IRS provides last-minute tips for last-minute filers

WASHINGTON — With the July 15 tax-filing deadline − postponed from April 15 – only a few days away, the IRS is reminding taxpayers who have yet to file their tax returns that IRS.gov has tools and services to help them meet their tax obligations.

IRS tax help is available 24 hours a day on IRS.gov. Whether filing a tax return, requesting an extension or making a payment, the IRS website can help last-minute filers on just about everything related to taxes. Taxpayers can also use the Interactive Tax Assistant tool to answer many tax questions they may encounter.

The IRS reminds taxpayers they have a range of expert help available through a qualified tax professional, including certified public accountants, enrolled agents and attorneys. The IRS encourages people who need the help of a tax professional to visit a special page on IRS.gov.

Prepare and file taxes for free

Taxpayers also have several options for preparing and filing their tax returns:

• Taxpayers with income of $69,000 or less can use IRS Free File to find free tax preparation software.

• Taxpayers with incomes above $66,000 and comfortable doing their own taxes can use Free File Fillable Forms for free.

• Use commercial tax prep software to prepare and file taxes through IRS approved electronic channels.

• Use an authorized e-File provider accepted by our electronic filing program. Authorized IRS e-file providers are qualified to prepare, transmit and electronically file returns.

• Members of the military and qualified veterans can use MilTax, a free online tax service provided by the Department of Defense and Military OneSource.

Receive refunds faster

The fastest way to receive a refund is to file electronically and use direct deposit. Taxpayers who file electronically and request direct deposit for their refund need to know that:

• Nine out of 10 tax refunds are issued in 21 days or less.

• The best way to check on a refund is the “Where’s My Refund?” tool.

• The “Where’s My Refund?” tool available on IRS.gov and the IRS2Go mobile app.

• “Where’s My Refund?” is updated once a day, usually overnight.

•  Refunds can be divided into up to three accounts.

Delays for paper tax returns

The IRS is experiencing delays in processing paper tax returns due to limited staffing. This is another reason that taxpayers should choose to electronically file their taxes.

Taxpayers who filed a paper tax return and expect a refund may experience a delay beyond the normal time frame of four to six weeks from the time they mailed the return. The IRS will process paper returns in the order they are received.

Taxpayers should not file the same return again or call the IRS if they filed a paper tax return and are experiencing a refund delay.

Get more time to file

Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension to Oct. 15 in one of two ways:

• Filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov.

• Submitting an electronic payment with Direct Pay, Electronic Federal Tax Payment System or by debit, credit card or digital wallet options and selecting Form 4868 or extension as the payment type. The automatic extension of time to file will process when taxpayers pay all or part of their taxes, electronically, by the July 15 due date. An extension to file is not an extension to pay. Taxes are still due by July 15.

Special rules may apply for some military personnel if they are:

• Serving in a combat zone or a qualified hazardous duty area

• Living outside the United States

Pay with ease

Taxpayers can file now and schedule their federal tax payments up to the July 15 due date. They can pay online, by phone or with their mobile device using the IRS2Go app. When paying federal taxes electronically taxpayers should remember:

• Electronic payment options are the optimal way to make a tax payment.

• They can pay when they file electronically using tax software online. If using a tax preparer, taxpayers should ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account.

• IRS Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance.

• Taxpayers can choose to pay with a credit card, debit card or digital wallet option through a payment processor. The payment processor adds a fee; no fees go to the IRS.

• The IRS2Go app provides the mobile-friendly payment options, including Direct Pay and through payment providers.

• Taxpayers may also enroll in the Electronic Federal Tax Payment System and have a choice of paying online or by phone by using the EFTPS Voice Response System.

Get more time to pay

Qualified taxpayers can choose to pay any taxes owed over time through an installment agreement. An online payment plan can be set up in a matter of minutes. Interest and late-payment penalties continue to accrue on any unpaid taxes after July 15.

Payment options include:

• Short-term payment plan (paying within 120 days).

• Long-term payment plan (paying in more than 120 days).

However, a taxpayer’s specific tax situation will determine which payment options are available.

The IRS has more information for taxpayers who owe taxes, but cannot afford to pay the full amount.

Get the full picture

Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, access their tax records online, review their payment history and view key tax return information for the most recent tax return as originally filed.

Source: IRS Newswire

Tax Reform and U.S. Expats: The Good, the Bad and the Same

Source: CPA Practice Advisor

Here’s what we know. The new tax reform bill called, Tax Cuts and Jobs Act (TCJA), is the first time in 30 years that the tax code has been fully transformed. While it is expected to ease tax filings and processing for Americans, the same can’t be said for American Expats. These are US Citizens who live abroad (whether for personal or professional reasons), and who are also required to file with the IRS annually. For years, this group of tax-paying Americans have raised concerns about changes they would like made but unfortunately, for the most part, their voices were ignored. Below is a look inside the new tax reform bill for US Expats:

What hasn’t changed:

The Foreign Information Reporting Requirements Expats are required to submit, in addition to their tax returns, are largely unchanged. The Foreign Bank Account Report, AKA FBAR or FinCen 114, the FATCA requirements - Form 8938, Form 5471 (Report of Certain Foreign Corporations), Form 3520 (Report of Foreign Trusts), and the Net Investment Income Tax, are still here and unchanged. This means that many Expats will continue having trouble banking abroad and face onerous penalties if they fail to file.

The two most important tax code provisions for Expats, the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit have also not been substantially changed. Expats can use the FEIE to exclude over $100,000 in earned income, from their US taxes each year and can use the FTC to reduce their US taxes dollar for dollar by the amount they have paid to a foreign government. This allows individuals to try to avoid double taxation and this has been largely unchanged in the Tax Cuts and Jobs Act. However, the way the FEIE will increase going forward has been changed, which brings us to what has changed.

