IRS Restores E-File Functionality

IRS Restores E-filing Services

Article By Paul Bonner | Featured on Journal of Accountancy

The IRS’s tax return e-filing system was back in operation Thursday afternoon, a day after a computer hardware failure knocked out it and other IRS system services. According to the IRS, taxpayers do not need to take any additional steps or action due to the outage.

The failure occurred Wednesday afternoon, leaving the IRS’s modernized e-file and related systems unavailable through Thursday afternoon, while the Service tried to make repairs and restore normal operations.

Read more

United States issues new corporate anti-inversion rules

United States Issues New Corporate Anti-Inversion Rules

Article By Sally P. Schreiber, J.D. | Featured on CGMA Magazine

In a further move to reduce the tax benefits of, and therefore the incentives for, corporate inversions, the U.S. tax agency, the Internal Revenue Service (IRS), on Thursday announced additional rules designed to curtail the ability of an inverted company to access foreign subsidiaries’ earnings without paying U.S. tax (Notice 2015-79). In a corporate inversion, a multinational company based in the United States replaces its U.S. parent with a foreign parent. The IRS issued the notice to inform taxpayers that it intends to issue regulations, and that the regulations will generally apply to transactions completed on or after Nov. 19, 2015.

Read more

Protecting Americans from Tax Hikes Act of 2015

Protecting Americans from Tax Hikes Act of 2015

By Isler Northwest LLC
December 30, 2015

On December 18, the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) was signed by President Obama and became law. As is often the case at the end of the year, Congress had to pass legislation to extend popular tax breaks for the 2015 tax year which had officially expired on December 31, 2014. Unlike in past years when tax extenders passed through Congress at the end of the year are only for the current tax year, the Path Act makes many of these tax breaks permanent and extends others for several years.

Read more

Tax RecordKeeping

Poor Recordkeeping Hurts Taxpayers: Problems and Preventions

Article by By Annette Nellen, Esq., CPA, CGMA | Featured on The Tax Adviser

Every year a few taxpayers go to court hoping for a better outcome than the one offered by the IRS. Usually, they lose due to poor records, not meeting all requirements for particular deductions, or inadequately separating business from personal expenditures. This article examines a few 2015 cases involving these issues and makes suggestions for practitioners to remind clients that they need timely records and should only report allowable deductions.

Read more

Small Business Owners

For Small Businesses: IRS Raises Tangible Property Expensing Threshold to $2,500; Simplifies Filing and Recordkeeping

Article Featured on irs.gov

WASHINGTON —The Internal Revenue Service today simplified the paperwork and recordkeeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

Read more

Politicians slam tax-avoiding Pfizer-Allergan deal

Politicians slam tax-avoiding Pfizer-Allergan deal

BY KEVIN DRAWBAUGH AND EMILY STEPHENSON | Featured on Reuters

U.S. politicians condemned Pfizer Inc’s deal with Allergan Plc as a tax dodge on Monday, bringing another round of hand-wringing in Washington over the corporate tax code, though legislative action before 2017 is unlikely.

Democrats heaped the most criticism on the New York-based drug maker, with Hillary Clinton accusing Pfizer of using legal loopholes to avoid its “fair share” of taxes in a deal that she said “will leave U.S. taxpayers holding the bag.”

The front-runner for the Democratic presidential nomination in the November 2016 election said she will propose steps to prevent more inversions, but she did not provide details. “We cannot delay in cracking down on inversions that erode our tax base,” said the ex-U.S. secretary of state and former New York senator in a statement.

Republican front-runner Donald Trump, who has called for a corporate tax overhaul, called the deal “disgusting” in a statement, saying “our politicians should be ashamed.”

Pfizer is doing the largest inversion deal of all time. In a $160-billion transaction, Showbox App Download it plans to move its tax address from the United States to Ireland, if only on paper, by buying and merging into Allergan, a smaller, Dublin-based competitor.

Read more

Demanding tax season likely ahead, IRS commissioner tells AICPA

Demanding tax season likely ahead, IRS commissioner tells AICPA

Article Featured on Journal of Accountancy | By Paul Bonner

The 2016 tax filing season promises to be challenging for the IRS, Commissioner John Koskinen told attendees at the AICPA National Tax Conference in Washington on Tuesday.

Koskinen made a similar prediction a year ago in his first address to CPAs in the same forum. That prediction was borne out, and for some of the same reasons he cited again this time: Congress’s tardiness in acting on a raft of currently expired temporary Code provisions and last year’s cuts in the IRS’s budget, coming on top of several previous years of cuts. Despite those problems, filing of returns went relatively smoothly for most taxpayers last year, he said, although the IRS’s level of service to taxpayers and practitioners sank to “totally unacceptable” levels.

