Thursday, May 23, 2013

IRS OPERATIONS CLOSED FOR 5 DAYS DUE TO BUDGET CONSTRAINTS

On May 15, 2013, the IRS announced in IR-2013-51 that, due to budgetary constraints, IRS operations will be shut down on the following 5 days.  While these furlough days generally should not impact operations or client service, they should be noted:

•          Friday, May 24, 2013
•          Friday, June 14, 2013
•          Friday, July 5, 2013
•          Monday, July 22, 2013
•          Friday, August 30, 2013

On the shutdown days, IRS offices will be closed, including the Taxpayer Advocate Service and the taxpayer assistance centers. In addition, the IRS toll-free hotlines will not be available.

The shutdowns will have no impact on any tax filing deadline. However, the IRS will be unable to accept or acknowledge receipt of electronically-filed returns on a shutdown day.

The shutdowns will have no impact on any tax payment deadline. Please note that the only payment deadlines coinciding with a particular shutdown day relate to employment tax deposits and excise tax deposits, which are made through Electronic Federal Tax Payment System, or EFTPS. EFTPS will not be affected by the shutdowns.

Certain web-based online tools and phone-based automated services will continue to function on the shutdown days, including:  Withholding Calculator; Order a Transcript; EITC Assistant; Interactive Tax Assistant; PTIN system for tax professionals; Tele-Tax; and Online Look-up Tool.

The following services will not be available on any shutdown day:  Where’s My Refund? and On-line Payment Agreement.

If the deadline for complying with an IRS request for documents (such as, an administrative summons, a request for records in connection with a return examination, a review or compliance check, or a document request related to a collection matter) falls on a shutdown day, the taxpayer will have until the next business day to provide the IRS with the requested documents/information.  For example, suppose the last day to respond to an IRS request for documents falls on Friday, May 24, 2013. In such a case, the taxpayer will have until Tuesday, May 28, 2013, to comply with the request because that is the “next business day” given that Monday, May 27, Memorial Day, is a federal holiday.

IRS Reminds Those with Foreign Assets of U.S. Tax Obligations

WASHINGTON – The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2012, that they may have a U.S. tax liability and a filing requirement in 2013.

The filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Eligible taxpayers get two additional days because the normal June 15 extended due date falls on Saturday this year. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for additional information additional information on extensions of time to file.

Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 17 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. For details, see Publication 4261: Do You Have a Foreign Financial Account? Though this form can be filed on paper, Treasury encourages taxpayers to file it electronically.

Taxpayers abroad can now use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $57,000 or less can use brand-name software to prepare their returns and then e-file them for free.

Taxpayers with an AGI greater than $57,000 who don’t qualify for Free File can still choose the accuracy, speed and convenience of electronic filing. Check out the e-file link on IRS.gov for details on using the Free File Fillable Forms or e-file by purchasing commercial software.
A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best, get help choosing a software provider. Both e-file and Free File are available until Oct. 15, 2013, for anyone filing a 2012 return.

“Mantyla McReynolds would be happy to help you complete the filing of these forms.”


Wednesday, May 22, 2013

Keep the Child Care Credit in Mind for Summer




If you are a working parent or look for work this summer, you may need to pay for the care of your child or children. These expenses may qualify for a tax credit that can reduce your federal income taxes. The Child and Dependent Care Tax Credit is available not only while school’s out for summer, but also throughout the year. Here are eight key points the IRS wants you to know about this credit.


1. You must pay for care so you – and your spouse if filing jointly – can work or actively look for work. Your spouse meets this test during any month they are full-time student, or physically or mentally incapable of self-care.

2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There is an exception to this rule for a spouse who is full-time student or who is physically or mentally incapable of self-care.

3. You must pay for the care of one or more qualifying persons. Qualifying children under age 13 who you claim as a dependent meet this test. Your spouse or dependent who lived with you for more than half the year may meet this test if they are physically or mentally incapable of self-care.

4. You may qualify for the credit whether you pay for care at home, at a daycare facility outside the home or at a day camp. If you pay for care in your home, you may be a household employer. For more information, see Publication 926, Household Employer's Tax Guide.

5. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person. It can be up to 35 percent of your expenses, depending on your income.

6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying person.

7. Expenses for overnight camps or summer school tutoring do not qualify. You cannot include the cost of care provided by your spouse or a person you can claim as your dependent. If you get dependent care benefits from your employer, special rules apply.

8. Keep your receipts and records to use when you file your 2013 tax return next year. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return.

For more details about the rules to claim this credit, see Publication 503, Child and Dependent Care Expenses. You can get both publications at IRS.gov or have them mailed by calling 800-TAX-FORM (800-829-3676).

