Category Archives: Estate Planning

2017 PENNSYLVANIA TAX AMNESTY PROGRAM

PA Amnesty Program

What Is The Pennsylvania Tax Amnesty Program?

The PA Tax Amnesty program creates an incentive for taxpayers to pay there tax liabilities during a narrow time period that ends on June 19, 2017.  While this program is open, the PA Department of Revenue will waive all penalties and half of the interest for anyone who participates in the Tax Amnesty program.

 

What tax periods are eligible for the Tax Amnesty program?

Eligible periods for tax amnesty are those where a delinquency exists as of December 31, 2015, whether the delinquency is known or unknown to the department.

What taxes are eligible for the Tax Amnesty program?

The taxes administered by the department, listed below, are eligible for the Tax Amnesty program:

  • Agriculture Cooperative Tax;
  • Bank and Trust Company Shares Tax;
  • Capital Stock or Foreign Franchise Tax;
  • Cigarette Tax;
  • Corporate Net Income Tax;
  • Corporate Loans Tax;
  • Electric Cooperative Tax;
  • Employer Withholding Tax;
  • Financial Institutions/Title Insurance Company Shares Tax;
  • Fuel Use Tax;
  • Gross Premiums Tax;
  • Gross Receipts Tax
  • Hotel Occupancy Tax, including the state administered 1% Local Hotel Occupancy Tax for Philadelphia and Allegheny    County;
  • Inheritance and Estate Tax;
  • Liquid Fuels Tax;
  • Malt Beverage Tax;
  • Marine Underwriting Profits Tax;
  • Motor Carriers Road Tax, for IFTA vehicles, PA portion only;
  • Motor Vehicle Carriers Gross Receipts Tax;
  • Mutual Thrift Institutions Tax;
  • Oil Company Franchise Tax;
  • Parimutuel Wagering and Admissions Tax;
  • Personal Income Tax;
  • Public Transportation Assistance (PTA);
  • Public Utility Realty Tax;
  • Realty Transfer Tax, including Local Realty Transfer Tax;
  • Sales and Use Tax, including Local Sales and Use Tax for Philadelphia and Allegheny County;
  • Surplus Lines Tax;
  • Unauthorized Insurance Tax, monthly; and Vehicle Rental Tax (VRT)

Note:  The Tax Amnesty program does not apply to Unemployment Compensation because it is administered by the Pennsylvania Department of Labor and Industry.

Note:  Also, the Tax Amnesty program does not apply to any tax administered by another state, local government or the federal government/Internal Revenue Service.

What are the benefits of the Tax Amnesty program?

You may resolve your tax amnesty eligible debt by paying the tax and half of the interest. The benefits of the tax amnesty program are the following:

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IRS Installment Agreements: 2017 User Fee Schedule and Options

irs-installment-agreement-fees-2017

Starting in 2017, the IRS has revised its user fee schedule for installment agreements. The new fee schedule applies to installment agreements entered into, restructured or reinstated on or after January 2, 2017.

The final regulations increase the existing user fees (except for low-income taxpayers) and create two new types of online installment agreements, each subject to a separate fee. Five of these rates are based on the full cost of establishing and monitoring installment agreements, while the sixth rate is for low-income taxpayers.

Here are the new fees effective starting in 2017:

(1) A top rate of $225, up from the current rate of $120, applies to taxpayers who enter into installment agreements in person, over the phone, by mail, or by filing Form 9465, Installment Agreement Request, with the IRS.

Note: This includes taxpayers requesting installment agreements with their e-filed returns.

(2) A reduced rate of $107, up from $52, applies to a direct debit agreement.

(3) A taxpayer who sets up an installment agreement through IRS.gov and agrees to make payments either by mailing a check or through the Electronic Federal Tax Payment System (EFTPS) will pay $149.

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Tax Positions of Presidential Candidates

Here is a neat info-graphic on the tax positions of the Presidential Candidates. Special thanks to MBACentral.org

Candidates_Tax_Proposals

New 2015 Tax Law Changes Tax and FBAR Filing Deadlines & Other Noteworthy Compliance Provisions: The Good, The Bad & The Ugly

2015 Tax Law Changes

On Friday, July 31, 2015, President Barack Obama signed HR 3236, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” (the “Act”). Not sure how this name relates to taxes but in any event the following tax law changes and provisions became law under this Act:

  • Changes to the due dates for various returns. The Act sets new due dates for partnership returns, C corporation returns.
  • Foreign Bank Account Reporting:  New due dates for the important and often overlooked foreign bank account reporting (FBAR) forms, known as FinCEN Form 114, Report of Foreign Bank and Financial Accounts have been implemented.
  • Changing the six year statute of limitations to apply to understatements of income that resulted from taxpayers overstating tax basis when calculating sales.  This change overturns the Home Concrete case where the Supreme Court ruled that understatements of income as a result of basis miscalculations would not trigger the extended six-year statute of limitations applicable to understatements of income.
  • Requiring consistent basis reporting for estates and estate beneficiaries.
  • Requiring additional information to be included in mortgage information statements.
  • Other Information Returns:  The new act imposes new filing requirements for several other IRS information returns.

