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New law keeps payroll tax cut in place through February of 2012

Tuesday, December 27th, 2011 by Moore McLaughlin

On December 23, Congress passed H.R. 3765, the “Temporary Payroll Tax Cut Continuation Act of 2011” (the TTCA). The bill was signed into law by President Obama shortly thereafter. The tax provisions of the TTCA consist of a two-month temporary extension of the payroll tax cut that’s in place for 2011, plus a parallel extension of a lower Self Employment Contributions Act (SECA) tax rate on self-employment income.

Overview. The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

Before passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Relief Act, P.L. 111-312), the FICA tax rate for employees and employers was 7.65% each—6.2% for OASDI and 1.45% for HI. Under the SECA tax, self-employment income of self-employed taxpayers was subject to a tax of 15.3%—12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation subject to the OASDI tax (the wage base), but no maximum for HI. (The wage base is $106,800 for 2011 and $110,100 for 2012.) Similar rules apply under the Railroad Retirement Tax Act (RRTA).

Under pre-2010 Tax Relief Act law, for computing the income tax of an individual, Code Sec. 164(f) allowed an above-the-line deduction equal to 50% of the amount of the SECA tax imposed on the individual’s self-employment income for the tax year.

Under Code Sec. 1402(a)(12), a taxpayer is allowed a deduction in computing net earnings from self-employment equal to: (1) net earnings from self-employment as determined before taking the Code Sec. 1402(a)(12) deduction into account, multiplied by (2) one-half the sum of the OASDI tax rate and the HI tax rate. This deduction is allowed in computing net earnings from self-employment in lieu of the Code Sec. 164(f) above-the-line deduction of one-half of the self-employment tax. Thus, the Code Sec. 164(f) deduction can’t be taken in computing self-employment tax liability. The Code Sec. 1402(a)(12) deduction is designed to put the self-employed in the same position as employees in that they don’t have to pay self-employment tax on about half of the amount of the tax itself.

Temporary tax cut for 2011. For remuneration received during 2011, the 2010 Tax Relief Act reduced the employee OASDI tax rate under the FICA tax by two percentage points to 4.2%. Similarly, for self-employment income for tax years beginning in 2011, the Act reduced the OASDI tax rate under the SECA tax by two percentage points to 10.4% percent. As a result, for 2011, employees pay only 4.2% Social Security tax on wages up to $106,800 and self-employed individuals pay only 10.4% Social Security self-employment taxes on self-employment income up to $106,800.

The 2010 Tax Relief Act provided rules for coordination with deductions for employment taxes, as follows.

The Code Sec. 164(f) income tax deduction allowed for tax years beginning in 2011 is computed at the rate of 59.6% of the OASDI tax paid, plus one half of the HI tax paid.

A new percentage (59.6%) replaces the rate of one half (50%) allowed under pre-2010 Tax Relief Act law for this portion of the deduction. The new percentage is necessary to continue to allow the self-employed taxpayer to deduct the full amount of the employer portion of SECA taxes. The employer OASDI tax rate remains at 6.2%, while the employee portion falls to 4.2%. Thus, the employer share of total OASDI taxes is 6.2 divided by 10.4, or 59.6% of the OASDI portion of SECA taxes.

However, the two-percentage-point reduction is not taken into account in determining the Code Sec. 1402 SECA tax deduction allowed for determining the amount of the net earnings from self-employment for the tax year.

New law. Under the TTCA, the reduced employee OASDI tax rate of 4.2% under the FICA tax, and the equivalent employee portion of the RRTA tax, is extended to apply to covered wages paid in the first two months of 2012. (Sec. 601(c) of the 2010 Tax Relief Act (P.L. 111-312), as amended by TTCA Sec. 101)

The TTCA also provides for a recapture of any benefit a taxpayer may have received from the reduction in the OASDI tax rate, and the equivalent employee portion of the RRTA tax, for remuneration received during the first two months of 2012 in excess of $18,350 (i.e., two-twelfths of the 2012 wage base of $110,100). (Sec. 601(g) of the 2010 Tax Relief Act (P.L. 111-312), as amended by TTCA Sec. 101) The recapture is accomplished by a tax equal to 2% of the amount of wages (and railroad compensation) received during the first two months of 2012 that exceed $18,350.

M&Q observation: A highlight of the TTCA issued by the House Ways & Means Committee on December 22, indicates that the recapture provision would apply only if the temporary payroll tax cut ends on Feb. 29, 2012. A House-Senate Conference will convene soon to consider extending the temporary payroll tax cut for the remainder of 2012.

