IRS Streamlined Filing Compliance Procedures explained by Richard S. Leh...

OVDP IRS Streamlined Offshore Voluntary Disclosure Program

IRS Offers New Cash Payment Option

IRS Offers New Cash Payment Option
The Internal Revenue Service recently announced a new payment option for individual taxpayers who need to pay their taxes with cash. In partnership with ACI Worldwide's OfficialPayments.com and the PayNearMe Company, individuals can now make a payment without the need of a bank account or credit card at over 7,000 7-Eleven stores nationwide.

"We continue to look for new ways to provide services for our taxpayers. Taxpayers have many options to pay their tax bills by direct debit, a check or a credit card, but this provides a new way for people who can only pay their taxes in cash without having to travel to an IRS Taxpayer Assistance Center," said IRS Commissioner John Koskinen.

Individuals wishing to take advantage of this payment option should visit the IRS.gov paymentspage, select the cash option in the other ways you can pay section and follow the instructions:

• Taxpayers will receive an email from OfficialPayments.com confirming their information.
• Once the IRS has verified the information, PayNearMe sends the taxpayer an email with a link to the payment code and instructions.
• Individuals may print the payment code provided or send it to their smart phone, along with a list of the closest 7-Eleven stores.
• The retail store provides a receipt after accepting the cash and the payment usually posts to the taxpayer's account within two business days.
• There is a $1,000 payment limit per day and a $3.99 fee per payment.

Because PayNearMe involves a three-step process, the IRS urges taxpayers choosing this option to start the process well ahead of the tax deadline to avoid interest and penalty charges.

The IRS has been partnering with Official Payments since 1999 for taxpayers wanting to use a credit card to pay taxes.

In this new option, PayNearMe is currently available at participating 7-Eleven stores in 34 states. Most stores are open 24 hours a day, seven days a week,. For details about PayNearMe, the IRS offers a list of frequently asked questions on IRS.gov.

The IRS reminds individuals without the need to pay in cash that IRS Direct Pay offers the fastest and easiest way to pay the taxes they owe. Available at IRS.gov/Payments/Direct-Pay, this free, secure online tool allows taxpayers to pay their income tax directly from a checking or savings account without any fees or pre-registration.
Click here for more information about the new IRS payment option.

IRS removes Cuba from list of countries with foreign tax restrictions

IRS removes Cuba from list of countries with foreign tax restrictions
The IRS has removed Cuba from the so-called “IRC §901 blacklist” of foreign countries from which US taxpayers may not be entitled to a foreign tax credit. Removal of Cuba from this list means that US taxpayers are now entitled to the benefit of a foreign tax credit to any income attributable to Cuba. Income earned in Cuba through a controlled foreign corporation will no longer be Subpart F income barred from deferral treatment under IRC §952(a)(5).

The restrictions are lifted as of December 21, 2015, based upon certification by the Secretary of State that Cuba is no longer a country described in IRC §901(j)(2)(A). That section applies to any country with whom the US does not maintain diplomatic relations or that is designated by the State Department as a country that supports international terrorism.

Where Tax Dollars Went in 2015

Premium Tax Credit

Check Out this Graphic to Determine if You Might be Eligible for the Premium Tax Credit

• IRS Health Care Tax Tip 2016-30, March 10, 2016 Español
• The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. Answer the yes-or-no questions in the following chart – or in this accessible text – and follow the arrows to find out if you may be eligible for the premium tax credit.
• Here are links to information and resources referenced in the graphic:
• Form 8962, Premium Tax Credit (PTC) and Instructions
• Information about the federal poverty line (FPL)
• Publication 974, Premium Tax Credit (PTC)
• Interactive Tax Assistant: Am I Eligible to Claim the Premium Tax Credit

New Minimum Late File Penalty

• The Trade Facilitation and Trade Enforcement Act of 2015, referred to as the "Customs Bill", was signed into law on Feb 24th, 2016.   The Bill originally grabbed tax headlines news for it's ban on local taxation of InterNet access.  
• This law included late-filing penalties. 
• For tax returns filed after Dec 31, 2015, the minimum late-file penalty is the smaller of $205 or 100% of the unpaid tax. 
• The previous minimum late-file penalty was the smaller of $135 or 100% of the unpaid tax. 
• The late-file penalty is assessed on tax returns filed 60 days after the filing deadline, usually April 15th.

IRS Penalties

• Normally, the IRS treats each late filer individually and calculates penalties and interest on a case-by-case basis.
• Once the IRS receives or accepts your return, the penalties are computed (plus interest) and a separate bill is sent to the taxpayer.
• There is no penalty if you're getting a tax refund, provided you file within 3 years of the April 15 deadline (or October 15 deadline if you filed an extension).
• After 3 years, unclaimed tax refunds are forfeited and become the property of the US Treasury.
• There is no late-file penalty if you filed an extension and paid any additional taxes owed by April 15, as long as you file your return by the October 15 deadline.
• A late-file penalty applies if you owe taxes and didn't file your return or extension by April 15.
• This penalty applies if you owe taxes, filed an extension, but didn't file your return by October 15.
• The late-file penalty is 5% of the additional taxes owed amount for every month (or fraction thereof) your return is late, up to a maximum of 25%.
• If you file more than 60 days after the due date, the minimum penalty is $205 or 100% of your unpaid tax, whichever is smaller.
• The late-file penalty is 10 times higher than the late-pay penalty. Even if you can't pay your tax bill, file your return on time, or at least file a 6-month extension. You can file an amendment later.
• A late-pay penalty applies if you didn't pay any balance due owed by April 15, whether you filed an extension or not.
• The late-pay penalty is 0.5% (1/2 of 1%) of any balance due amount for every month (or fraction thereof) the owed tax remains unpaid, up to 25% maximum.
• For any month(s) in which both the late-pay and late-file penalties apply, the 0.5% late-pay penalty is waived.

