Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

February 2017: Client Alert

Tax Calendar

February 28

  • Payers must file informational returns with the IRS. (Except certain Forms 1099-MISC with non-employee compensation payments in box 7, which are due before February 1. Excluding previously outlined Forms 1099-MISC, the deadline is March 31, if filing electronically.)
  • Forms 1095-B and 1095-C due to the IRS, if filing on paper.

March 1

  • Farmers and fishermen who did not make 2016 estimated tax payments must file 2016 tax returns and pay taxes in full.

March 2

  • Large employers must furnish Form 1095-B and Form 1095-C to employees.

March 15

  • 2016 calendar-year S corporation Form 1120S income tax returns are due.
  • 2016 calendar-year partnerships Form 1065 income tax returns are due.

March 31

  • Forms 1095-B and 1095-C due to the IRS, if filing electronically. (Employers who have 250 or more employees are required to file electronically.)

 

2016 Tax Preparation

We hope that 2016 was a happy, healthy, and prosperous year for you and your family. It’s that time of year again when you are receiving your annual income and other statements for the purpose of preparing your 2016 individual, corporate, and/or other entity income tax returns.

As such, we wish to remind you to timely file and pay your 2016 tax returns and any additional taxes or estimates that you may owe.

To have Moskowitz LLP prepare your 2016 tax returns, contact Erin Humbles and begin completing our 2016 Tax Organizer.

Along with Tax Season Come the Scams; Don't Be a Victim

One thing we can count on when tax season begins is the scammers coming out from under their rocks. They come up with schemes to trick you in order to steal your ID and file returns under your Social Security number (SSN). They may even email or call you pretending to be IRS or state tax agents, attempting to intimidate you into sending them money to pay fabricated tax liabilities. These crooks take advantage of individuals’ natural fear of the IRS, coercing their marks into making payments without first verifying the validity of the liability.

ID thieves prize three things: your name, Social Security number, and birth date. You should always be very careful about divulging your birth date and SSN. Don’t use them unless absolutely necessary, and always question the requester’s need to know.

You should also be aware that the IRS never initiates contact in any way other than by U.S. Mail. So, if you receive a phone call from out of the blue demanding payment, you can be assured it is a scam. Simply hang up the phone without providing any information. If you receive an email from the IRS, do not click on embedded links or attachments. Doing so could cause malware to be installed on your computer, allowing scammers to access your computer. Contact Moskowitz LLP, if you believe you are the victim of a tax scam.

Additionally, be aware that the IRS:

  ✓ Never asks for credit card, debit card, or prepaid card information over the telephone.
  ✓ Never insists that taxpayers use a specific payment method to pay tax obligations.
  ✓ Never requests immediate payment over the telephone.
  ✓ Will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior written notification of IRS enforcement actions involving IRS tax liens or levies.

What to do About Tax Penalties

According to the IRS, in 1955, the Internal Revenue Code contained 14 penalties. Fast forward to today, and the number has increased tenfold. Penalties apply on a per-return basis, vary in size from minimal to astronomical amounts, and can increase each year with inflation.

Penalty Relief
If you have been assessed tax penalties, contact our office to discuss Penalty Relief. Penalties can be abated or reduced for various reasons, Including:

  • Reasonable cause. Penalties may be abated when an error is made despite exercising ordinary business care and prudence.
  • Safe harbor for certain de minimis (small) mistakes.
  • Inconsequential omission.
  • Time sensitive. Penalties may be reduced if filed within specific time frames.
  • Small business limitation. The maximum penalty may be reduced based on gross income.

Moskowitz LLP Aggressively Contests FBAR Penalties

Moskowitz LLP will be very active this year litigating FBAR penalties assessed to taxpayers. We currently have three cases that will soon be filed in District Court suing the United States for FBAR penalties, as well as a case to be filed in the United States Court of Federal Claims as to FBAR penalties.

What to do if You Owe Taxes and Cannot Pay Them

We routinely help clients devise delinquent tax liability strategies with the primary goal of resolving a tax dispute with authorities.

For example: When taxes are not paid in full, a bill is received from the IRS. This bill initiates a collection process, which only ends when the bill is paid in full, the government agrees to another settlement, or the taxing agency can no longer legally collect the tax (e.g. the statute of limitations has run). In addition to the original tax bill, various penalties and interest will accrue.

Listen to our recent Podcast regarding your rights and options when it comes to Tax Debts.

Important Tax Changes for Small Businesses

Tax legislation passed late in December 2015 (the Protecting Americans from Tax Hikes Act) extended a number of favorable business provisions and made some others permanent. The provisions can have a significant impact on a business’s taxes for 2016. Here is a rundown of the changes to consider when preparing your 2016 and 2017 returns.