For tax years beginning in 2012, the TTCA provides that the OASDI rate for a self-employed individual remains at 10.4%, for self-employment income of up to $18,350 (reduced by wages subject to the lower OASDI rate for 2012). (Sec. 601(f) of the 2010 Tax Relief Act (P.L. 111-312), as amended by TTCA Sec. 101) Related rules for 2011 concerning coordination of a self-employed individual’s deductions in determining net earnings from self-employment and income tax also apply for 2012, except that the income tax deduction allowed for the OASDI portion of SECA tax paid for tax years beginning in 2012 is computed at the rate of 59.6% of the OASDI tax paid on self-employment income of up to $18,350. For self-employment income in excess of this amount, the deduction is equal to half of the OASDI portion of the SECA tax paid. The Joint Committee on Taxation explanation of the TTCA says that the 59.6% used for the first $18,350 of self-employment income is necessary to continue to allow the self-employed taxpayer to deduct the full amount of the employer portion of SECA taxes. The employer OASDI tax rate remains at 6.2%, while the employee portion falls to a 4.2% rate for the first $18,350 of self-employment income. Thus, the employer share of total OASDI taxes is 6.2% divided by 10.4, or 59.6% of the OASDI portion of SECA taxes, for the first $18,350 of self-employment income.

Effective date. The above TTCA changes are effective for remuneration received during the months of January and February in 2012 and for self-employment income for tax years beginning in 2012. (TTCA Sec. 101(c)).

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Posted in Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning

Top 10 Tax Developments of 2011

Thursday, December 22nd, 2011 by Moore McLaughlin

As 2011 draws to a close, many tax developments will likely continue to make headlines and influence tax planning in 2012. In the usual tradition, we present a “Top 10 ” list of tax developments that may prove useful to practitioners as 2012 begins.

1. Fate of Bush-era tax cuts unresolved

2011 ended without any resolution of the fate of the Bush-era tax cuts. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) extended the Bush-era tax cuts through 2012. President Obama and House Speaker John Boehner, R-Ohio, reportedly came close to an agreement in August 2011 to extend some of the Bush-era tax cuts as part of a comprehensive deficit reduction package. When their agreement fell apart, many Washington observers predicted the Joint Select Committee on Deficit Reduction would address the Bush-era tax cuts in a deficit reduction package. The Deficit Reduction Committee announced in November that it failed to reach an agreement and disbanded.

Comment

The fate of the Bush-era tax cuts may ultimately be decided by the lame-duck Congress, which will meet after the November 2012 elections. The outcome of the presidential election and which party controls the House and Senate will undoubtedly influence whatever decision lawmakers take over the Bush-era tax cuts.

2. Rollback of tax legislation

Congress repealed three tax laws in 2011: expanded business information reporting, real property expense reporting and three percent government withholding.

Business information reporting. The Patient Protection and Affordable Care Act (PPACA) required businesses, charities and government entities to file information returns (Forms 1099) for all payments of $600 or more in a calendar year to a single vendor, other than a tax-exempt vendor. The PPACA also repealed the long-standing reporting exception for payments made to corporations. The PPACA’s expansion of business information reporting proved universally unpopular. Congress passed the Comprehensive 1099 Taxpayer Protection Act in April 2011. The Comprehensive 1099 Taxpayer Protection Act repeals the expanded business information reporting provisions in the PPACA as if they have never been enacted.

Rental property expense reporting. The Small Business Jobs Act of 2010 required landlords to file a Form 1099 to report certain rental property expense payments of $600 or more. The Comprehensive 1099 Taxpayer Protection Act also repealed rental expense reporting as if it had never been enacted.

Government withholding. The Tax Increase Prevention and Reconciliation Act of 2007 imposed three percent withholding on payments for goods or services to contractors made by federal, state and local governments. In November 2011, President Obama signed the 3% Withholding Repeal and Job Creation Act, which repeals three percent government withholding as if it had never been enacted.

3. Foreign accounts

The Treasury Department and the IRS continued to focus on foreign account reporting in 2011. Three developments were interconnected: implementation of the Foreign Account Tax Compliance Act (FATCA), FBAR filings and the 2011 Offshore Voluntary Disclosure Initiative (OVDI).

