Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

June 2017: Client Alert

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Our Tax Attorneys and Tax Professionals aim to successfully resolve tax problems and disputes. The results reflect our years of experience, diligent work, and triumphs.

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Protecting Your Estate from a Will Contest

Dear Readers,

Happy Summer!

 

Tax Calendar

June 15

  • Second quarterly installment 2017 individual estimated tax due.
  • Second quarterly installment 2017 estimated tax for calendar-year corporations due.
  • Individual tax filing deadline for U.S. citizens living or serving in the military overseas.

 

Schedule Your Midyear Tax Planning Session

Most people don’t include tax planning on their summertime agenda, but it’s a good idea to start thinking about it now. The problem with waiting until the end of the year is that your time for planning strategies to take effect is reduced. If you take the time for a midyear tax planning review, you’ll still have eight months for your actions to make a difference on your 2017 tax return. Additionally, proposed tax reforms could be cause for additional changes to your tax plan. Planning now for 2017 taxes not only helps reduce your tax burden, but it can help you gain control of your entire financial situation. Call Moskowitz LLP to set up your appointment today.

 

IRS Is Now Using Collection Agencies

The IRS is now using outside collection agencies to collect unpaid tax obligations. This new program will start slowly with only a few hundred taxpayers receiving mailings. The number will grow to the thousands into the summer. Taxpayers who are contacted will first receive several collection notices from the IRS before their accounts are turned over to the private collection agencies. The agency will then send its own letter to the taxpayer informing them that the IRS has transferred the account to the agency. These agencies are required to identify themselves as working with the IRS in all communications.

Unfortunately, a change like this can often lead to confusion among taxpayers, which gives scammers a new opportunity to steal taxpayer dollars. The IRS is aware of the potential fraud problems and plans to continue to help taxpayers avoid confusion. The IRS reminds taxpayers that private collection companies, like the IRS, will never approach taxpayers in a threatening way; pressure taxpayers for immediate payment; request credit card information; or request payments in gift cards, prepaid debit cards, or a wire transfer. A legitimate letter from a collection agency associated with the IRS will instruct taxpayers to write a check directly to the IRS.

What to Do If You Are Selected for a Correspondence Audit

The IRS is now handling many routine audit reviews through form letters called correspondence audits. These letters come from the IRS and ask for clarification and justification of specific deductions on your tax return. Common issues that trigger a correspondence audit are large charitable deductions, withdrawals from retirement accounts and education savings plans, excess miscellaneous deductions, and small business expenses.

Don’t panic if you get one of these audit form letters. The IRS often uses computer programs to compare individual return deductions with the averages for a person’s income level or profession. If you’ve received a letter, you may have simply fallen outside the averages. As long as you respond promptly, thoroughly, and with good documentation, it won’t necessarily become a contentious issue. The key is to keep proper, well-organized documentation under the assumption that you may need it to support your deductions. When done correctly, the correspondence audit will end with a “no change” letter from the IRS, acknowledging you’ve addressed their concerns. Call Moskowitz LLP, if you receive one of these letters from the IRS or want to talk about record keeping. We’re here to help you.

Everyone Knows Someone Who Missed the Boat

This year’s April 18 tax deadline has come and gone, but not everyone has filed a 2016 tax return. While many have filed an extension and intend on getting their return in order, too many taxpayers who should file, simply do not. Common culprits are older, retired parents and young adults who are new to tax filing requirements.

Here are some of the reasons why filing a tax return is helpful.

Get withholdings. People who work but earn less than the required filing threshold should still file a tax return to get back any withholdings their employer may have taken out of their paycheck.

 This happens because many taxpayers focus on the income threshold required to file a tax return and forget to look at their W-2 to see if money was taken out of their paycheck. The 2016 filing threshold for a single individual is $10,350 and the married filing jointly threshold is $20,700.

Get refundable credits. There are a number of refundable or partially refundable tax credits, such as the earned income tax credit and the additional child tax credit, that are only available if you file a tax return. Refundable credits are special because they come off the top of your tax bill and can even reduce it below zero. In that case, you get the amount of the credit back in a refund check from the IRS.

 Help apply for loans or financial aid. Many banks or colleges will ask to see your tax return information to help you qualify for loans or financial aid. Filing a tax return, even if you’re not required, helps support your application.

Protect yourself. There’s a disturbing trend of identity thieves filing false returns in an attempt to collect illicit refunds from the IRS. They often target people who may not usually file a return. By filing even a simple return, you can shut down this attempt at fraud by identity thieves.

