Archive for the ‘IRS and state tax collections’ Category
Sunday, December 19th, 2010 by Moore McLaughlin
At about 3:50 p.m. on Friday, December 17, 2010, President Obama signed into law the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” This new law is a sweeping tax package that includes, among many other items, an extension of the Bush-era tax cuts for two years, estate tax relief, a two-year “patch” of the alternative minimum tax (AMT), a two-percentage-point cut in employee-paid payroll taxes and in self-employment tax for 2011, new incentives to invest in machinery and equipment, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses. Here’s a look at the key elements of the package:
- The current income tax rates will be retained for two years (2011 and 2012), with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.
- Employees and self-employed workers will receive a reduction of two percentage points in Social Security payroll tax in 2011, bringing the rate down from 6.2% to 4.2% for employees, and from 12.4% to 10.4% for the self-employed.
- A two-year AMT “patch” for 2010 and 2011 will keep the AMT exemption near current levels and allow personal credits to offset AMT. Without the patch, an estimated 21 million additional taxpayers would have owed AMT for 2010.
- Key tax credits for working families that were enacted or expanded in the American Recovery and Reinvestment Act of 2009 will be retained. Specifically, the new law extends the $1,000 child tax credit and maintains its expanded refundability for two years, extends rules expanding the earned income credit for larger families and married couples, and extends the higher education tax credit (the American Opportunity tax credit) and its partial refundability for two years.
- Businesses can write off 100% of their equipment and machinery purchases, effective for property placed in service after September 8, 2010 and through December 31, 2011. For property placed in service in 2012, the new law provides for 50% additional first-year depreciation.
- Many of the “traditional” tax extenders are extended for two years, retroactively to 2010 and through the end of 2011. Among many others, the extended provisions include the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes; the $250 above-the-line deduction for certain expenses of elementary and secondary school teachers; and the research credit.
- After a one-year hiatus, the estate tax will be reinstated for 2011 and 2012, with a top rate of 35%. The exemption amount will be $5 million per individual in 2011 and will be indexed to inflation in following years. Estates of people who died in 2010 can choose to follow either 2010′s or 2011′s rules.
- Omitted from the new law: Repeal of a controversial expansion of Form 1099 reporting requirements.
- Also not included: Extension of the Build America Bonds program, which permits state and localities to issue federally-subsidized municipal bonds.
Watch for upcoming posts containing more detail on this new law. In the meantime, feel free to contact us with any questions you may have.
Tags: 1031 exchange real estate investment, alternative minimum tax, American Recovery and Reinvestment Act of 2009, AMT, and Job Creation Act of 2010, asset protection, Asset Protection Planning, business tax, Capital gains tax, collection, corporate tax, elderlaw, Estate Planning, income tax, internal revenue code, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, real estate, Rhode Island, seniors, Social Security payroll tax, Tax planning, tax relief, Thomas P. Quinn, Unemployment Insurance Reauthorization
Posted in 1031 Exchanges, Asset Protection Planning, Bankruptcy, Current Events, Elderlaw/Law For Life, Estate Planning, Financial workout, IRS and state tax collections, Self-directed IRAs, Tax Current Events and News, Tax planning
Friday, November 5th, 2010 by Moore McLaughlin
Some individuals with substantial income in addition to salaries may find that the amount of tax withheld from their salaries is not enough to cover their required estimated tax payments. This may be the result of miscalculation, or forgotten surprises pleasant and unpleasant. A pleasant forgotten surprise might be a windfall on the sale of a capital asset earlier this year. An unpleasant one might be the realization by a taxpayer who claimed a first time homebuyer credit in 2008 that he must begin repaying the credit in 25 installments, beginning with the 2010 tax year. Increased withholding, as well as a couple of creative workarounds, can stave off an estimated tax penalty.
Background. An individual subject to the estimated tax must pay, on each of four installment dates (April 15, June 15, September 15 and January 15 of the following year for a calendar-year taxpayer), 25% of his “required annual payment” for the current year. The required annual payment generally is the lesser of 100% of the tax shown on the taxpayer’s return for the preceding year or 90% of his tax for the current year. However, in figuring 2010 estimated taxes, taxpayers whose 2009 AGI was over $150,000 have to pay the lesser of 110% of the tax shown on the 2009 return or 90% of their 2010 tax liability.
The applicable test is applied separately to each installment. Thus, a taxpayer may be penalized for the underpayment of estimated taxes for any installment for which his estimated tax payments plus taxes withheld from his salary don’t total at least 25% of his required annual payment.