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College Tuition: Discover How Grandparents Can Help Their Grandchildren and Save Taxes Too

College-Tuition-Tax-Breaks

With college tuition coming due, families should consider tax efficient ways to pay for these expenses. Grandparents who wish to help their children with tuition costs can take advantage of some special gift tax breaks.

Grandparents have the usual annual present interest gift tax exclusion (now $14,000) and a lifetime exclusion (now $5,340,000). When a spouse joins in the gift (the called “spousal joinder”), these amounts double .

But these are not the only tax breaks available to a grandparent who wants to help the family. In addition, grandparents have an unlimited gift tax exemption for amounts paid for tuition. By using this special educational exclusion, such payments do not count against the annual gift tax or lifetime exclusions.

Here are the basic rules to qualifying these gifts for such unlimited educational exemption:

Unlimited Exclusion For Tuition Only

This exclusion from the gift tax for gifts of tuition is unlimited in amount. However, the scope of the exclusion applies to tuition only.

Books, Supplies and Other Items Not Covered

There is no exclusion for amounts paid for the following:

  • Board or other similar expenses that are not direct tuition costs.
  • Books
  • Supplies
  • Laboratory fees
  • Dormitory fees

See Treasury Regulations 25.2503-6(b)(2) for more details.

While Only Tuition Qualifies, This Educational Exemption Can Be For Part-Time or Full-Time Tuition

The gift tax is not imposed on amounts paid as tuition for a student to a qualifying domestic or foreign educational organization for the education or training of such person. See Code Section 2503(e)(1) and (2)(A).

Tuition payments for the student qualify where enrollment is part-time or full-time.

Qualifying Educational Organization

A qualifying educational organization is one which:

  • Normally maintains a regular faculty and curriculum and
  • Normally has a regularly enrolled body of students in attendance at the place where its educational activities are regularly carried on.

See Code Section 170(b)(1)(A)(ii) and Treasury Regulation 25.2503-6(b)(2).

Direct Payment of Tuition to Educational Organization

The tuition payment must be made directly to the educational organization to qualify for this exclusion.

Critical Point:

Neither a payment to the student for delivery to the organization nor a payment Continue reading

Weddings: Quick and Easy Tax Guide For Those Getting Married and Newlyweds

My Loving In-Laws-RITA AND JOE circa 1950

Rita and Joe, My Wonderful In-Laws, On Their Wedding Day, June 23,1950

The excitement, joy and anticipation of getting married can be almost overwhelming.  With the planning that goes into the wedding it is easy to overlook the tax implications of marriage.  Although taxes are probably not high on your summer wedding plan checklist, it is important to be aware of the tax changes that come along with marriage. Here are some basic tips that can help keep those issues under control.

Name Change:

The names and Social Security numbers on your tax return must match your Social Security Administration (SSA) records. If you change your name, it is imperative to report it to the SSA.

Change Income Tax Withholding:

A change in your marital status means you must give your employer a new Form W-4, Employee’s Withholding Allowance Certificate.

If you and your spouse both work, your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.

To avoid problems and to get specific advice speak with your tax adviser.

Changes In Circumstances:

Marriage can have an impact on insurance. It is important that you report changes in circumstances, such as changes in your income or family size, to your health insurance company (or Health Insurance Marketplace).  You should also notify your insurance company when you move out of the area covered by your current insurance plan.

Address Change:

Let the IRS know if your address changes.

You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office.

Change In Filing Status:

If you’re married as of December 31, that’s your marital status for the entire year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year.

Note: Once married, neither of you can file using single status.

Generally and in most cases, married filing jointly results in a lower amount of taxes due.  However, you may want to figure the tax both ways to find out which status results in the lowest tax.