FATCA. The IRS continued to implement the Foreign Account Tax Compliance Act (FATCA) in 2011. FATCA generally requires certain U.S. taxpayers holding specified foreign financial assets to report information about these assets on a new form to be attached to the taxpayer’s return. Additionally, foreign financial institutions must report certain information about accounts held by U.S. taxpayers. In July 2011, the IRS announced it intended to provide for a phased implementation of the FATCA requirements for foreign financial institutions. In December 2011, the IRS issued guidance about new Form 8938, Statement of Specified Foreign Financial Assets.

FBAR. The Treasury Department issued final rules on Form TD-F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR) in February 2011. The final rules retain and clarify the requirement to report signature or other authority over a foreign financial account. The final rules also reserved the treatment of investment companies other than mutual funds or similar pooled funds. In related news, the Treasury Department announced that taxpayers may electronically file the FBAR; previously, electronic filing was not an option for the FBAR.

OVDI. The IRS launched a campaign in 2011 to encourage taxpayers to voluntarily disclose unreported offshore accounts. The 2011 Offshore Voluntary Disclosure Initiative (OVDI) rewarded taxpayers who came forward voluntarily with a reduced penalty framework (although not as generous as a similar program in 2009). The 2011 OVDI closed on September 9, 2011. In December, IRS Commissioner Douglas Shulman reported that the agency has received more than 33,000 voluntary disclosures since 2009.

4. IRS help for distressed taxpayers

The IRS announced in February 2011 a series of measures intended to help good-faith taxpayers who cannot meet their tax obligations. The IRS “Fresh Start” initiative generally allows lien withdrawals for taxpayers entering into direct debit installment agreements (and for taxpayers who convert from a regular installment agreement to a direct debit agreement). The IRS also announced it would make streamlined installment agreements available to more small businesses. Qualified small businesses with $25,000 or less in unpaid taxes can participate in the streamlined installment agreement program.

Comment

According to Commissioner Douglas Shulman and other top agency officials, IRS personnel have been instructed to be more flexible in helping distressed taxpayers.

5. Worker classification

The IRS launched a new program in September 2011 to enable employers to voluntarily reclassify their workers for federal employment tax purposes and take advantage of a reduced penalty framework. The Voluntary Classification System Program (VCSP) is open to employers currently treating their workers as independent contractors or other nonemployees and who want to prospectively treat the workers as employees. The employer must not be under audit and satisfy other requirements. The IRS has not announced an end-date to the VCSP.

6. Basis overstatement regs

The Supreme Court agreed in September 2011 to resolve a split among the federal courts of appeal over IRS regs (TD 9515) that impose a six-year limitations period on assessments due to overstated basis (Home Concrete & Supply, LLC, 2011-1 ustc ¶50,207). The government asked the Supreme Court to decide, among other questions, whether an understatement of gross income attributable to an overstatement of basis in sold property is an omission from income that can trigger the six-year assessment period.

Comment

In March 2011, the Court of Appeals for the Federal Circuit upheld the basis overstatement regs under Chevron-deference (Grapevine Imports, Ltd., 2011-1 ustc ¶50,264).

7. Mid-year mileage rate increase

For the third time in six years, the IRS announced a mid-year adjustment to the business standard mileage rate because of rising gasoline prices. The business standard mileage rate increased from 51 cents-per-mile to 55.5 cents-per-mile for the second half of 2011. The medical/moving standard mileage rate increased from 19 cents-per-mile to 23.5 cents-per-mile for the second half of 2011. Congress did not make a mid-year adjustment to the charitable standard mileage rate, which remained at 14 cents-per-mile for the second half of 2011.

Comment

For 2012, the business standard mileage rate is 55.5 cents-per-mile and the medical/moving standard mileage rate is 23 cents-per-mile. The statutorily-determined charitable standard mileage rate remains at 14 cents-per-mile for 2012.

8. Return preparer oversight

The IRS moved forward with its return preparer oversight initiative in 2011, defining the new designation “registered tax return preparer” and launching the registered tax return preparer competency examination. In June, the IRS issued final Circular 230 regulations, which clarified professional standards for certified public accountants (CPAs), enrolled agents (EAs) and registered tax return preparers. The IRS also fine-tuned its online preparer tax identification number (PTIN) registration system. Additionally, the IRS announced it would revisit its proposal to fingerprint certain PTIN applicants; a proposal which many tax professionals criticized as duplicative of their own employee background checks and too costly.