If you know someone who hasn’t filed and needs help doing so, pass along this article with our contact information for a consultation.

IRS Phone Scam – Plea Deals Secured

Five men pleaded guilty between May 26 and June 6 for their roles in a scheme in which individuals in India called U.S. taxpayers, impersonating IRS or U.S. Citizenship and Immigration Services officials, demanding payment of unpaid taxes, according to a June 5 Justice Department release.

Rajubhai Patel, Viraj Patel, Dilipkumar Ambal Patel, and Fahad Ali each pleaded guilty to money laundering conspiracy under 18 U.S.C. section 1956(h), while Hardik Patel pleaded guilty to wire fraud conspiracy under 18 U.S.C. section 1349. According to plea agreements, the men and other co-conspirators perpetrated a complex telephone scam from call centers located in Ahmedabad, India. Call center operators called U.S. victims and threatened them with arrest, imprisonment, fines, or deportation if they did not pay alleged owed taxes. Victims were then instructed to make payments through stored value cards or wire transfers. Finally, “runners” in the United States liquidated and laundered the ill-gotten funds.

4 Tips to Land Your Dream Home in a Seller’s Market

Here are some suggestions to land your dream home in our current real estate market.

  1. Be nimble, be flexible. Try to investigate new listings quickly – within hours of their first posting, if possible. If you’re interested in a house but an inspection finds a few flaws, you may have to be flexible about accepting a house with a few quirks or in need of some repairs.
  2.  Make a strong offer. A seller’s market isn’t a time to lowball your first offer on a house you want. If you’ve prepared and set your expectations below your minimum price range, you should be able to make a strong offer to ensure you are among the most attractive bidders. You shouldn’t wildly overpay, but making a strategic offer above the listing price may sweeten the deal enough to close quickly.
  3. Earnest money. You may consider offering a meaningful earnest money component to your offer to show you are serious. Just understand that this money is put at risk if you later change your mind.
  4.  Few strings. Try to make your offer as simple as possible. The more contingencies, the more room for someone else to sneak in and snap up your target home. Flexible move-in dates may help the seller navigate their purchase. Having to sell your home before buying theirs may create a snag versus another offer.

Reasons to Incorporate Your Business

Here are some reasons you may want to consider incorporating your growing business.

Protect your personal assets from creditors. When you operate your business within a corporation, creditors are often limited to corporate assets to satisfy a debt. Your home, savings, and retirement accounts are no longer fair game.

Provide a personal liability firewall. The corporate form can help protect you against claims made by others for injuries or losses arising from actions of your business.

Issue shares of stock. You can help build your business by issuing shares to new investors, or by offering stock options to key employees as a form of compensation.

Gain tax flexibility. A corporation can provide you with more tax flexibility. Deliberate planning can help optimize the taxable division between corporate income, dividends, and your personal wages.

Enhance your business presence. Being incorporated sends a signal that your business is a serious enterprise and it could open doors to opportunities not offered to sole proprietors. Consumers, vendors, and other businesses often prefer to do business with incorporated companies.

If you are still going over the pros and cons of incorporating your business, pick up the phone. Together, we can complete a thorough tax review that will help shed light on the impact such a move will have on your business situation.

Keep Your Estate Plan Current

In 2013, the U.S. Supreme Court issued a ruling that sent a clear message on how important it is to keep your estate plan up to date. The case centered on a dispute between the widow of Warren Hillman and his ex-wife. Hillman, a federal employee, owned a Federal Employees Group Life Insurance (FEGLI) policy with a death benefit of $124,558. Hillman neglected to change the beneficiary designation on the policy following his divorce and remarriage, and when he passed away in 2008, his ex-wife Judy Maretta collected on the policy. Hillman’s widow, Jacqueline Hillman, sued to recover benefits.

The subsequent court battle lasted five years and went all the way to the Supreme Court. The widow argued that Virginia law revokes a divorced spouse’s beneficiary in favor of a widow or widower (Va. Code Ann. §20–111.1(A)), but the Court ruled that a federal employee’s choice of beneficiary cannot be overridden by a state statute. Hillman’s ex-wife was therefore entitled to keep the money. Read More for our recommendations.

March 2017: Client Alert

March 2017: Client Alert

 

It's tax season and we are hard at work preparing returns and answering tax questions.   If you have tax questions or concerns, please do not hesitate to contact us.     You also may enjoy Frequently Asked Questions with Chip Franklin on KGO radio.