Section 179 Expensing - The Internal Revenue Code, Sec. 179, allows businesses to expense, rather than depreciate, personal tangible property other than buildings or their structural components used in a trade or business in the year the property is placed into business service. The annual limit is inflation-adjusted, and for 2017, that limit is $510,000, up from $500,000 in 2016. The limit is reduced by one dollar for each dollar when the total cost of the qualifying property placed in service in any given year exceeds the investment limit, which is $2,030,000 for 2017, a $20,000 increase from the 2016 amount.

Bonus Depreciation - Bonus depreciation is extended through 2019 and allows first-year depreciation of 50% of the cost of qualifying business assets placed in service through 2017. After 2017, the bonus depreciation will be phased out, with the bonus rate 40% in 2018 and 30% in 2019. After 2019, the bonus depreciation will no longer apply. Qualifying business assets generally include personal tangible property other than real property with a depreciable life of 20 years or fewer, although there are some special exceptions that include qualified leasehold property. Generally, qualified leasehold improvements include interior improvements to non-residential property made after the building was originally placed in service, but expenditures attributable to the enlargement of the building, any elevator or escalator, and the internal structural framework of the building do not qualify.

In addition, the bonus depreciation will apply to certain trees, vines, and plants bearing fruits and nuts that are planted or grafted before January 1, 2020.

Vehicle Depreciation - The first-year depreciation for cars and light trucks used in business is limited by the so-called luxury-auto rules that apply to highway vehicles with an unloaded gross weight of 6,000 pounds or less. The first-year depreciation amounts for cars and small trucks change slightly from time to time; they are currently set at $3,160 for cars and $3,560 for light trucks. However, a taxpayer can elect to apply the bonus depreciation amounts to these amounts. The bonus-depreciation addition to the luxury-auto limits is $8,000 through 2017, after which it will be phased out by dropping it to $6,400 in 2018 and $4,800 in 2019. After 2019, the bonus depreciation will no longer apply.

Can Bartering be an Effective Business Strategy?

Have you ever thought about bartering as a way to get the goods and services you need for your business? A growing number of businesses are finding ways to use the bartering system as a means to avoid using up their company’s cash.

A simple bartering arrangement involves two parties trading items of similar value. For example, let’s say your business owns a building located next to a telephone company. An internet service provider might be interested in storing its equipment in an unused portion of your basement. Instead of paying rent, they offer to provide you with a high-speed internet connection and website.

Complicated bartering may now take place through bartering clubs that give members credits for items or services they contribute. Members can then use the credits to pay for goods or services offered by other club members. This service offers a convenience to businesses, as it can be difficult to find the businesses that offer what you are looking for when searching on your own.

It’s important to note that there are income tax consequences to bartering. To be safe, view your trades as if cash changed hands, since the goods and services are valued, for tax purposes, at their fair market values and taxed accordingly. Also, a bartering arrangement does not always result in a deduction immediately equal to the income you recognized. You might provide a service and recognize income immediately in exchange for some equipment you will end up depreciating over several years.

Call Moskowitz LLP for more information about implementing bartering as a strategy to help your business.

 

 

January 2017: Client Alert

 
 

January 2017: Client Alert

 

Happy New Year!

We wish you prosperity and good health in 2017. At Moskowitz LLP, we look forward to continuing to represent and serve you, our client. Remember, tax day is just around the corner!

Sincerely,

Steve Moskowitz, Esq.
Founding Partner

Mark Your Calendar: First Quarter 2017 Tax Deadlines

Tax return filing season has arrived, which means it's time to mark your calendar for these 2017 tax deadlines.

January 17

  • Due date for the fourth and final installment of 2016 estimated tax for individuals (unless you file your 2016 return and pay any balance due by January 31).

January 31

  • Employers must furnish 2016 W-2 statements to employees, and send copies to the Social Security Administration. This deadline applies to both paper and electronic filing.
  • Payers must file all copies of 2016 Forms 1099-MISC with non-employee compensation in Box 7. This deadline applies to both paper and electronic filing.
  • Employers must generally file 2016 federal unemployment tax returns and pay any tax due.

February 28

  • Payers must file information returns with the IRS. (Except for certain Forms 1099-MISC, March 31 is the deadline if filing electronically.)

March 1

  • Farmers and fishermen who did not make 2016 estimated tax payments must file 2016 tax returns and pay taxes in full.

March 2

  • Large employers must furnish Form 1095-B and Form 1095-C to employees.