9. Mandatory e-file for preparers

Beginning January 1, 2011, specified tax return preparers who reasonably expected to file 100 or more covered returns in calendar year 2011 were required to file those returns electronically. The e-filing requirement was put in place by Congress in 2009. The IRS phased-in the requirement over two years (2011 and 2012). For calendar year 2012 (and subsequent years), the threshold for mandatory e-filing by specified tax return preparers is 11 or more covered returns. Firms must compute the number of covered returns in the aggregate that they reasonably expect to file as a firm. If the number is 11 or more in calendar year 2012 and subsequent years, all members of the firm must electronically file covered returns.

10. Updated PAL rules

The IRS issued proposed regs in November 2011 updating the definition of an interest in a limited partnership as a limited partner for purposes of the Code Sec. 469 passive activity loss (PAL) rules. Under the proposed regs, an interest in a limited liability company is treated as a limited partnership interest for the PAL rules.

Comment

The proposed regs reflect the evolution of the rules for limited partners since passage of the Uniform Limited Partnership Act of 1916.

Honorable mention

  • Congress bans tax strategy patents;
  • IRS helps organizations regain tax-exempt status after automatic revocation;
  • IRS responds to Hurricane Irene and many other natural disasters in 2011;
  • FUTA surtax expires mid-year;
  • Congress expands Work Opportunity Tax Credit (WOTC) for veterans;
  • Supreme Court agrees to hear arguments on PPACA;
  • IRS issues final regs on Code Sec. 6707A penalty.
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Posted in Asset Protection Planning, Current Events, Tax Current Events and News, Tax planning

Rhode Island—Personal Income Tax: Figures for Tax Year 2012 Provided

Tuesday, December 20th, 2011 by Moore McLaughlin

The Rhode Island Division of Taxation has provided personal income taxpayers with the standard deduction and personal and dependency exemption amounts as well as the tax rate schedule for tax year 2012. State law requires annual adjustments for inflation. The standard deduction amounts are as follows: $7,800 for single or married filing separate filing status, $15,600 for married filing joint, and $11,700 for head of household. The personal and dependency exemption amount is $3,650, and the phaseout range for exemptions is $181,900 to $202,700. The tax rate schedule is 3.75% for $0 to $57,150 in income; 4.75% for $57,150 to $129,900; and 5.99% for $129,900 and above.

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Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning

Massachusetts—Personal Income Tax: Part B Income Tax Rate Reduced

Monday, December 19th, 2011 by Moore McLaughlin

The Massachusetts Department of Revenue has announced that for tax years after 2011 the Part B personal income tax rate will be reduced to 5.25% (previously 5.3%). The tax rate for Part B income is subject to reduction by 0.05% if the inflation-adjusted growth in baseline taxes in the fiscal year ending June 30 of the previous year exceeds 2.5% and the inflation-adjusted growth in baseline taxes for each consecutive three-month period reported by the Commissioner of Revenue between August and December of the previous year is greater than zero. There is a minimum rate of 5%.

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Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning

Massachusetts Enacts 2012 Budget Act

Wednesday, July 13th, 2011 by Moore McLaughlin

On July 11, 2011, Governor Deval Patrick signed the 2012 budget act, which postpones the Statement of Financial Accounting Standards 109 (FAS 109) deduction allowed certain corporations by a year, shortens the tax audit process, allows a deduction related to human organ donation, provides for recalculation of the dairy tax credit or trigger price in certain circumstances, and establishes a life sciences tax incentive program. It also provides certain sales tax exemption and revises certain administrative provisions.

Income tax. Life sciences tax incentive program: Effective as of January 1, 2009, a life sciences tax incentive program is established. The Life Sciences Center, in consultation with the Department of Revenue may authorize incentives not exceeding $25 million annually. Effective for tax years beginning on or after January 1, 2012, a taxpayer who commits to the creation of a minimum of 50 net new permanent full-time positions in Massachusetts is allowed, to the extent authorized by the life sciences tax incentive program, a refundable jobs credit against personal and corporate income taxes.

FAS 109 deduction: The implementation of the deduction allowed to limit the impact of combined reporting on the financial statements of some publicly traded corporation is delayed to 2013. The deduction was to be prorated over the 7-year period beginning with the combined group’s taxable year that begins 2012.

Organ donation related expenses: Effective for taxable years beginning on or after January 1, 2012, a resident individual who donates an organ to another person for human organ transplantation may claim a deduction in an amount equal to the travel expenses, lodging expenses and lost wages not to exceed $10,000 that the individual incurred in donating his or her organ. Human organ means all or part of human bone marrow, liver, pancreas, kidney, intestine or lung.