Monday, May 20, 2013

Summer Job Tax Information for Students


When summer vacation begins, classroom learning ends for most students. Even so, summer doesn't have to mean a complete break from learning. Students starting summer jobs have the opportunity to learn some important life lessons. Summer jobs offer students the opportunity to learn about the working world – and taxes.
Here are six things about summer jobs that the IRS wants students to know.
1. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It is important to complete your W-4 form correctly so your employer withholds the right amount of taxes. You can use the IRS Withholding Calculator tool at IRS.gov to help you fill out the form.
2. If you’ll receive tips as part of your income, remember that all tips you receive are taxable. Keep a daily log to record your tips. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer.
3. Maybe you’ll earn money doing odd jobs this summer. If so, keep in mind that earnings you receive from self-employment are subject to income tax. Self-employment can include pay you get from jobs like baby-sitting and lawn mowing. 
4. You may not earn enough money from your summer job to owe income tax, but you will probably have to pay Social Security and Medicare taxes. Your employer usually must withhold these taxes from your paycheck. Or, if you’re self-employed, you may have to pay self-employment taxes. Your payment of these taxes contributes to your coverage under the Social Security system.
5. If you’re in ROTC, your active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances you receive in advanced training are not.
6. If you’re a newspaper carrier or distributor, special rules apply to your income. Whatever your age, you are treated as self-employed for federal tax purposes if:
  • You are in the business of delivering newspapers.
  • Substantially all your pay for these services directly relates to sales rather than to the number of hours worked.
  • You work under a written contract that states the employer will not treat you as an employee for federal tax purposes.
If you do not meet these conditions and you are under age 18, then you are usually exempt from Social Security and Medicare tax.
Visit IRS.gov, the official IRS website, for more information about income tax withholding and employment taxes.

Monday, May 13, 2013

Many Tax-Exempt Organizations Must File with IRS By May 15 to Preserve Tax-Exempt Status


WASHINGTON — A key deadline of May 15 is facing many tax-exempt organizations that are required by law to file annual reports with the Internal Revenue Service. Organizations will see their federal tax exemptions automatically revoked if they have not filed reports for three consecutive years.

The Pension Protection Act of 2006 mandates that most tax-exempt organizations file annual Form 990-series informational returns or notices with the IRS. Under this law, organizations that fail to file reports for three consecutive years automatically lose their federal tax-exempt status. The law, which went into effect at the beginning of 2007, also imposed a new annual filing requirement on small organizations. Churches and church-related organizations are not required to file annual reports.

Form 990-series information returns and notices are due on the 15th day of the fifth month after an organization’s fiscal year ends. Organizations that need additional time to file may obtain an extension.
Many organizations use the calendar year as their fiscal year, which makes May 15 the deadline for them. Organizations that fail to file annual reports for three consecutive years will see their tax exemptions automatically revoked as of the due date of the third required filing.

Small tax-exempt organizations with average annual receipts of $50,000 or less may file an electronic notice called a Form 990-N (e-Postcard), which asks organizations for a few basic pieces of information. Tax-exempt organizations with average annual receipts above $50,000 must file a Form 990 or 990-EZ, depending on their receipts and assets. Private foundations file a Form 990-PF.

The IRS began to publish the names of organizations identified as having automatically lost their tax-exempt status for failing to file annual reports for three consecutive years. Organizations that have had their exemptions automatically revoked and wish to have that status reinstated must file an application for exemption and pay the appropriate user fee.

The IRS offers an online search tool, Exempt Organizations Select Check, to help users more easily find key information about the federal tax status and filings of certain tax-exempt organizations, including whether organizations have had their federal tax exemptions automatically revoked.

Thursday, May 9, 2013

IRS, Australia and United Kingdom Engaged in Cooperative Effort to Combat Offshore Tax Evasion



WASHINGTON — The tax administrations from the United States, Australia and the United Kingdom announced today a plan to share tax information involving a multitude of trusts and companies holding assets on behalf of residents in jurisdictions throughout the world.

The three nations have each acquired a substantial amount of data revealing extensive use of such entities organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands.  The data contains both the identities of the individual owners of these entities, as well as the advisors who assisted in establishing the entity structure.

The IRS, Australian Tax Office and HM Revenue & Customs have been working together to analyze this data and have uncovered information that may be relevant to tax administrations of other jurisdictions. Thus, they have developed a plan for sharing the data, as well as their preliminary analysis, if requested by those other tax administrations.

“This is part of a wider effort by the IRS and other tax administrations to pursue international tax evasion,” said IRS Acting Commissioner Steven T. Miller. "Our cooperative work with the United Kingdom and Australia reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes.”
There is nothing illegal about holding assets through offshore entities; however, such offshore arrangements are often used to avoid or evade tax liabilities on income represented by the principal or on the income generated by the underlying assets. In addition, advisors may be subject to civil penalties or criminal prosecution for promoting such arrangements as a means to avoid or evade tax liability or circumvent information reporting requirements.

It is expected that this multilateral cooperation and coordinated effort will allow many countries to efficiently process this information and effectively enforce any laws that may have been broken.  Increasingly, tax administrations are working together in this way to assist one another in identifying non-compliance with the tax laws.

U.S. taxpayers holding assets through offshore entities are encouraged to review their tax obligations with respect to these holdings, seek professional advice if necessary, and to participate in the IRS Offshore Voluntary Disclosure Program where appropriate.  Failure to do so may result in significant penalties and possibly criminal prosecution.