to a C corporation? There is no quick answer to this question. Each taxpayer is in a unique situation that would have to be evaluated in order to make the determination of which taxing structure is proper for that taxpayer.
With the tax bill almost complete, the estate and gift tax exemption will double to approximately $11,000,000 in 2018 for an individual or $22,000,000 if you are married.
In response to the federal tax bill signed into law on Dec. 22, 2017, New York state governor, Andrew M. Cuomo, signed an emergency executive order allowing individuals the ability to prepay next year's New York property taxes. The order is intended to protect taxpayers from the impact of the GOP tax bill, which caps the deductibility of state and local taxes at $10,000. By allowing individuals to pay a portion or all of their 2018 property taxes in 2017, the executive order aims to provide individuals with options as a result of the tax bill's negative financial impact.
The Tax Cuts and Jobs Act passed by the House and Senate this week widens current tax brackets and almost doubles the standard deduction, but also limits or repeals some itemized deductions. Beginning in 2018, the Act increases the standard deduction to $24,000 for married-filing joint filers, $18,000 for head-of-household filers and $12,000 for all others.
Virtual currency, or cryptocurrency, is a digital representation of value that can be exchanged for goods and services or held for investment. These currencies include Bitcoin, Litecoin, Ethereum and many others. For Bitcoin, if a taxpayer "mines" the virtual currency, it needs to be included in gross income at the fair market value upon receipt or discovery of the currency. The character of the income depends on the intended purpose of the currency.
Cybercriminals typically increase their activity in the first part of the year through phone scams and email phishing schemes. These scammers try to obtain personal information using different tricks and tactics so they can file income tax returns and claim refunds on behalf of unsuspecting taxpayers. Some scammers may also allege a taxpayer owes taxes and aggressively demand payment for a quick payout.
Retirement means different things to different people. Some people look at this as the last chapter in a long life. They wish to slow down, travel a bit and spend more time with their families. Other people look at retirement as an opportunity to reshuffle the cards and pursue new dreams or passions that their earlier career did not provide.
The Bipartisan Budget Act of 2018, passed by Congress and signed by President Trump on Feb. 9, 2018, retroactively extends over 30 tax provisions that had expired at the end of 2016. This one year extension applies to the extended provisions and is effective for 2017 only. Many of the extended provisions are related to energy credits which are especially important for businesses and individual taxpayers.
Beginning in 2018, regardless of when incurred, home equity loan interest is generally not deductible under the new Tax Cuts and Jobs Act. The IRS has issued clarifying guidance that taxpayers, in certain situations, can continue to deduct interest on a home equity loan, a home equity line of credit or a second mortgage, as mortgage interest. All the interest paid on these types of loans is deductible if they are secured by a qualified residence and the total loans do not exceed the home's cost. Also, the total amount of these loans cannot exceed $750,000, reduced to $375,000 for taxpayers filing as married filing separate.
Among the data exposed in the Equifax breach of 2017 were Social Security numbers, which thieves can use to file a fraudulent tax return using taxpayer information obtained in the breach. Tax-related identity theft is one of the top tax scams on the IRS "Dirty Dozen" list and the breach will exacerbate that problem.
Twenty years! That's how long Roth IRAs have been around. In the year 2000 only about $77 billion was invested in these types of accounts but by 2017 it is estimated that there is almost $3 trillion in Roth IRAs. While these accounts have enjoyed explosive growth over two decades, many things are not fully understood about this tax-free retirement account.
The Internal Revenue Service announced on March 13 that it plans to end its Offshore Voluntary Disclosure Program (OVDP) on Sept. 28, 2018. The OVDP allowed taxpayers to avoid prosecution by voluntarily disclosing untaxed money held overseas and paying a set penalty. The OVDP, which has been available since 2009, has experienced a significant decline in taxpayer participation as awareness of offshore tax and reporting requirements has increased.
Prior to the Tax Cuts and Jobs Act (TCJA), an individual had until the due date (including extensions) to reverse a Roth conversion if it did not make sense, which resulted in a date of October 15 of the year following the conversion. With passage of the TCJA, this recharacterization was eliminated.
For 2018, the standard deduction amounts will increase to simplify the deduction scheme. More taxpayers will find it beneficial to claim the standard deduction. Itemized deductions have been modified for the 2018 tax year following tax reform. Many of the itemized deductions have either disappeared or changed. Here is how the itemized deductions found on Schedule A have changed.