In addition, this year significant provisions of the Patient Protection and Affordable Care Act, P.L. 111-148, and reporting requirements under the Foreign Account Tax Compliance Act (FATCA), P.L. 111-147, take full effect, as well. Add to that certification requirements under the new Achieving a Better Life Experience (ABLE) accounts and Congress’s recent reauthorization of the Sec. 35 health coverage tax credit for displaced workers, and the IRS has more than its share of largely unfunded new legislative mandates to carry out—with the specter of further budget cuts, he said.

Read more

Navigating Today’s IRS Examination With Fast Track Settlement

By Thomas A. Warnshuis, CPA, MSA, Grand Rapids, Mich. (former IRS revenue agent) | Article featured on Tax Advisor

Editor: Howard Wagner, CPA | Image Credit: g0d4ather / Shutterstock.com

At the end of an IRS audit many taxpayers are left to decide how to proceed, especially when faced with a proposed adjustment that they disagree with. Before pursuing an appeal, Fast Track Settlement may provide a viable alternative to consider.

IRS Appeals

The mission of the IRS Appeals team is to resolve tax controversies in a fair and impartial manner without litigation. Appeals frequently settles cases by reducing an adjustment by a particular percentage that the taxpayer will choose to accept. Appeals has no specific quota on the number of cases it can recommend for litigation, but there is significant pressure to settle cases and avoid litigation unless a case is egregious.

Most taxpayers do not understand the Appeals process or how Appeals resolves cases. Appeals gets involved when a taxpayer does not agree to the adjustments proposed by the IRS examination team. Appeals acts as an independent party to the examination and takes a fresh look at each case before it. Unresolved cases are closed from the examination field team and assigned to Appeals. It should be noted that most examiners complete a Form 4665, Report Transmittal, that is addressed to Appeals. The purpose of this letter is for the examination team to communicate any specific details it wants Appeals to be aware of. This could be a description of questionable taxpayer behavior, tactics the taxpayer or its adviser could use to disrupt the examination team’s pre-Appeals conference presentation, or any other pertinent information.

Read more

Migration

Moved South But Still Taxed Up North

Article by Liz Opalka, CPA | Featured on Journal of Accountancy 

Migrating to a low-tax state to retire doesn’t always allow people to escape estate and inheritance taxes in the states they left.

As 2014 drew to a close, Florida finally pulled ahead of New York to become the nation’s third most populous state, following California and Texas. But retirees and others from northern states who take up residence in Florida and other sunny, low-tax states should not be surprised when their former home states are reluctant to see them go as taxpayers.

State domicile typically arises in the context of not only state income taxes, but also state estate or inheritance taxes. Currently, 19 states and the District of Columbia impose estate or inheritance taxes, or both, in addition to the federal estate tax. These taxing authorities generally reach nonresident estates owning real estate or tangible personal property within their borders. Florida, Texas, and Nevada don’t have income taxes or estate taxes.

For a retired snowbird, avoiding estate or inheritance taxes up north is not as simple as it would seem. Sometimes the individual didn’t cut enough ties to the old state, so he or she is still considered a resident.

Individuals should be aware that they can be considered to be a resident in more than one state although they will be domiciled in only one state. Domicile is defined as a person’s fixed or permanent abode that the person intends to remain in indefinitely and to which the person intends to return. Residency is a much more flexible term and may be defined differently depending on the state. For example, some states determine residency by looking at whether a person has a permanent place of abode in the state and lives in it a certain number of days in the year.

Just owning a vacant lot, other real property, or even tangible personal property located in another state can require a nonresident estate tax return to be filed, and the state exemption amount is often much lower than expected.

Read more

FBAR Deadline Moves Up 3 Months to April 15

FBAR Deadline Moves Up 3 Months to April 15

Article by SHANNON SMITH RETZKE AND AARON D. SCHUMACHER | Featured on AccountingToday.com

It’s the beginning of the end of the filing date disconnect between foreign bank account reports and income tax returns.

On July 31, President Obama signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 into law, which modified the due date of several key forms for Americans with foreign income and Americans living abroad.

That includes the Report of Foreign Bank and Financial Accounts, or Form 114, colloquially known as the FBAR. Any U.S. person with a financial interest in, or signatory authority over, foreign financial accounts must file the FBAR, if at any time, the aggregate value of their relevant foreign account or accounts exceeds $10,000. An account over which a person has signature authority but no ownership interest is included in this computation.

Read more