An individual who has underpaid an estimated tax installment can’t avoid the penalty by increasing his estimated tax payment for a later period (although payment in a later period will reduce the period for which the penalty applies).
Increased withholding is one possible solution. Income tax withheld by an employer from an employee’s wages or salary is treated as paid in equal amounts on each of the four installment due dates unless the individual establishes the dates on which the amounts were actually withheld. Thus, if an employee asks his employer to withhold sufficient additional amounts for the rest of the year, the penalty can be retroactively eliminated. This is because the heavy year-end withholding will be treated as paid equally over the four installment due dates.
Illustration: Jennifer expects her 2010 tax liability to be $15,000. Her 2009 return showed a liability of $14,000. Her withholding for 2010 will total only $10,500 and she has made no estimated tax payments. If she makes an additional estimated tax payment of $3,000 on January 15, 2011, she will avoid any underpayment penalty for the last installment ($10,500 plus $3,000 equals $13,500, which is 90% of $15,000) but she may still be penalized for underpaying the first three installments. But if Jennifer instead has her employer withhold an additional $3,000 before the end of 2010, her total withholding ($13,500) will be treated as estimated tax payments of $3,375 on each of the installment due dates. Since $3,375 is 25% of $13,500 (90% of $15,000), the underpayment penalty would be completely avoided for all four installments.
Other amounts may also be treated as retroactive payments of estimated tax. The same rules described above in regard to amounts withheld from wages and salaries also apply to overpayments of Social Security taxes and to income taxes withheld from:
- supplemental unemployment compensation benefits, sick pay, pensions, annuities and other deferred income (e.g., 20% withholding on certain “eligible rollover distributions” from qualified retirement plans and other deferred income arrangements).
- interest and dividends subject to backup withholding.
- gambling winnings.
Recommendation: Another possible option for a taxpayer who has underpaid estimated tax is to take an eligible rollover distribution from a qualified plan before the end of 2010. Income tax will be withheld from the distribution and will be applied toward the taxes owed for 2010. The taxpayer can then timely roll over the gross amount of the distribution, as increased by the amount of withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2010, but the withheld tax will be applied pro rata over the full tax year to reduce previous underpayments of estimated tax.
Tags: 2010 estimated taxes, asset protection, Asset Protection Planning, business tax, Capital gains tax, estimated tax payments, estimated taxes, first time homebuyer credit, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, Rhode Island, tax, Tax planning, Thomas P. Quinn, year-end planning, year-end tax planning
Posted in Asset Protection Planning, IRS and state tax collections, Tax Current Events and News, Tax planning
Tuesday, October 26th, 2010 by Moore McLaughlin
Tax relief comes in many forms, whether it means eliminating penalties, settling your debt, or ensuring that the IRS does not seize your bank accounts or garnish your wages. If you owe money on your taxes, your plan for resolving this debt should include addressing all possible angles: Protection from IRS actions, determining ways to reduce the amount owed, and putting a plan into place that will permanently make worrying about taxes a thing of the past. 
McLaughlin & Quinn, LLC has published “9 Secrets to Success When You Owe the IRS” This list has been developed by the attorneys at McLaughlin & Quinn, LLC over the course of dozens of years in private practice and dozens more working for the IRS. Avoiding these landmines will significantly increase the odds of getting one’s tax life in order and moving on. Failure to know these secrets, and use them to your advantage can turn a potentially minor problem into a federal case.
This is the most straight-forward guide you will find anywhere on resolving taxes. In it you will learn:
- 9 Different Ways to Keep the IRS from Taking Action Against You
- How not to be afraid of the IRS
- How to avoid common mistakes
- Simple steps to keep you out of trouble
Downloading this guide is absolutely free.
Click here to download this Free guide.
Tags: 9 Secrets to Success When You Owe the IRS, asset protection, Asset Protection Planning, business tax, Capital gains tax, collection, corporate tax, Estate Planning, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, levy, lien, mclaughlin & quinn, Moore McLaughlin, Owe the IRS, Providence, Rhode Island, sales tax, state taxes, tax, Tax planning, tax relief, Thomas P. Quinn
Posted in Asset Protection Planning, Bankruptcy, Current Events, Elderlaw/Law For Life, Estate Planning, Financial workout, IRS and state tax collections, McLaughlin & Quinn News, Tax Current Events and News, Tax planning
Tuesday, October 26th, 2010 by Moore McLaughlin
This past year has seen a multitude of new cases affecting Massachusetts taxes. Click here for a well written summary of these cases by Scott M. Susko and Richard L. Jones. These cases range from domicile cases in the personal income tax context to sales tax nexus cases to the sales-factor sourcing rules, and others.