Daily farmer tax credit program: Effective July 1, 2011, the law requires that the regulations for the implementation, administration, and enforcement of the daily farmer tax credit program must provide that when the board of food and agriculture determines that an error has been made in calculating the trigger price or in reporting or collecting data used in the calculation of the trigger price or the tax credit, the Commissioner must recalculate said trigger price or tax credit.

Sales tax. Effective July 1, 2011, a sales tax exemption is provided for sales of physician-prescribed, medically necessary breast pumps.

Property tax. A person required to file a true list of taxable personal property may not be prevented from inspecting or receiving a copy of his or her submission.

Cigarette tax. Applicable to stamps purchased on or after January 1, 2012, a higher amount that a stamper may withhold as compensation in case of encrypted stamps purchased is provided. A stamper who has complied with cigarette tax law may withhold from each payment to be made by that stamper for such stamps as compensation the following amounts: (1) for encrypted stamps purchased and not returned for an abatement, $12 per roll of 1,200 stamps; and (2) in each fiscal year, $600 per roll of 30,000 encrypted stamps for the first 50 rolls purchased and $200 per each additional roll of 30,000 encrypted stamps purchased. Current law only provides for non-encrypted stamps purchases, which is $1.85 for each 600 stamps purchased.

Administrative provisions. Interests on deficiency assessments: Applicable to interest accruing on deficiency assessments where the audit resulting in the deficiency assessment commences after July 1, 2011, the tax audit cycle is shortened by reducing some interest penalties charged businesses if the Department takes more than 18 months to perform an audit provided the taxpayer meets certain conditions.

Abatement and assessment periods: Applicable to requests for refund or applications for abatement filed with the Commissioner on or after July 1, 2011, the statutes of limitations for assessment and abatements are revised. However, the change will not apply with respect to tax periods where the statute of limitations for refund or abatement, as applicable, had expired prior to July 1, 2011.

A request for a refund or credit of an overpayment of any tax where a required return has not been timely filed must be made by filing the overdue return within three years from the due date of the return, taking into account any extension of time for filing the return, or within two years of the date that the tax was paid, whichever is later. A request for a refund or credit of an overpayment of any tax where no return is required must be made by the taxpayer within two years from the time the tax was paid. A request for a refund or credit of an overpayment of tax where the required return was timely filed must be made within the period permitted for abatement for that return. Where a refund or credit results from an abatement, the amount of the refund or credit must be limited to the amount paid or deemed paid within three years of the date that the application for abatement is filed, taking into account any extension of time for filing the return. Previously, a request for a refund or credit of an overpayment of any tax where a required return has not been timely filed must be made by filing the overdue return within three years from the due date of the return, without regard to extension of time for filing the return, or within two years of the date that the tax was paid, whichever is later.

Any person aggrieved by the assessment of a tax, other than taxes assessed under the laws on taxation of legacies and successions or on taxation or transfers of certain estates, may apply in writing to the Commissioner for an abatement at any time within three years from the date of filing the return, within two years from the date the tax was assessed or deemed to be assessed or within one year from the date that the tax was paid, whichever is later.

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Posted in Current Events, Estate Planning, IRS and state tax collections, Tax Current Events and News, Tax planning

Happy Birthday, America

Thursday, June 30th, 2011 by Moore McLaughlin

To all our friends and families,

The partners and employees of McLaughlin & Quinn, LLC wish all of you a happy and safe 4th of July, and Happy Birthday America.

Moore, Tom, Michaela, Priscilla, Jill, Stefanie, Frank and Rebecca.

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Tax Tips from the IRS on Capital Gains

Wednesday, June 8th, 2011 by Moore McLaughlin
Ten Important Facts About Capital Gains and Losses
 
IRS Tax Tip 2011-35

Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

3. You must report all capital gains.

4. You may deduct capital losses only on investment property, not on property held for personal use.

5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.

6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.

7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.

8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.

For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
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IRS explains how DC’s Emancipation Day can affect filing and payment deadlines

Monday, February 21st, 2011 by Moore McLaughlin

The IRS had earlier announced that because of the Emancipation Day holiday in the District of Columbia (DC), the due date of Form 1040 for 2010 is April 18, 2011, instead of April 15, 2011. Now, in Notice 2011-17, the IRS has explained the mechanics of this deferral, and how it may apply in other years.

Background. Under Code Sec. 6072(a), income tax returns must be filed on April 15. When April 15 falls on a Saturday, Sunday, or legal holiday, a return is considered timely filed if filed on the next succeeding day that is not a Saturday, Sunday, or legal holiday, defined as legal holiday in DC.

