Be Weary of State SALT Deduction Workarounds

With the pass of the Tax Cuts and Jobs Act (TCJA), a new limit has been placed on the deduction for SALT, State And Local Taxes. These limits severely impact residents of states that derive the majority of their revenue through state income taxes and high property taxes.

Several states have or are in the process of implementing workarounds to the deduction limits. For example, New York established new “charitable gifts trust funds” to which taxpayers can make deductible contributions and claim a tax credit equal to 85% of the donation. Similarly, New Jersey enacted legislation that permits localities to establish charitable funds to which taxpayers can contribute and receive a 90% New Jersey property tax credit. California and Connecticut are among the other states that have been weighing similar options.

It’s important to note that when applying the substance over form doctrine, many of these transactions would not qualify for the charitable deduction the states are hoping. Remember, charitable contributions are only deductible to the extent that no goods or services (benefit) is received in exchange. Transactions that are “quid pro quo” would reduce your charitable deduction, dollar for dollar by the fair market value of any benefit received.

The IRS is planning to issue regulations to address these transactions in the coming months. We advise our clients to wait for these proposed regulations, as our professional opinion is the IRS will not recognize a charitable contribution deduction that is a disguised SALT deduction.

2017 Compliance Deadlines

Just a quick reminder, the 2017 tax compliance deadlines are quickly approaching. For reference, the ones you need to be aware of are:

January 31, 2018

  • Deadline to distribute annual wage and tax reports to employees and independent
    contractors who did work for you in 2017.
  • Deadline to submit transmittal forms for W-2s to the Social Security Administration
    (Form W-3, all W-2s and Form 1096, along with all 1099 forms) is now January 31—NEW
    for 2018.
  • Deadline for Annual Payroll tax reports, due for 2017 payroll taxes, including annual
    wage and tax reports, unemployment tax reports, and Form 941 (the quarterly payroll
    tax report).
  • Deadline for the monthly payment on federal unemployment (FUTA) taxes and the
    Federal Unemployment Tax Report for 2017.

March 15, 2018

  • Deadline for Partnerships and S-Corporations to file tax returns.

April 17, 2018

  • Deadline for C-Corporations, sole proprietors, and individuals to file tax returns.

When to File? Important Changes to Due Dates and more

As the 2016 tax year winds down, there is no better time than now to get your finances in order. Let’s face it, the last thing you want to think about during the holiday season is taxes. I compiled a list of the deadlines to follow after year-end. Please note that legislation during the year changed the due dates for many common forms. Below is a summary:

Individual Due Dates:

  • Individual Form 1040 – April 15th (no change)
  • FinCEN Form 114 (FBAR) – April 15th (previously due June 30th)

Business Due Dates:

  • Partnership Form 1065 – March 15th (previously due April 15th)
  • S-Corporation Form 1120S – March 15th (no change)
  • C-Corporation Form 1120 (calendar year) –  April 15th (previously March 15th)
  • Forms W-2 – January 31 (previously February 28 & March 31 if electronically filed)
  • Forms 1099-MISC – January 31* (previously February 28 & March 31 if electronically filed)

*This new due date is only for Forms 1099-MISC using Box 7 to report non-employee compensation.

For a complete list of all updated due dates, including Trust and Estate Forms 1041, and Form 990 for Exempt Organizations, the AICPA has compiled the changes into a PDF table.

Accelerated Due Date for FinCEN Form 114

FinCEN Form 114, formerly referred to as “FBAR”, Report of Foreign Bank and Financial Accounts, is used to report a financial interest in or signature authority over a foreign financial account. The “FBAR” is due June 30 this year to report 2015 accounts, with no extensions allowed.

As part of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, tax years beginning after December 31, 2015 (beginning Jan 1, 2016), will be due April 15 with a maximum extension of 6 months.

The IRS has done a pretty good job with assuming this role on behalf of the Financial Crimes Enforcement Network and the Department of the Treasury. The first step they took was the electronic filing mandate a few years ago, and now, matching the deadline to the individual taxpayer deadline and adding an extension makes for a smoother filing season.

For more information on whether you may be required to file FinCEN Form 114, contact Paul Glantz, CPA at paul@launchconsultinginc.com

Due Date for Forms 1099 Quickly Approaching

Form 1099-MISC along with many other informational returns are due to recipients at the end of this month. Last year, I gave a brief outline of who may be be required to file.

Penalties for late filing range from $30-100 per late or incorrectly filed return. The maximum penalty is $250,000 per year. ($75,000 for small businesses).

These are pretty steep penalties for an informational return, and they are set to increase for the 2016 filing period ($50 for the minimum and up to $175,000 for small businesses).

