News & Articles

Tax Fraud Awareness: How to Protect Your Identity and Assets

Posted on Tue, Jan 17, 2017

The IRS, taxpayers and tax preparers share a common enemy: identity thieves. We all have a part to play in the fight against tax-related identity theft. Your role starts by learning the mechanics and warning signs. From there, taxpayers can take proactive steps to protect their data online and at home.

Read More

Tags: Tax, IRS, Fraud, Tax Return

Tax Responsibilities After Someone Dies

Posted on Mon, Dec 05, 2016

The death of a loved one is always difficult but it can be even more challenging if you are the one who must handle all the resulting tax responsibilities.

Read More

Tags: Tax, Estate, Tax Return

Form 1099 Filing Alert

Posted on Tue, Nov 15, 2016

The IRS has been focusing on taxpayer compliance when it comes to reporting taxable income on Form
1099 and Congress has been increasing the penalties for non-compliant taxpayers. New this year,
penalties can range from $100 to $500 per 1099 return if filing with the Internal Revenue Service is
not completed by the compressed deadline of January 31, 2017.

Read More

Tags: Tax, Business, IRS, Business Owner, Form 1099

Get Ready Businesses: Some Filing Due Dates are Changing

Posted on Mon, Nov 14, 2016

Thanks to recent legislation, the due dates have been changed for some information returns and related statements and for some business tax returns. Here's what you need to know.

Two Laws Are Responsible for the Changes

1. The Protecting Americans from Tax Hikes (PATH) Act. Enacted on December 18, 2015, the PATH Act extended or made permanent a number of "tax extenders" (provisions with expiration dates that had been routinely extended by Congress on a one- or two-year basis). It also contained a number of other provisions, including the changed due dates for W-2s and some 1099s.

2. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. This new law was primarily designed as a three-month stopgap extension of the Highway Trust Fund and related measures. But it includes a number of important tax provisions, including the revised due dates for partnership and corporation tax returns. President Obama signed it into law on July 31, 2015.

Earlier Due Dates for Forms 1099-MISC and W-2

When a business pays non-employee compensation aggregating to $600 or more to a single payee in a tax year, the business must file a Form 1099-MISC to report the payments to the IRS. Similarly, employers must report wages paid to employees on Forms W-2. Copies of these forms (called payee statements) must also be supplied to payment recipients. 

Before a law passed last year, Forms 1099-MISC and W-2 were required to be filed with the IRS and the Social Security Administration (SSA) by the last day of February or by March 31 if filed electronically. (See "Two Laws Are Responsible for the Changes" at right.) Now, the due dates have been accelerated.

Starting with returns for the 2016 calendar year (which must be filed in early 2017), the due date for IRS and SSA filings is advanced to January 31 of the following year. The March 31 due date for electronic filings is no longer available. So the deadline for filing 2016 Forms 1099-MISC and W-2 with the IRS and the SSA is January 31, 2017.

Note: For filing 2016 Forms 1099-MISC and W-2 with the IRS and the SSA, one 30-day extension is allowed. To obtain an extension, you must file Form 8809, "Application for Extension of Time to File Information Returns," by no later than January 31.

The deadline to supply payee statements to recipients remains January 31 with no extensions allowed.

Reason for the New W-2 and 1099 Deadline

The goal of the new earlier deadline is to:

  • Give the IRS more time to spot errors on tax returns.
  • Make it easier for the tax agency to verify the legitimacy of returns and properly issue refunds to taxpayers eligible to receive them.

Reducing tax refund fraud has been a priority of the federal government in recent years.

Later Due Dates for 2016 Corporate Federal Income Tax Returns

For many years, C corporation federal income tax returns on Form 1120 were due two and a half months after the end of the corporation's taxable year (March 15, adjusted for weekends and holidays, for a calendar-year corporation). Form 1120 could be automatically extended for six months (through September 15, adjusted for weekends and holidays, for a calendar-year corporation).

