Don’t Miss Filing Deadlines Related to Foreign Income and Assets

All U.S. citizens and residents must report worldwide income on their federal income tax return. If you lived outside the U.S. on the regular due date of your tax return, the extended filing deadline for your 2014 tax return is Monday, June 15, 2015. Similarly, the deadline to report interests in certain foreign financial accounts is the end of June. Here are some important tips to know if these reporting rules apply to you:
• FATCA Requirements. FATCA refers to the Foreign Account Tax Compliance Act. In general, federal law requires U.S. citizens and resident aliens to report any worldwide income. You must report the existence of and income from foreign accounts. This includes foreign trusts, banks and securities accounts. In most cases you must report the country where each account is located. To do this file Schedule B, Interest and Ordinary Dividends with your tax return.
You may also have to file Form 8938, Statement of Special Foreign Financial Assets with your tax return. Use the form to report specified foreign financial assets if the aggregate value of those assets exceeds certain thresholds. See the form instructions for details.
• FBAR Requirements. FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts. If you must file this form you file it with the Financial Crimes Enforcement Network, or FinCEN. FinCEN is a bureau of the Treasury Department. You generally must file the form if you had an interest in foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014. This also applies if you had signature or other authority over those accounts. You must file Form 114 electronically. It is available online through the BSA E-Filing System website. The FBAR filing requirement is not part of filing a tax return. The deadline to file Form 114 is June 30.
• View the IRS Webinar. You can get help and learn about FBAR rules by watching the IRS webinar on this topic. The title is “Reporting of Foreign Financial Accounts on the Electronic FBAR.” The presentation is one hour long. You can find it by entering “FBAR” in the search box of the IRS Video Portal home page. Topics include:
o FBAR legal authorities
o FBAR mandatory e-filing overview
o Using FinCEN Form 114; and Form 114a
o FBAR filing requirements
o FBAR filing exceptions
o Special filing rules
o Recordkeeping
o Administrative guidance
You can access IRS forms, videos and tools on IRS.gov at any time

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ACA resources for individuals and families available on IRS.gov/aca

The Affordable Care Act, also known as the health care law, adds new health insurance coverage and financial assistance options for individuals and families.

IRS.gov/aca explains the tax benefits and responsibilities for individuals and families. This includes information about the individual shared responsibility provision and premium tax credit provision. It also provides basic information about how health insurance choices you make may affect the tax return you file.

IRS electronic publications include:

Watch the IRS You Tube videos for an overview of the individual shared responsibility provision and the premium tax credit. Subscribe to Health Care Tax Tips to understand the tax provisions of health care law.

IRS.gov/aca has the most updated information about the Affordable Care Act tax provisions for individuals and families. IRS.gov/aca also provides information about rules and responsibilities for employers, as well as tax provisions for insurers, tax-exempt organizations, and other businesses.

Tax Tips for Disabled Spouses

There is an interesting and helpful article concerning tips regarding what benefits are taxable and non-taxable for a disabled spouse as well as what care expenses may be credited. Here is the link:

https://turbotax.intuit.com/tax-tools/tax-tips/Family/Tax-Tips-for-Caring-for-a-Disabled-Spouse/INF27737.html

IRS – PART 2 – Enforcement Cuts

The IRS will also see enforcement cuts of more than $160 million, Koskinen noted. The reduced staffing in enforcement will result in fewer audit and collection cases, including at least 46,000 fewer individual and business audit closures and more than 280,000 fewer Automated Collection System and Field Collection case closures.

“As a result of the hiring freeze, we will lose about 1,800 enforcement personnel through attrition during FY 2015,” Koskinen added. “The reduced enforcement staffing for just FY 2015 means the government will lose at least $2 billion in revenue that otherwise would have been collected.”

He also anticipates cuts in overtime and temporary staff hours of more than $180 million. This will lead to delays in refunds for some taxpayers who file on paper or make errors, with longer delays in correspondence between the IRS and taxpayers, as well as on the phone lines.