Under DC law, Emancipation Day, April 16, is a legal holiday. The twists and turns in DC law regarding this holiday produce the following results for filing deadlines for all tax forms and payments that must be filed or completed on or before April 15, including the Form 1040 series tax returns:

  • When April 16 falls on Saturday, then Friday, April 15, is the observed date for Emancipation Day and the filing deadline for all tax forms and payments required to be filed or completed on or before April 15, is Monday, April 18.

That’s the situation this year, when April 16 falls on a Saturday, which means Emancipation Day will be observed on Friday, Apr. 15, 2011. Thus, the filing deadline for all tax forms and payments required to be filed or completed on or before April 15 will be Monday, April 18, 2011.

  • When April 16 falls on Sunday, then Monday, April 17, is the observed date for Emancipation Day, and the filing deadline for all tax forms and payments required to be filed or completed on or before April 15 is Tuesday, April 18.
  • When April 16 falls on Monday, then that day is the observed date for Emancipation Day, and the filing deadline for all forms and payments required to be filed or completed on or before April 15 is Tuesday, April 17.

The last time this happened was in 2007.

IRS said it will widely publicize the Emancipation Day rules in affected years to remind the public that the filing deadline is extended.

In all likelihood, the new Notice was issued in response to a flood of questions about why the filing deadline was deferred to April 18, even though April 15 will fall on a Friday this year.

The deadline deferral to April 18, 2011, applies to a host of deadlines for filing and paying, including:

… Requests for an automatic six-month tax-filing extension on an individual return for calendar-year 2010.

… Tax-year 2010 balance-due payments.

… For calendar-year taxpayers, individual estimated tax payments for the first quarter of 2011.

… For calendar-year taxpayers, tax-year 2010 contributions to a Roth or traditional IRA.

… Corporation income tax returns, including S corporations, for a fiscal year ending on January 31, 2011, and any balance due.

… For calendar-year corporations, the estimated tax payment for the first quarter of 2011.

… Calendar-year estate and trust income tax returns (Form 1041) and any balance due.

… Calendar-year 2010 partnership returns (Form 1065).

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Posted in 1031 Exchanges, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning

Ways and Means OKs two competing bills to repeal new 1099 requirements

Monday, February 21st, 2011 by Moore McLaughlin

On February 17, the House Ways and Means Committee by a vote of 21-15 approved. H.R. 705, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011. Upon passage of H.R. 705, the text of a competing bill (H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011), which was approved by voice vote earlier in the day, was incorporated into H.R. 705. There were no other amendments adopted to H.R.705.

Both bills seek to modify or repeal the new requirements imposed by Sec. 9006 of the Patient Protection and Affordable Care Act (PPACA), which provides that payments for goods and payments made to corporations (that are not tax-exempt) will be subject to information reporting beginning in 2012. H.R. 705 also seeks to repeal Code Sec. 6041(h), which was added by the Small Business Jobs Act of 2010 and which treats recipients of rental income from real estate as engaged in the trade or business of renting property for information reporting purposes beginning in 2011. However, H.R. 705 provides an offset for the estimated $21.9 billion cost of repeal, whereas H.R. 4 does not.

Also on February 17, the Senate by a vote of 92-2 invoked cloture (i.e. voted to cut off debate) on S. 223, the FAA Air Transportation Modernization and Safety Improvement Act, which includes a provision to repeal the Sec. 9006 reporting requirements.  Unless time is yielded back, there remains 30 hours of debate on the bill before a vote on final passage of the measure.

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Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning

IRS Set To Launch New Offshore Voluntary Disclosure Program

Thursday, February 3rd, 2011 by Moore McLaughlin

The IRS is putting the finishing touches on a new offshore voluntary disclosure program, according to several agency officials quoted in news reports. The new program will have some similarity to the previous voluntary disclosure program that ended in October 2010, but is expected to offer different terms regarding possible penalties. Many observers foresee the new initiative offering terms less generous than those in the previous program. At an American Bar Association gathering on Janury 21, Steven Miller, IRS deputy commissioner for services and enforcement, put the tax professional community on notice that another initiative was in the works. Other agency officials have since indicated that the details of the program would soon be forthcoming.

Stay tuned to our Blog, or contact Partner Moore McLaughlin, Esq. for more information at mmclaughlin@mclaughlinquinn.com or by phone at 401-421-5115 ext 212.

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Posted in Asset Protection Planning, Current Events, Estate Planning, IRS and state tax collections, Tax Current Events and News, Tax planning

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