However, a law passed last year established new due dates for Form 1120. For tax years beginning after December 31, 2015, the due date is generally moved back one month to three and a half months after the close of the corporation's tax year (to April 15, adjusted for weekends and holidays, for a calendar-year corporation).

Automatic five-month extensions are allowed (to September 15, adjusted for weekends and holidays, for a calendar-year corporation). You must file Form 7004, "Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns," to obtain an automatic extension.

The Form 1120S due date for S corporations is unchanged.

Note: Under a special transition rule for C corporations with fiscal years ending on June 30, the due date change won't kick in until tax years beginning after 2025. Until then, the traditional due date of September 15 (adjusted for weekends and holidays) for these corporations will continue to apply, with automatic seven-month extensions allowed.

Earlier Due Dates for 2016 Partnership and LLC Returns

For many years, partnership federal income tax returns on Form 1065 have been due three and a half months after the end of the partnership tax year. So for a calendar-year partnership, the filing deadline was April 15 of the following year (adjusted for weekends and holidays).

The Form 1065 due dates have also now been changed. For partnership tax years beginning after December 31, 2015, the Form 1065 due date is accelerated by one month, to two and a half months after the close of the partnership's tax year (March 15 for calendar-year partnerships). The same deadline applies to limited liability companies (LLCs) that are treated as partnerships for federal tax purposes.

Automatic six-month extensions are allowed (to September 15, adjusted for weekends and holidays, for a calendar-year partnership or LLC). File Form 7004 to obtain an automatic extension.

Need Help with Compliance?

If you have questions about the new filing deadlines for tax returns or information returns, or you want to file an extension, contact your EHTC Tax Advisor.

 

Read More

Tags: Tax, Business, IRS, IRS Filing, Small Business

Tax-Savvy Planning Strategies for Inherited IRAs

Posted on Fri, Aug 26, 2016
Say an IRA is inherited by multiple individual beneficiaries or by one or more individuals and one or more charities or other beneficiaries that aren't "natural persons." How do these scenarios affect the rules for required minimum distributions (RMDs) that apply after the IRA owner dies? And how can you optimize the tax results for individual beneficiaries?

Here, we answer these questions and explain the importance of the fast-approaching deadline on September 30, 2016, that must be met to change beneficiaries for IRAs that were owned by individuals who died in 2015.

Read More

Tags: Tax, Tax Penalties, IRA, RMD

To Forgive Is Not Always Divine

Posted on Fri, Aug 19, 2016
F or tax purposes don't think that you're off the hook if another party forgives or cancels a debt. Under the "cancellation of debt" (COD) provision in the tax law, this seemingly generous act could result in an unexpected tax bill.

Some businesses and organizations must file Form 1099-C, Cancellation of Debt, when they forgive debts over a certain amount.

Read More

Tags: Tax, Cancellation of Debt, Forgiveness of Debt

Compare and Contrast the Republican and Democratic Tax Reforms

Posted on Fri, Aug 12, 2016

With both major political party conventions finally behind us, it's time to focus on the upcoming national election. Among their many differences, the Republicans and Democrats have widely divergent tax platforms. While platforms are always relatively nonspecific and not necessarily synced with what the presidential candidates have in mind, it's still good to know what tax positions the two parties and their presidential candidates have staked out. Here's a quick summary.

Read More

Tags: Tax, Affordable Care Act (ACA), Social Security, Tax Penalties, Marriage

Midyear Planning for Vacation Home Rentals with Significant Personal Use

Posted on Wed, Jun 22, 2016

Summer is the time for family vacations in the sun, sand and fresh air. It's also a good time to plan for how your vacation home will be used for the second half of the year.

Read More

Tags: Tax, Vacation Home, mixed-use vacation property, Mortgage

10 Midyear Tax Planning Moves Inspired by the PATH Act

Posted on Thu, Jun 02, 2016
Numerous tax breaks have been retroactively expanded for 2015 and beyond — or, in some cases, been made permanent — under the Protecting Americans from Tax Hikes (PATH) Act of 2015. Now that the dust from the new law has settled, individuals and small business owners can plan ahead with these 10 midyear tax strategies inspired by the recent legislation.

