Category Archives: IRS

Here Are The IRS 2017 Standard Business, Medical and Moving Mileage Rates

2017-auto-article-2 

The Internal Revenue Service has recently issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016.

The charitable rate is set by statute and remains unchanged.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle Continue reading

IRS Warns & Updates Taxpayers of Numerous Tax Scams Nationwide: All Taxpayers, Tax and Financial Advisers Need To Read This

irs-scams

You Do Not Want To Be In This Position

 

As tax season approaches, the Internal Revenue Service, in IR-2016-164,  has just reminded taxpayers to be on the lookout for an array of evolving tax scams related to identity theft and refund fraud.

Every tax season, there is an increase in schemes that target innocent taxpayers by email, by phone and on-line. Taxpayers and tax professionals can not be too careful and should be on the lookout for these deceptive schemes.

“Whether it’s during the holidays or the approach of tax season, scam artists look for ways to use tax agencies and the tax industry to trick and confuse people,” said IRS Commissioner John Koskinen. “There are warning signs to these scams people should watch out for, and simple steps to avoid being duped into giving these criminals money, sensitive financial information or access to computers.”

Here are Seven of the Most Prevalent IRS Impersonation Scams:

Continue reading

Do You Want To Know About Your IRS Account Balance? IRS Launches New Online Tool to Assist Taxpayers with Basic Tax Account Information

irs-online-toolThe Internal Revenue Service announced on December 1, 2016 (IR-2016-155) the launch of an online application that will assist taxpayers with straightforward balance inquiries in a safe, easy and convenient way.

This new and secure tool, available on IRS.gov allows taxpayers to view their IRS account balance, which will include the amount they owe for tax, penalties and interest.

It also should be pointed out that taxpayers may also continue to take advantage of the Continue reading

Did You Get a Letter in the Mail from the IRS? Here is What You Need to Do

IRS NOTICE OF PROPOSED CHANGEEach year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. This can be extremely upsetting when receiving this form of communication, whether it is from the IRS or any other taxing authority.  The following tips are presented to reduce your anxiety and to provide a specific action plan for any correspondence received from the IRS (or from your state or local taxing authority):

  • Don’t Panic: You can usually deal with a notice simply by responding to it. You should immediately contact your tax attorney, CPA or tax adviser to discuss this matter in more detail.
    • Tip: Waiting can only compound and complicate your tax problems.
  • Most IRS notices are about federal tax returns or tax accounts: Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do.  Follow the instructions very carefully.  The goal here is to give a specific and detailed response to the tax issue in question.
    • Tip: Only respond to the particular issue and do not provide or discuss issues that are not being raised by the IRS.
  • Taxes You Owe or Payment Request:  Your notice will likely be about changes to your account, taxes you owe or a payment request. However, your notice may ask you for more information about a specific issue.
    • Tip: Do not assume that the taxes owed are correct. In many cases, the IRS calculates taxes without all the relevant facts.

Continue reading

2016 Standard Mileage Rates for Business, Medical and Moving

2015 IRS Mileage RatesThe Internal Revenue Service on December 18, 2015 issued the 2016 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 54 cents per mile for business miles driven, down from 57.5 cents for 2015

• 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015 Continue reading

2014 Year-End Tax Planning Guide For Businesses: Discover 9 Proven Tax Planning Strategies

Year-End Tax Planning For Business

Business Year-End Tax Planning

The arrival of year-end presents special opportunities for most small businesses to take steps in lowering their tax liability. The starting point is to run projections to determine the income and tax bracket for this year and what it may be next year.  Once this is known, decisions can be made as to whether any of the following planning tools should be employed to cut taxes before the tax year closes.

Last second tax law changes also must be considered.  It is also important to know that on December 19, 2014, the President passed the Tax Increase Prevention Act that extended many expired tax provisions some of which are discussed in more detail below.  Note that these tax breaks are only available through the end of  2014.  If any of these tax breaks are available to you, it would be prudent to take advantage of them before they expire.

Also keep in mind ordinary income tax rates for individuals can be as high as 35% to 39.6%  so members of flow through entities such as partnerships, limited liability companies (LLCs) and S Corporations need to recognize this and other tax changes and plan accordingly.

The following presents some year-end tax strategies that may prove helpful to  businesses of all shapes and sizes:

1. Accelerating or Deferring Income and Deductions as Part of a Year-end Tax Strategy

A good part of year-end tax planning involves techniques to accelerate or postpone income or deductions, as your tax situation dictates. The idea is to keep income even from year to year. Having spikes in taxable income in any one tax year puts you in a higher average tax bracket than you would be in if you had evened out the amount of taxable income between current and later year(s).  (Historical note:  For those of you old enough to remember, there was an income averaging rule built into the tax code that actually corrected for the inequity that can result in big shifts in income from year to year.  That provision has long been abolished.)

So every year, businesses can take advantage of the traditional planning technique that involves alternatively deferring income or accelerating deductions. For example, business taxpayers such as pass-through entities (limited liability companies, partnerships, S corporations, sole proprietorship) should consider accelerating business income into the current year and deferring deductions until 2015 (and perhaps beyond) if they expect income to rise next year. 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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