Case Study:  Let's say you haven't filed your return or an extension by April 15, and you still have a $10,000 balance due the IRS.

• If you file your return on April 29 (2 weeks late) and submit your payment for $10,000, you would likely owe an additional $500 for the late-file penalty ($10,000 x 5% = $500).
• Had an extension been filed by April 15, your late-pay penalty would only be $50 ($10,000 x .05% = $50) and not a late-file penalty of $500. 
• Say instead, you filed your return and submit your payment for $10,000, 5-years late, (past the original due date).  You would owe an additional $5,000 for filing late and paying late ($10,000 X 25%), (5% per month up to 25% for filing late) plus ($10,000 X 25%), (0.5% per month up to 25% for paying late)*, plus possible interest.

* The late-pay penalty is 0.5% of the unpaid taxes, assessed on a monthly basis, up to a maximum of 25%.

Courtesy: IRS Tax Topic 653

Estate and Gift Tax - Consistent Basis Reporting Between Estate and Person Acquiring Property from Decedent

Estate and Gift Tax - Consistent Basis Reporting Between Estate and Person Acquiring Property from Decedent

Last year’s “Highway Bill”, Regarding Beneficiaries Acquiring Property From a Decedent, requires certain estates to file Form 8971 to ensure consistent basis reporting among estates and their beneficiaries.

On February 29, 2016, the IRS plans to begin accepting basis information with respect to property acquired from decedents as required by H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, signed into law on July 31, 2015.

The law created IRC §6035, which requires the executor of an estate required to file an estate tax return to also provide certain statements to the IRS and to beneficiaries receiving inherited property. This also applies to IRC §6018(b) filers.

The law also adds IRC §1014(f), which requires consistent basis reporting between an estate and the beneficiary receiving property from a decedent.

These changes apply to any estate tax return filed, and to property with respect to which an estate tax return is filed, after July 31, 2015.

The IRS is working steadily to identify and define the policy, procedural, and information system changes necessary to meet the requirements of the new law. Please see Notice 2015-57 for important information.

Source: irs.gov

FBAR Deadlines Changed

FBAR Deadlines Changed

• On July 31, 2015, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, which modifies the due date for Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114) for any American living abroad and any American with a foreign financial account(s). 
• Any US person holding a financial interest in or having signatory authority over a foreign financial account, must file FBAR, when the aggregate value of their foreign account(s) exceeds $10,000 at any time during the year. FBAR includes any account which a person has signature authority, regardless of ownership interest.
• New due date for the FBAR is April 15th, with a maximum 6-month extension until October 15th. For US citizens living abroad, the deadline is June 15th. New deadlines are effective for 2016 tax returns, due in 2017. 

See FBAR details here: blog post.

Special Alert: 2015 Tax Extenders

Special Alert: 2015 Tax Extenders 
President Obama has signed the Protecting Americans from Tax Hikes (PATH) Act which extends numerous tax provisions. Some important tax provisions have been made permanent, while others were extended through 2016 or 2019. The PATH Act adds in other provisions to mitigate "erroneous" education credit, child tax credit and earned income tax credit claims. Some of the most notable provisions include:

• A permanent extension of the $500,000 §179 limit.
• An extension for bonus depreciation through 2019.
• A permanent extension of the general state and local sales tax deduction.
• A permanent extension of the $250 educator expense deduction.
• An extension for the exclusion from the cancellation of debt of qualified principal residence indebtedness through 2016.
• The research credit.
• A requirement that a tax preparer exercise due diligence, similar to the earned income tax credit, for the American opportunity tax credit and child tax credit, with similar penalties for failure to do so.

A full listing of PATH Act provisions can be found here.

• By signing into law the Tax Extenders bill, President Barack Obama extended over 50 provisions in the tax code due to expire. 
• If your house was foreclosed, and the foreclosure sale did not satisfy the mortgage debt, there is an exclusion for the mortgage debt that is cancelled as a result of the foreclosure.
• Tuition deduction, aimed at students pursuing higher education, e.g. Master's or PhD degrees, is a deduction up to $2,000 or $4,000, subject to income thresholds.
• Earned Income Tax Credit (EITC), an antipoverty program set to expire in 2016, is extended permanently. 
• EITC is intended to encourage workers with children. 
• Max credit for families with 3 or more children has been raised from 40% to 45%.
• American Opportunity Tax Credit (AOTC) is extended permanently, AOTC is a benefit for college students, who can claim a tax credit of up to $2,500 per academic year subject to income limitations.
• "Teacher Deduction" is made permanent, which allows teachers to deduct up to $250 of their personal expenses spent on school supplies for their classrooms.

For a list of the 50 provisions, visit the Journal of Accountancy for more detailed information.

References:

National Association of Tax Professionals

Journal of Accountancy