TaxConnections

 
 

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please enter your input in search

Tag Archive for IRS

Tax Situations When Taking Care Of A Family Member

IRS LOGO

Families often hire individuals to care for children and dependents in their home, so family members can work or actively look for work. These individuals include babysitters, caretakers, health aides, nannies, private nurses and au pairs. As employers, family members have additional tax responsibilities for their household employee.

Social Security And Medicare Taxes

Both the employee and employer pay Social Security and Medicare taxes (commonly called FICA). This applies if an employer pays cash wages of $2,100 or more to any one household employee. For FICA, both the employer and the employee pay to the IRS 7.65% of wages paid – 6.2% for Social Security and 1.45% for Medicare taxes. An employer generally must withhold the employee’s share of FICA tax from their wages.

Read more

IRS Increases Enforcement Action On Syndicated Conservation Easements

IRS LOGO

The Internal Revenue Service announced today a significant increase in enforcement actions for syndicated conservation easement transactions, a priority compliance area for the agency.

Coordinated examinations are being conducted across the IRS in the Small Business and Self-Employed Division, Large Business and International Division and Tax Exempt and Government Entities Division. Separately, investigations have been initiated by the IRS’ Criminal Investigation division. These audits and investigations cover billions of dollars of potentially inflated deductions as well as hundreds of partnerships and thousands of investors.

“We will not stop in our pursuit of everyone involved in the creation, marketing, promotion and wrongful acquisition of artificial, highly inflated deductions based on these aggressive transactions. Every available enforcement option will be considered, including civil penalties and, where appropriate, criminal investigations that could lead to a criminal prosecution,” said IRS Commissioner Chuck Rettig. “Our innovation labs are continually developing new, more extensive enforcement tools that employ advanced techniques. If you engaged in any questionable syndicated conservation easement transaction, you should immediately consult an independent, competent tax advisor to consider your best available options. It is always worthwhile to take advantage of various methods of getting back into compliance by correcting your tax returns before you hear from the IRS. Our continued use of ever-changing technologies would suggest that waiting is not a viable option for most taxpayers.”

Read more

Important Things To Know About Tax Credits

IRS LOGO

With the tax filing season quickly approaching, the Internal Revenue Service recommends taxpayers take time now to determine if they are eligible for important tax credits.

This is the second in a series of reminders to help taxpayers Get Ready for the upcoming tax filing season. The IRS recently updated its Get Ready page with steps to take now for the 2020 filing season.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for working people with low to moderate incomes who meet certain eligibility requirements. Because it’s a refundable credit, those who qualify and claim EITC pay less federal tax, pay no tax or may even get a tax refund. EITC can mean a credit of up to $6,557 for working families with three or more qualifying children. Workers without a qualifying child may be eligible for a credit up to $529.

To get the credit, people must have earned income and file a federal tax return — even if they don’t owe any tax or aren’t otherwise required to file.

Read more

What Is A CDP Hearing And What It Does For You

If for some reason, you find yourself defaulting on a tax payment or two, the IRS will take steps to recover that debt. This could be through IRS levies, allowing them to seize your assets, taking money from your accounts or through a Notice of Federal Tax Lien (NFTL). By law, the IRS must inform you before any collection efforts are made, and after filing an NFTL.

What Is A CDP Hearing?

After the IRS makes it known to you that they intend to initiate steps to recover what you owe, you can request a hearing to discuss your case. At the hearing, you get to find out whether there were any procedural issues on the IRS’s side or propose alternative methods of collection. So, a CDP hearing is a last-ditch effort to avoid the penalties altogether or offer payment alternatives that would be easier on you. It’s important to note, though, that most CDP hearings discuss alternative collection methods. So your chances of getting away without making payments are slim.

Read more

IRS To Non-U.S. Banks: You Don’t Need To Close Accounts Of Americans Whose TINs You Don’t Have After All

Bank
Under pressure from European banks in particular, the U.S. Internal Revenue Service has issued clarification with respect to a FATCA requirement that “foreign financial institutions” be obliged to provide the so-called Tax Information Numbers of their American clients from January, 2020 onward, which tax experts say means that banks now won’t have to close the accounts of their TIN-lacking “accidental American” clients at the end of this year.

The new guidance is contained in a new question added 10 days ago to the IRS’s FATCA FAQs page, according to John Richardson, a Toronto-based lawyer who is active in American expat matters.

It confirms comments issued in September by Dutch finance minister Menno Snel, who, as reported, said he based his statements on information he’d received “in recent weeks” from his “American counterparts about their enforcement of FATCA”.

The IRS has not yet issued a statement formally announcing the new guidance with respect to FATCA and the TIN requirement, but tax experts spotted it and have been sharing the news of it on social media, Richardson and other tax experts said today.

Read more

IRS Position On Qualified Business Income Deduction

Qualified Business Income Deduction

Many owners of sole proprietorships, partnerships, S corporations and some trusts and estates may be eligible for a qualified business income (QBI) deduction – also called Section 199A – for tax years beginning after December 31, 2017. The deduction allows eligible taxpayers to deduct up to 20 percent of their qualified business income (QBI), plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Income earned through a C corporation or by providing services as an employee is not eligible for the deduction. For more information on what qualifies as a trade or business, see Determining your qualified trades or businesses in Publication 535 (PDF).