“We realize there will be growing inventories in Accounts Management, and taxpayer correspondence will face lengthy delays,” Kosiknen wrote. “Taxpayer service diminished further over the phone and in person. We now anticipate an even lower level of telephone service than before, which raises the real possibility that fewer than half of taxpayers trying to call us will actually reach us. During fiscal year 2014, 64 percent were able to get through. Those who do reach us will face extended wait times that are unacceptable to all of us.”

Olson wrote in her report to Congress about the declines in customer service at the IRS. She said the IRS is unlikely to answer even half the telephone calls it receives, and levels of service may average as low as 43 percent. Taxpayers who manage to get through are expected to wait on hold for 30 minutes on average and considerably longer at peak times. In addition, she pointed out, the IRS will answer far fewer tax-law questions than in past years.

“During the upcoming filing season, it will not answer any tax-law questions except ‘basic’ ones,” Olson wrote.  “After the filing season, it will not answer any tax-law questions at all, leaving the roughly 15 million taxpayers who file later in the year unable to get answers to their questions by calling or visiting IRS offices.” Tax return preparation assistance has been eliminated, according to Olson.

Plan Now to Get Full Benefit of Saver’s Credit; Tax Credit Helps Low- and Moderate-Income Workers Save for Retirement

Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2014 and years ahead, according to the Internal Revenue Service.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2014 tax return. People have until April 15, 2015, to set up a new individual retirement arrangement or add money to an existing IRA for 2014. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2015 contributions soon so their employer can begin withholding them in January.
The saver’s credit can be claimed by:
Married couples filing jointly with incomes up to $60,000 in 2014 or $61,000 in 2015;

Heads of Household with incomes up to $45,000 in 2014 or $45,750 in 2015; and

Married individuals filing separately and singles with incomes up to $30,000 in 2014 or $30,500 in 2015.
Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.
In tax year 2012, the most recent year for which complete figures are available, saver’s credits totaling $1.2 billion were claimed on more than 6.9 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $165 for heads of household and $127 for single filers.
The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.
Other special rules that apply to the saver’s credit include the following:
Eligible taxpayers must be at least 18 years of age.

Anyone claimed as a dependent on someone else’s return cannot take the credit.

A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2014, this rule applies to distributions received after 2011 and before the due date, including extensions, of the 2014 return. Form 8880 and its instructions have details on making this computation.
Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on IRS.gov.

Save Twice with the Saver’s Credit

If you are a low-to-moderate income worker, you can take steps now to save two ways for the same amount. With the saver’s credit you can save for your retirement and save on your taxes with a special tax credit. Here are six tips you should know about this credit:
1. Save for retirement. The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.
2. Save on taxes. The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.
3. Income limits. Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:
• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.
• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.
• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.
4. When to contribute. If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.
If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.
5. Special rules apply. Other special rules that apply to the credit include:
• You must be at least 18 years of age.
• You can’t have been a full-time student in 2014.
• Another person can’t claim you as a dependent on their tax return.
6. Visit IRS.gov. You figure your credit amount based on your filing status, adjusted gross income, tax liability and the amount of your qualified contribution. Other rules also apply. For more information visit IRS.gov.
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IRS Adjusts Tax Rate and Deduction Levels for 2015

The Internal Revenue Service announced the annual inflation adjustments for tax year 2015 for more than 40 tax provisions, including the tax rate schedules, and other tax changes.
Revenue Procedure 2014-61 provides details about these annual adjustments. The tax items for tax year 2015 of greatest interest to most taxpayers include the following dollar amounts:
The tax rate of 39.6 percent affects singles whose income exceeds $413,200 ($464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates—10, 15, 25, 28, 33 and 35 percent—and the related income tax thresholds are described in the revenue procedure.
The standard deduction rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.
The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly.)
The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).
The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of decedents who died in 2014.
For 2015, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014.
For 2015, the foreign earned income exclusion breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014.
The annual exclusion for gifts remains at $14,000 for 2015.
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550, up $50 dollars from the amount for 2014.
Under the small business health care tax credit, the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,800 for tax year 2015, up from $25,400 for 2014.
Details on these inflation adjustments and others not listed in this release can be found in Revenue Procedure 2014-61, which will be published in Internal Revenue Bulletin 2014-47 on Nov. 17, 2013. The pension limitations for 2015 were announced last week.