What’s New:

The new tax reform changes the way inflation is calculated and will affect a number of tax-related issues. Inflation calculations had previously been calculated using the “regular consumer price index,” but going forward the IRS will use the “chained consumer price index.” The end result is a lower rate of inflation will be used to calculate the increase to the FEIE, which will increase taxes over time.

Modifications were made in tax brackets, exemptions, and deductions. Tax brackets are now larger, meaning you may now be in a lower bracket than you were previously, and the standard deduction has been nearly doubled. For those considering a move to or from the US, two new issues should be considered: 1) the moving deduction has been completely eliminated; 2) the individual mandate, as part of the Affordable Care Act has been eliminated. Unfortunately, the Net Investment Income Tax was not eliminated and will still impact Expats.

The corporate tax has been the most talked about change. This tax reform bill has transitioned the US to a territorial system of corporate taxation. Before, the US operated using worldwide taxation, meaning that corporations had to pay taxes on the income they earned abroad. This change will affect Expats who own corporations outside of the US, because they will face a one-time deemed repatriation tax of 15.5% of any previously untaxed overseas profits as the US transitions to a more territorial system for corporations instead of a worldwide system.

For US Expats, the new tax bill is pretty much the same tax bill with disappointments and frustrations for the nearly 9 million Americans living away from the United States. And, those who own small businesses abroad may actually find their situation is worse under the TCJA than under the old system! We at Zhong and Sanchez will help you sort through TCJA and advise on your international exposure under TCJA. We are dedicated to provide high-quality tax and financial reporting services to privately-held entities and small business owners. Our expertise ranges from income tax filing and accounting services to international compliance and financial analysis. Located in the Silicon Valley, you can reach us at 510-458-4451 or schedule your first free consultation today at https://calendly.com/zhongsanchez

Senate tax reform bill contains more changes

The Senate Finance Committee on Thursday evening approved its version of the Tax Cuts and Jobs Act, sending the bill to the full Senate for debate and a vote. The committee had spent the week amending the bill, and the final version includes some changes beyond those included in the chairman’s mark released on Tuesday. 

The Senate is expected to take up the bill after it returns from its Thanksgiving recess.

Here are notable changes in the final version approved by the Senate Finance Committee.

Individuals

Free File program: The Senate bill would codify and make permanent the IRS’s Free File program.

Whistleblower awards: The Senate bill would provide an above-the-line deduction for attorneys’ fees and court costs paid in connection with any action involving claims under a state false claims act, the SEC whistleblower program, and the Commodity Futures Trading Commission whistleblower program.

The bill would also modify Sec. 7623 to expand the definition of collected proceeds eligible for whistleblower awards.

Carried interests: The Senate bill would impose a three-year holding period requirement before certain partnership interests transferred in connection with the performance of services would qualify for long-term capital gain treatment.

Businesses

Excessive compensation: Sec. 162(m) limits the deductibility of compensation paid to certain covered employees of publicly traded corporations. Current law defines a covered employee as the chief executive officer and the four most highly compensated officers (other than the CEO). The Senate bill would revise the definition of a covered employee under Sec. 162(m) to include both the principal executive officer and the principal financial officer and would reduce the number of other officers included to the three most highly compensated officers for the tax year. The bill would also require that if an individual is a covered employee for any tax year (after 2016), that individual will remain a covered employee for all future years. The bill would also remove current exceptions for commissions and performance-based compensation.

The bill includes a transition rule, so that the proposed changes would not apply to any remuneration under a written binding contract that was in effect on Nov. 2, 2017, and that was not later modified in any material respect.

Dividends paid: Under the Senate bill, corporations that pay dividends would be required to report the total amount of dividends paid during the tax year and the first 2½ months of the succeeding year, effective for tax years beginning after 2018. Corporations would not be allowed to deduct dividends paid when computing taxable income.

Dividends received: The Senate bill would also reduce the current 70% dividends-received deduction to 50% and the 80% dividends-received deduction to 65%.

Net operating losses: The Senate bill would limit the net operating loss deduction to 80% of taxable income (as determined without regard to the deduction). Net operating losses would be allowed to be carried forward indefinitely, but not carried back (except for certain farming losses). This change would apply to tax years beginning after 2022.

Orphan drug credit: The Senate bill would reduce the current Sec. 45C 50% orphan drug credit to 27.5% and would institute reporting requirements similar to the required for the Sec. 48C qualifying advanced energy project credit and the Sec. 48D qualifying therapeutic discovery project credit.

Employer-provided meals: The Senate bill would disallow an employer’s deduction for expenses associated with meals provided for the convenience of the employer on the employer’s business premises, or provided on or near the employer’s business premises through an employer-operated facility that meets certain requirements. However, the final version of the bill delays this change until tax years starting after 2025.

Amortization of research and experimental expenditures: The Senate bill would require specified research or experimental expenditures to be capitalized and amortized over a five-year period, effective for amounts paid or incurred in tax years beginning after 2025. Specified research and experimental expenditures attributable to research conducted outside the United States would be amortized over a 15-year period. The bill would also institute a new reporting requirement, for tax years beginning after 2024.

Exempt organizations

Excise tax on private college investments: Under current law, private colleges and universities are generally treated as public charities rather than private foundations, and thus they are not subject to the Sec. 4940 private foundation excise tax on net investment income. However, the Senate bill would impose a 1.4% excise tax on net investment income of private colleges and universities that have at least 500 students and aggregate assets of at least $250,000 per student. The assets-per-student threshold will be determined by including amounts held by related organizations, but only to assets held by the related organization for the education institution and to investment income that relates to assets held for the institution

Source: https://www.journalofaccountancy.com/