5 Tax Breaks for Individuals

1. Consider tax breaks for college students. If you have a child in college this year, you may be eligible for tax benefits. The PATH Act makes the American Opportunity credit permanent and extends the tuition and fees deduction through 2016. Both of these breaks are subject to phaseouts based on income level. For each student, you may claim either the American Opportunity credit or the tuition and fees deduction, but not both. Thus, while it is possible to claim the credit and the deduction in the same year, you may not claim both for the same student. If your income is too high to take one of these breaks, your child might be eligible.

The PATH Act also permanently treats computers, computer equipment, software and Internet service as qualified expenses for Section 529 savings plans, so distributions for this purpose are tax-free. Summer planning can help maximize your tax benefits for costs incurred for the fall semester.

2. Shop for a new car. If you itemize deductions on your federal income tax return, you can generally deduct state and local income taxes paid for the year. As an alternative, however, you may claim a deduction for state and local sales taxes. This option — which has been permanently extended by the PATH Act — is generally beneficial to taxpayers in locales with low or no state or local income taxes. But it can also benefit taxpayers who make large purchases during the year, regardless of where they live.

The sales tax deduction is determined based on actual receipts or an IRS table that lists amounts for each state. If you opt to use the IRS table, you can add on the actual sales tax paid for certain "big-ticket items," such as cars or boats. If you're in the market for a new vehicle, remember this alternate tax deduction.

3. Transfer IRA funds directly to charity. After you turn age 70½, you must take required minimum distributions (RMDs) from your traditional IRAs, whether you want to or not. These RMDs are taxable in the tax year they're received.

Under a provision made permanent by the PATH Act, if you're age 70½ or older, you may transfer up to $100,000 directly from your IRA to a charity without any tax consequences. In other words, you can't claim a charitable deduction for these transfers, but the payouts aren't taxable either — even if they're used to satisfy your RMD. Act sooner rather than later to avoid year-end scrambling. Keep in mind that this is a per person benefit. Although both spouses may individually transfer up to $100,000 from an IRA to a charity, one spouse cannot "borrow" the other spouse's $100,000 to make a $200,000 transfer.

4. Gift property to a charity. Real estate owners can deduct the value of "conservation easements" made to a charity that preserve the property in its original condition. Charitable deductions for long-term capital gains property (appreciated property that's been held more than one year) are generally limited to 30% of the taxpayer's adjusted gross income (AGI). Any excess may be carried forward for up to 15 years.

Under enhancements made permanent by the PATH Act, the deduction threshold is raised to 50% of AGI (100% for farmers and ranchers) for conservation easements. Any excess may still be carried forward for up to 15 years. One catch, however, is that all such conservation donations must be made in perpetuity.

5. Install energy-saving equipment. Are you dreading the summer heat? It may be time to install a central air conditioning system. There are various requirements to qualify for the credit. First, the home must be your main home. Also, while the credit is generally equal to 10% of the cost of qualified energy-saving improvements, there is a lifetime credit limit of $500. Thus, if you've claimed the credit in a prior year, your current-year credit will be reduced accordingly. Other special dollar limits may apply. It's available for a wide range of items from central air to insulation.

The PATH Act extended the residential energy credit only through 2016. So, it's important to act before this tax-saving opportunity expires. (It may be extended again, but there are no guarantees.)

5 Tax Breaks for Small Businesses

Read More

Tags: Tax, Gifts, Vehicle, Planning, Tax Breaks, College Expenses, PATH Act

Age Has its Privileges...and Penalties

Posted on Tue, Feb 09, 2016

In an era filled with uncertainty, you can count on one thing: time marches on. Here are some important age-related financial and tax milestones to keep in mind for you and your loved ones:

Read More

Tags: Tax