Note the New Due Dates for Forms W-2 and 1099

Did you spot the new due dates on the tax calendar? As you begin your January payroll preparation, take into account earlier due dates for two common information reporting forms.

Forms W-2 for 2016 are due January 31 for all copies. In the past, you had to provide Forms W-2 to your employees by January 31. Now the January 31 deadline also applies to copies submitted to the Social Security Administration.

Also, the due date for filing all copies of 2016 Forms 1099-MISC with non-employee compensation in Box 7 is January 31, 2017. For these forms, the January 31 due date also applies to both paper and electronic filing.


IRS Extended the Due Date for Forms 1095

When you're an applicable large employer (generally, when you employ 50 or more full-time workers and equivalents), you're required to provide information about health coverage to the IRS and to your employees. The IRS extended the date on which two of these forms are due to your employees. Instead of being due January 31, Form 1095-B, Health Coverage, and Form 1095-C, Employer Provided Health Insurance Offer and Coverage, are now due March 2, 2017. There is no change to the February 28, 2017, due date for filing paper forms with the IRS, nor the March 31, 2017, due date for filing electronically.


2017 Financial Fitness: Small Steps Toward Big Goals

Shaping up your finances in 2017 may seem like a big goal, perhaps even too daunting, but if you take one small step at a time, these small steps will add up. Here are some suggestions:

Shift Out of Automatic Have you established automatic bill pay at your bank or service provider, or automatic charges to your credit card?
Small Step: Look for payments for goods or services you no longer use, such as recurring monthly subscriptions and cancel them.
Big Goal: Reduce total expenses and increase savings.

Take the Urgency Out of Emergency Sure, you know that having an account with enough funds specifically earmarked for emergencies is a good idea, but the amount you need to save seems overwhelming. The good news is you don’t have to immediately fund six months of living expenses.
Small Step: Set up a separate account with automatic deposits of $5 or $10 per paycheck, perhaps with funds you’ve redirected from those unused recurring monthly subscriptions.
Big Goal: An emergency fund with enough cash to cover six months of expenses.

Give Yourself Credit Maybe you intend to pay off your credit card debt, but do you have a plan? Knowing where you stand is the first step in getting to where you want to be.
Small Step: Make a list of your cards, balances, minimum payments, and interest rates.
Big Goal: Eliminate finance charges by being able to pay off your balance each month.

Retire Your Excuses Does your employer offer a retirement plan? If so, you may be leaving money on the table.
Small Step: Find out what amount is on offer as “matching” funds. That’s money your employer will add to your account when you make contributions.
Big Goal: Maximize your retirement contributions.

Small steps can lead to big improvements in your financial health. Contact Moskowitz LLP for more tips.

Some Federal Income Tax Refunds may be Temporarily Delayed

In general, you can expect your federal refund to be issued approximately 21 days after your electronically filed tax return has been accepted. However, identity theft is still a major problem, and the IRS continues to implement new strategies to protect taxpayer data. For example, if you claim the Earned Income Tax Credit or Additional Child Tax Credit on your 2016 individual federal income tax return, your refund will be held until February 15.

Employment Tax - Still a Top Priority with DOJ and State of California

Both the United States and the State of California continue to prevail in cases regarding unpaid payroll/employment tax matters. Our tax law blog discusses many of the recent cases, below are a couple of interest.

The federal case discusses the Responsible Officer Penalty and the burden (it's high) that a taxpayer must establish for relief from the penalty. The IRS prevailed in a case upholding a responsible officer penalty against a doctor who, after an embezzlement, used his own funds to pay office bills. See McClendon v. United States of America below.

Further, the State of California brought criminal charges for employment tax and unemployment insurance matters. From a criminal tax law perspective, the charges and the fact pattern are garden variety. What is interesting is that the Tax Recovery and Criminal Enforcement Tax Force (TRaCE) was involved and that the taxpayer took a plea deal. The plea deal is significant only because the public will not get a chance to glean insights as to how the investigation was conducted and the surrounding circumstances, which would be available through a trial and/or sentencing memorandums. Links discussing these two recent posts are below:

McClendon v. United States of America: Good Motives are Not an Excuse of Unpaid Employment Taxes

State of California v. Fumeei Nikko Wu: Willful Failure to Report Employee Wages to EDD Leads to Felony Conviction

 

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Moskowitz LLP, A Tax Law Firm, Disclaimer: Because of the generality of this post, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice from a tax attorney based on particular situations. Prior results do not guarantee a similar outcome. Furthermore, in accordance with Treasury Regulation Circular 230, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purposes of (i) avoiding tax related penalties under the Internal Revenue Code, or (ii.) promoting, marketing, or recommending to another party any tax related matter addressed herein.