Revenue Procedure 2018-27 provides relief for those with family coverage under high deductible health plans (HDHP) in regards to the annual deductible contributions limit for 2018 health savings accounts (HSA) under Internal Revenue Service Code section 223. The maximum coverage was initially issued as $6,900 on May 4, 2017. On March 2, 2018 the limit was reduced to $6,850 after tax reform changed the calculation for 2018 and future years.
Commencing in 2018, as enacted under the Tax Cuts and Jobs Act of 2017, Congress provided that deductions for state and local taxes are to be capped at $10,000 per married couple. Many high tax states such as California, New York, New Jersey and Connecticut have considered that this was inequitable to their residents, and have passed or are drafting legislation which would allow taxpayers to make payments to state or local municipal charitable organizations in exchange for credit against their real estate or state and local taxes.
There has been rapid growth in the number of people using virtual currencies, like Bitcoin, in the last few years. According to an article in The Tax Advisor, the IRS is beginning to watch this activity more closely. The underreporting of income from virtual currency transactions is potentially staggering. The IRS is beginning to aggressively pursue such transactions.
The Tax cuts and Jobs Act held many changes to tax planning and required documentation for business owners in 2018. One of those changes is meals and entertainment deductibility. Prior to 2018, meals and entertainment have been mostly considered 50 percent deductible for tax purposes as long as the taxpayer could show that the meal and/or entertainment had a business purpose or relation.
The Internal Revenue Service recently announced that the agency will waive certain late payment penalties pertaining to Section 965 of the Internal Revenue Code.
For publicly traded companies the Tax Cuts and Jobs Act eliminates the exceptions for performance- based compensation and commissions. Prior to the Tax Cuts and Jobs Act, performance- based compensation and commissions that exceeded $1 million were deductible under the exceptions available for these types of compensation to a covered employee. Previously, if a covered employee had a base salary of $500K and received performance- based bonuses of $4.5M the full $5M of compensation was deductible.
The Internal Revenue Service is encouraging taxpayers to use its Withholding Calculator to perform a "paycheck checkup". While they recommend reviewing your withholding amounts annually, changes from the Tax Cuts and Jobs Act of 2017 have made this a vital step for taxpayers. Taxpayers that do not verify that they are withholding the appropriate amount of tax from their paychecks risk an unexpected tax bill or penalty during tax time.
On Aug. 23, 2018, the Internal Revenue Service issued proposed regulations governing the availability of charitable contribution deductions when a taxpayer expects to receive a corresponding state or local tax credit.
On September 15, the IRS announced that it is extending tax filing and payment deadlines for taxpayers and businesses in North Carolina counties that were affected by Hurricane Florence and have been designated to qualify for FEMA. Currently, this only applies to parts of North Carolina, but taxpayers in other states will automatically receive these same filing and payment benefits as those states are added to the disaster area.
Sometimes a transaction does not result in the desired outcome. When it comes to IRA contributions and conversions though, tax laws were enacted to allow a do-over. This is the foundation for a "recharacterization." When a person converts a traditional IRA to a Roth IRA, the amount converted becomes immediately taxable to the account holder.
If you have any foreign assets that have not been reported to the Internal Revenue Service (IRS), it is imperative that you take action now!
Required minimum distributions (RMDs) are mandated withdrawals from qualified retirement plans and IRAs after you have reached the age of 70½. Miss one or don't take enough out of your account and a 50 percent penalty applies. While the IRS requires these distributions, that doesn't mean you can't plan to use it to your benefit.
The Tax Cuts and Jobs Act greatly simplified the "kiddie tax". The original kiddie tax required children under the age of 18, or under age 24 if they are a full time student, to pay taxes on their unearned income (interest, dividends, capital gains, rents, etc.) over $2,100 at their parents' highest tax rate. It also required a separate form and some complicated computations, as well as requiring parents to share their tax information with their children.
Division of assets, possible child support, alimony, child custody, emotions - divorce can be a complicated, stressful and painful process. For 2018, now add taxes and timing into the mix.
As part of the Tax Cuts and Jobs Act signed into law in December 2017, the new law grants a tax credit for 2018 and 2019 for employers that voluntarily offer paid family and medical leave.
With the government shutdown over and the IRS reopened, what can be expected? Currently, the IRS has an estimated five million unanswered inquires that took place during the shutdown. Additionally, it is estimated that they have already received several million tax returns since the filing season started on January 28.