Sincerely,

Steve Moskowitz, Esq.
Founding Partner

 

Tax Calendar

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

March 2

  • Large employers and others must furnish Form 1095-B or 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.

What's Inside

Hot Topics

Can the IRS revoke your passport?
The IRS is revoking anbd denying passports in certian cases of tax delinquency

Common misconceptions of reporting foreign income
Taxability of foreign income & financial accounts, signature of liability and more..

 

Reminder: Partnership Tax Returns Due One Month Earlier

Remember, partnership tax returns are now due on March 15. This is a month earlier than last year. The change is important to note, as filing the tax return late could result in unexpected penalties. The new due date now aligns filing Form 1065 with other flow-through entities like S corporation Form 1120S. If you get caught by surprise with this earlier filing date, contact Moskowitz LLP immediately.


2016 Proof of Health Insurance: the Form 1095 Wrinkle

Under the current Affordable Care Act (ACA), all Americans must have health insurance. If you receive your health insurance through the ACA marketplace or from your employer, you will receive a Form 1095. This form is used as documentation that you have adequate insurance and is used for other ACA reporting and potential tax benefits.

What’s happening now

Prior to filing your tax return you should receive your Form 1095 and review it for accuracy. If you receive your health insurance through a state or federal marketplace you will receive Form 1095-A. Otherwise your version of the form will be either Form 1095-B or Form 1095-C. Unfortunately, some providers of the “B and C” versions of Form 1095 are still having trouble issuing the forms on time. Because of this, the IRS has issued a notice backing off on this “receive the form before you file” requirement. While you will still need to prove you have adaquate health insurance, the suppliers of the Form 1095-B and Form 1095-C were given until as late as March 2 to get the form out to you.

What to do

  •  If you have health insurance through a state or federal marketplace, you will receive a Form 1095-A. You should have already received this form, and you must have it prior to filing your tax return.
  •  If you receive health insurance through your employer, or another program that generates Form 1095-B or 1095-C, for 2016 only, you can still file a tax return without receiving the form. Just make sure you can prove health insurance coverage for you, your spouse, and your dependents for the year.
  •  Place Form 1095 in your tax files. Even though some Forms 1095-B and Forms 1095-C will be received later, you must still retain the form in your files.
  •  If you file your tax return and then discover an error in your reporting based on a Form 1095-B or Form 1095-C received after February 1, there is penalty relief from the IRS if you need to amend your tax return.

Remember, this applies to the 2016 tax year only. For the 2017 tax year, unless changed, you will be required to use a Form 1095 as proof of health insurance prior to filing your tax return.

 

Current Tax Law Requires Health Insurance

During his first week in office, President Trump signed an executive order asking federal agencies to reduce the economic burden the Patient Protection and Affordable Care Act (ACA) puts on American citizens.

Unfortunately, this executive order is causing confusion. Many people are left wondering if fines will no longer be imposed or rules no longer need to be followed. Until the agencies impacted by this executive order publish their intent, act as though current laws are still in play. This includes:

  •  The requirement to have health insurance.
  •  The requirement to pay a shared responsibility tax if you do not have continuous health insurance coverage.
  •  The ability to receive a health insurance premium credit, if you qualify.
  •  Possible health insurance credits for qualifying small businesses.

It’s important to realize that unless tax laws actually change, you are expected to follow the laws as they are currently written.

 

More Credits Require Questions

Common errors have helped to make the Earned Income Tax Credit (EIC) a major source of what the IRS calls “improper payments.” The agency estimates that of the $66 billion in EIC funds paid in 2015, nearly a quarter were collected by filers who didn’t qualify to receive them. To help combat this problem, the IRS now requires additional confirmation of information regarding the EIC and three new credits beginning in 2016.

Now, if you claim the EIC, the Child Tax Credit (CTC), the Additional Child Tax Credit (ACTC), or the American Opportunity Tax Credit (AOTC), additional information may be requested of you.

For the CTC and ACTC, you may be asked how long your children lived with you over the past year, or whether they lived with an ex-spouse, relatives, or other guardian.

If you are eligible for the AOTC, which is a credit to defray as much as $2,500 in higher education costs for you or your children, you will need to provide Form 1098-T from the college or university. You will also need receipts for related expenses.

You may also be asked to double-check your social security numbers and dates of birth for the dependents on your return, as these are two common sources of errors.

If you get more questions than usual or are asked for additional documents, be aware that this is just a new IRS reporting requirement.