Filing Status For Same-Sex Couples:

If you are legally married in a state or country that recognizes same-sex marriage, you generally must file as married on your federal tax return. This is true even if you and your spouse later live in a state or country that does not recognize same-sex marriage. See Same-Sex Marriage Tax Guide: 16 Essential Tax Rules and Tips for a more detailed discussion. Continue reading

US Citizens Living Outside America: Streamlined Foreign Offshore Procedure Offers Tax and Compliance Relief

United States Citizens Living Abroad: New IRS Streamlined Procedure Offers Relief

United States Citizens Living Abroad: New IRS Streamlined Procedure Offers Relief

A couple of weeks ago, I had someone come in my office who has lived abroad since he was 7 years old. He is a citizen of the United States and Netherlands. He has never filed United States income tax returns. We discussed the general rule that US citizens must file returns and pay tax on their worldwide income. This meant that he should be filing a Form 1040 Return each year.  It also meant that he should have been filing for the last 20 years or so of his adult working years a Form 1040 even though he is not living or working in the US.  We discussed that although there may be a  Netherlands tax treaty with the United States it does not eliminate the need to file tax returns.  To add insult to injury, there could be taxes due, along with a whole host of penalties.

In addition to income taxes, having a bank account in the Netherlands could subject him to the Foreign Bank Account Reporting (FBAR) rules and penalties for failure to file for at least the last six years.

To help certain United States taxpayers, the IRS has previously put in place procedures to deal with many foreign bank account problems and to reduce compliance problems. These programs are explored  in some detail at Foreign Offshore Accounts: IRS Third Amnesty Program and Electronic Reporting of Foreign Bank and Financial Accounts (FBAR), and Quiet Disclosures of Offshore Foreign Accounts.  However, these programs did not adequately address the tax and compliance hardships of many United States citizens living abroad.  To make things easier for these taxpayers, the IRS announced yesterday, June 18, 2014, a new Streamlined Foreign Offshore Procedures under IR-2014-73.  Here are the details:

Benefits of the New Streamlined Program:

A taxpayer who is eligible to use these Streamlined Foreign Offshore Procedures and who complies with its requirements can avoid:

  • Failure-to-file penalties
  • Failure-to-pay penalties
  • Accuracy-related penalties
  • Information return penalties, or
  • FBAR penalties.

Even if returns properly filed under these procedures are subsequently selected for audit under existing IRS audit selection processes, the taxpayer will not be subject to failure-to-file and failure-to-pay penalties or accuracy-related penalties with respect to amounts reported on those returns, or to information return penalties or FBAR penalties, unless the examination results in a determination that the original tax noncompliance was fraudulent and/or that the FBAR violation was willful.

However, any previously assessed penalties with respect to those years, however, will not be abated.  Further, as with any U.S. tax return filed in the normal course, if the IRS determines an additional tax deficiency for a return submitted under these procedures, the IRS may assert applicable additions to tax and penalties relating to that additional deficiency.

Retirement and Savings Plan Deferral Elections: For returns filed under these procedures, retroactive relief will be provided for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by an applicable tax treaty. The proper deferral elections with respect to such plans must be made with the submission.

Eligibility For The Streamlined Program

In addition to having to meet the general eligibility criteria of these offshore programs, individual U.S. taxpayers, or estates of individual U.S. taxpayers, seeking to use the Streamlined Foreign Offshore Procedures must:

  • Meet the applicable non-residency requirement described below (for joint return filers, both spouses must meet the applicable non-residency requirement described below) and
  • Have failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and
  • May have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and
  • Such failures resulted from non-willful conduct.

Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

Non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents (i.e., “green card holders”):  Individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days.

Under IRC section 911 and its regulations, which apply for purposes of these procedures, neither temporary presence of the individual in the United States nor maintenance of a dwelling in the United States by an individual necessarily mean that the individual’s abode is in the United States.

What Has To Be Done To Qualify Under This Program

U.S. taxpayers eligible to use the Streamlined Foreign Offshore Procedures must do the following:

  • Income Tax Returns:  For each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, file delinquent or amended tax returns, together with all required information returns (e.g., Forms 3520, 5471, and 8938) and
  • FBAR:  For each of the most recent 6 years for which the FBAR due date has passed, file any delinquent FBARs.
  • Tax and Interest Must Be Paid With Filings: The full amount of the tax and interest due in connection with these filings must be remitted with the delinquent or amended returns.
  • Compliance Details:  There are other submission details and the IRS warns that “Failure to follow these instructions or to submit the items described below will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.”  So extreme care must be taken to comply with all the details of this IRS program.

Conclusion:

This is a very favorable development to US citizens living abroad who have no idea of their tax responsibilities to the United States.  As always, the devil is in the details, so tax counsel should be sought to insure that the various submissions meet all requirements under this Streamlined Foreign Offshore Procedures.  There is just too much at stake to do otherwise.

 

Disclosure and Disclaimer: As required by United States Treasury Regulations, you should be aware that this communication is not intended by the sender to be used, and it cannot be used, for the purpose of avoiding penalties under United States federal tax laws. This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.

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