The deduction is available, regardless of whether taxpayers itemize deductions on Schedule A or take the standard deduction.  Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file in 2019.

The deduction has two components.

Read more

Retirement Savings Contributions Credit (Saver’s Credit)

IRS On Retirement Credits

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. And, beginning in 2018, if you’re the designated beneficiary you may be eligible for a credit for contributions to your Achieving a Better Life Experience (ABLE) account.

Who Is Eligible For The Credit?

You’re eligible for the credit if you’re:

  1. Age 18 or older;
  2. Not a full-time student; and
  3. Not claimed as a dependent on another person’s return.

See the instructions for Form 8880, Credit for Qualified Retirement Savings Contributions, for the definition of a full-time student.

Amount Of The Credit

The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA or ABLE account contributions depending on your adjusted gross income (reported on your Form 1040 series return). The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). Use the chart below to calculate your credit.

Read more

The Newest 2019 IRS Expatriation Compliance Campaign

John Richardson

On July 19, 2019 the IRS announced six new compliance initiatives.

Of particular interest to U.S. citizens and permanent residents (Green Card holders) is what is described as:

Expatriation

U.S. citizens and long-term residents (lawful permanent residents in eight out of the last 15 taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.

What is expatriation?

From a tax perspective, expatriation is the process of ceasing to be a “tax resident” of the United States. Both U.S. citizens and permanent residents are taxable by the United States on their worldwide income. A U.S. citizen expatriates by relinquishing U.S. citizenship. A permanent resident expatriates by either surrendering their Green Card or making an appropriate election under a tax treaty.

Read more

Dealing With IRS Collections During A Financial Hardship

Venar Ayar On IRS Financial Hardship

If you’re already having financial problems, IRS collection actions can make your situation even more difficult. Fortunately, the IRS will consider your financial issues if you ask for a collection alternative.

Request A CDP Hearing

The IRS won’t know about your financial hardship unless you tell them. If your assets are about to be seized, you should make sure you request a Collection Due Process (CDP) hearing to explain your situation.

The IRS is usually required to send a Notice of Intent to Levy in the mail before your assets can be seized. You have 30 days to respond to this notice and request a CDP hearing. At the hearing, you can propose collection alternatives, and the IRS won’t levy your assets until the CDP process is complete.

Make sure you read every IRS notice you get and pay careful attention to any deadlines mentioned in the notice.

Read more

Can The IRS Take Your Passport?

Venar Ayar, Tax Lawyer

The IRS can’t seize your passport, but they can let the State Department know if you have seriously delinquent tax debt. Once this happens, the State Department can deny your passport renewal or revoke your current passport.

Before this happens, you’ll have several opportunities to resolve your tax problems and keep your right to carry a valid passport.

IRS Collections And Notices

Your tax debt can’t be certified to the State Department until it is “seriously delinquent”, which requires an outstanding balance of over $52,000. Before you reach this amount of tax debt, the IRS will likely send you several bills and notices asking you to submit payment.

You may also receive a notice informing you that the IRS is filing a tax lien in the public records or issuing a levy against your bank account, wages, or other assets. At this point, you should know the IRS means business and contact a tax attorney for assistance.

If you still don’t work out a deal with the IRS and your balance exceeds $52,000, the IRS then has the ability to certify your tax debt to the U.S. State Department.

Read more

American Couple In France In Major Win Against IRS Over Tax

French Flag

In a development that is being seen by American expat groups in France as a major win, the U.S. Internal Revenue Service has admitted in a U.S. Tax Court that it had wrongly collected millions of dollars of tax from France-resident American citizens, ending a years-long legal saga that could see millions of dollars paid to U.S. expats who have lived in and been filing tax returns from France, in the form of refunds.

The matter, which is seen as changing an element of the way Americans resident in France are taxed by the U.S., could lead to thousands of the estimated 100,000 American citizens currently living in France claiming back up to US$100m from the U.S. government, according to London-based U.S. tax attorney Stuart Horwich of Horwich Law.

Horwich assisted Ory and Linda Eshel, the two France-resident U.S. taxpayers who mounted the legal case in question, in bringing their claim to court.

At issue is a court statement by the IRS, in a Washington, DC court, that it had finally accepted that U.S. citizens resident in France could deduct against their U.S. taxes certain previously disallowed taxes paid to France.

Read more

Tax Debt And Passport Revocation: The New Weapon Against Americans Abroad

John-Richardson- Tax Debt and Passport Revocation

US Passport application links Citizenship (State Dept) to Taxation (Treasury) to enforce “Taxation based Citizenship

The logical progression continues …

I just got off the phone with someone who has just received a letter from the IRS stating that:

1. He had a “seriously delinquent” tax debt; and

2. That notice of the “seriously delinquent” tax debt was being forwarded to the State Department.

(In 2016 I did a presentation on this topic just a few months after the law came into force. You may view the presentation here.) Read more