Weather-related October filing extensions in Ouachita Parish

Secretary of Revenue Tim Barfield has authorized filing extensions on a case-by-case basis for business taxpayers affected by severe weather in Ouachita Parish on October 13, 2014.

The extension applies to the following Louisiana state taxes and due dates:

Tax Due Date Extension Date
Semi-monthly Withholding Remittance October 15, 2014 November 14, 2014
Alcoholic Beverage Tax Return October 15, 2014 November 14, 2014
Sales Tax Return October 20, 2014 November 14, 2014
911 Service Fee October 20, 2014 November 14, 2014
Statewide Hotel/Motel Sales Tax Return October 20, 2014 November 14, 2014
Hazardous Waste Tax Return October 20, 2014 November 14, 2014
Beer Tax Return October 20, 2014 November 14, 2014
Withholding Returns & Remittances October 31, 2014 November 14, 2014

To apply for an extension, taxpayers must submit to the Department of Revenue a written statement explaining why the return or remittance cannot be submitted on time by attaching it to the return or mailing it to:

Louisiana Department of Revenue

Post Office Box 201

Baton Rouge, LA 70821-0201

For more information, call the LDR Customer Service Center at 855-307-3893.

Tax preparer sentenced to prison for fraud

BATON ROUGE – A Slidell tax preparer who pled guilty to defrauding his clients and the State of Louisiana will spend three-and-a-half years in prison.

 

John Labee (Booking Photo) admitted to 6 felony counts of issuing worthless checks to the Louisiana Department of Revenue (LDR). East Baton Rouge Parish District Judge Bonnie Jackson sentenced him on Tuesday, September 23, to 46 months in prison at hard labor, five years of post-release supervised probation, and ordered him to pay restitution to LDR in the amount of $50,000. Failure to pay restitution will result in Labee serving an additional 14 months behind bars.

 

Labee was arrested in September 2011 on charges that included filing more than 500 fraudulent state individual income tax returns on behalf of clients of Innovative Professional Financial Services, a tax preparation business he operated in Slidell. The returns contained fabricated income tax withholding statements, overstated withholdings, and incorrectly reported tax deductions. In addition, Labee was charged with submitting worthless checks to the Department of Revenue for the payment of his clients’ tax debts.

 

A joint anti-fraud initiative between the Department of Revenue and the state Attorney General’s Office targets a wide range of felonies including but not limited to computer fraud, mail fraud, filing or maintaining false public records and issuing worthless checks.

 

Tax Tips for the Summer

  1. Taxes and Summer Jobs
    • Students working summer jobs may be exempt from withholdings.  If the student didnot owe any tax last year and they do not expect that to change, they should not have any income tax withheld.
    • If the student can be claimed as a dependent on their parents’ return, total income cannot exceed $6,100 and unearned (investment) income cannot exceed $350, if they want to avoid the income tax withholding. If unearned income does exceed $350, then the limit on total income is lowered to $1,000.
    • You are still subject to FICA and FUTA withholdings.  Sorry.
  2. Old W-4s No Longer Valid
    • Regardless of the number of exemptions claimed and the amount of withholdings taken out of your check, your employer needs to renew the W-4 on file.  The W-4s from 2012 are no longer valid, and employers face penalties for not taking out withholdings.
  3. Hiring your Children Can Lower your Tax Bill
    • If you are either a Sole Proprietor or a Husband-and-Wife Partnership, you can hire your children who are under 18 for the summer, and you are not required to withhold FICA taxes.  Also, as long as they are under 21, you do not pay FUTA on their wages, which means more money in your pocket.
    • Additionally, these tactics lower the parent/employer’s income and SECA taxes.
    • These rules also apply to Single-Member LLCs which are disregarded for tax purposes.

Brian J. Munson, J.D., LL.M. Taxation
Attorney at Losavio & DeJean, LLC
Derived from The Kiplinger Tax Letter, Vol.88, No. 10.  May 10, 2013.