 

For instructions on how to prepare Form 1099-MISC for the 2015 reporting tax year, visit the IRS website.

For information on due dates, and when and where to file, check out this IRS Publication.

If you have any questions about Form 1099-MISC contact Paul Glantz, CPA at paul@launchconsultinginc.com

IRS to Begin Contacting Employers with Late Payroll Tax Payments

Falling behind on payroll taxes? Expect a call from the IRS soon.

In a recent news release, the IRS announced its plans to launch a new initiative aimed at monitoring payroll deposit patterns. Employers that are falling behind on payments will receive a letter or automated phone message reminding them of their payroll tax responsibilities.

For more information on Employment Tax & Reporting due dates, visit the IRS website.

For questions about payroll reports or taxes, contact Paul Glantz, CPA at paul@launchconsultinginc.com

Update: New Tax Deadlines

President Obama Signing into law H.R. 3236 the

On the last day of July, Obama signed into law, H.R. 3236, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015”. One of the provisions of this law included a change to the due dates of corporation and partnership tax returns.

Previously, C-Corporation and S-Corporation tax returns were required to be filed within two and a half months after the close of its tax year, or March 15 for calender year filers, and partnerships were required to file within three and a half months after the close of their tax year, or April 15, the same date that applies to individuals.

The Act moved the partnership deadline to March 15 (or two and a half months following the close of its fiscal year), and pushed the C-Corporation deadline back a month, to April 15 (or three and a half months after the close of its tax year). For most taxpayers, this law will be effective for the 2016 tax year, as it addresses tax years beginning after December 31, 2015.

For more information on H.R. 3236 or tax deadlines, contact Paul at paul@launchconsultinging.com

No Penalty for Delinquent FBAR Submissions

Several years ago, the IRS passed legislation aimed to catch at tax cheats harboring income producing assets in foreign bank accounts. The legislation required taxpayers to disclose details relating to off shore banking accounts to the U.S. Treasury (and more recently on Form 8938 for the IRS). The form, referred as the Report of Foreign Bank and Financial Accounts, commonly called an “FBAR” (now revised and reported on FinCEN Form 114) carried strict penalties, currently the greater of $100,000 or 50% the account balance for each year  the taxpayer willfully fails to comply. And, yes, I’ve seen clients hit hard, with $10’s of millions in civil penalties.

While this law was aimed at tax cheats, it catches other taxpayers who may not be willfully trying to deceive the government, but could still fall prey to the harsh penalties. If you are a taxpayer who has signature authority over an foreign account with a balance greater than $10,000, have not filed an FBAR in the past, have not been contacted by the IRS, and are not under civil or criminal investigation by the IRS, you may qualify for relief under the new delinquent FBAR submission procedures (note that these are different from the OVDP program).

FBAR’s for the 2014 tax year are due next week, June 30.

For more information on whether or not you are required to file and FBAR, or you have questions on how to qualify under this new procedure, please contact Paul at paul@launchconsultinginc.com

 

IRS still holding over $1 Billion in federal tax refunds

With the April 15, 2015 individual tax deadline rapidly approaching, I want to remind everyone that your 2014 taxes aren’t the only returns you should be thinking about. If you neglected to file your Form 1040 from the 2011 tax year,  the final deadline to file for a refund is also this April 15th. After this date, the money will become the property of the U.S. Treasury.

The IRS released a notice that they are holding over $1  billion in federal tax refunds, this is money that belongs to the taxpayer and you could be missing out on your last chance to collect! Some people are under the assumption that they didn’t make enough money to file, others are students or part time employees, either way, you may still may be entitled to a refund.

For more information please contact Paul at paul@launchconsultinginc.com

or visit the IRS website for the official press release.

 

Tax Deadline Reminder: 2014 Forms 1099

Almost halfway through January, the Form 1099-MISC deadline is quickly approaching. Copies of this form are due to the recipient at the end of January (February 2, 2015 for 2014 Forms, since January 31, 2015 is a Saturday) and due to the IRS at the end of February (March 2, 2015, since February 28, 2015 is a Saturday). Penalties for failing to file range from $30-$100 PER recipient.

Think you might be required to file? Visit my blog on who is require to file and find out!

Launch Consulting 2014 Form 1099-Misc, Tax Consulting, CPA, Tax Prepare, Austin, Texas

IRS “Red Copy” of 2014 Form 1099-MISC

 

For help filing these informational returns, contact Paul@LaunchConsultingInc.com

For full instructions, visit the IRS website using the link provided below:

http://www.irs.gov/pub/irs-prior/i1099msc–2014.pdf