McLaughlin & Quinn, LLC Partners Moore McLaughlin and Tom Quinn represent Massachusetts taxpayers, both individuals and businesses, on a regular basis in tax planning matters as well as audits, appeals and in court. Feel free to contact either Moore McLaughlin at 401-421-5115 ext. 212 or by e-mail at mmclaughlin@mclaughlinquinn.com or Tom Quinn at 401-421-5115 ext. 218 or by e-mail at tquinn@mclaughlinquinn.com.
Tags: business tax, domicile, income tax, IRS and state tax collections, LLC, Massachusetts, Massachusetts domicile, Massachusetts personal income tax, Massachusetts sales tax nexus, Massachusetts sales-factor sourcing rules, Massachusetts taxes, mclaughlin & quinn, Moore McLaughlin, personal income tax, sales tax, sales tax nexus, sales-factor sourcing rules, Thomas P. Quinn
Posted in Asset Protection Planning, Estate Planning, IRS and state tax collections, Tax Current Events and News, Tax planning
Sunday, October 24th, 2010 by Moore McLaughlin
The IRS has updated its online FAQs explaining the new post-2010 requirement for tax return preparers to obtain and furnish a preparer tax identification number (PTIN) on tax returns and claims for refund of tax that they prepare. The FAQs supplement final regulations issued on the PTIN requirement and the application process, and update FAQs issued earlier this year. Among the subjects covered are how applicants are “compliant” with their federal tax obligations, and whether fingerprints will be required.
Background. Under new final regulations, for tax returns or refund claims filed after December 31, 2010, the identifying number that a domestic or foreign tax return preparer must include with the preparer’s signature on tax returns and refund claims is his PTIN or such other number as IRS prescribes in forms, instructions, or other guidance. Tax return preparers won’t be able to use a SSN as a preparer identifying number unless specifically prescribed by IRS in forms, instructions, or other guidance. The regulations also explain who may obtain a PTIN and who is a tax return preparer. (Preamble to TD 9501, 09/28/2010, Reg. § 1.6109-2)
Separate new regulations establish a new annual user fee for individuals who apply for or renew a tax return preparer tax identification number (PTIN), and a new information release explains the online PTIN registration process. (T.D. 9503, 09/28/2010; Reg. § 300.9; IR 2010-99)
Supplemental guidance on PTIN application process. The new FAQs provide additional guidance on a number of different aspects of the PTIN application process for tax return preparers, including the following information:
- All PTIN applicants must attest that they are compliant with their personal and business tax obligations, or provide an explanation if they are not. Being in tax compliance means all returns that are due have been filed (or an extension requested), and all taxes that are due have been paid (or acceptable payment arrangements have been established). (Online PTIN System, FAQ 18)
- IRS is not currently conducting fingerprint checks as part of the PTIN application process, but may do so for certain applicants in the future. (New PTIN Requirements, FAQ 11)
- Obtaining a PTIN through the new registration system does not trigger any new continuing education requirement (the beginning date for CPE has not been determined). Once the CPE requirement begins, affected preparers will have a full twelve months to meet their first year’s requirement. (Attorneys, CPAs, enrolled agents, enrolled actuaries, or enrolled retirement plan agents won’t need to meet the new CPE requirements due to their existing education requirements.) (CPE Requirements, FAQ 1)
- Every PTIN holder must have his or her own e-mail account. Thus an organization cannot use one e-mail account to create accounts for all of its employees.
- The name to use when applying for a PTIN should be the name used on the applicant’s most recent Form 1040. If applicants are married filing jointly and both spouses apply for a PTIN, each must create a user account under different mail addresses and file a separate PTIN application. Each spouse must each enter his or her own information on separate applications (name, social security number and address). The spouse’s name or social security number should not be entered. (Online PTIN System, FAQ 8 )
All of the updated “New Requirements for Tax Return Preparers: Frequently Asked Questions” can be viewed by clicking through the categories on the IRS website at: http://www.irs.gov/taxpros/article/0,,id=218611,00.html.
Tags: collection, corporate tax, income tax, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, preparer tax identification number, Providence, PTIN, PTIN registration process, Rhode Island, tax, Tax planning
Posted in IRS and state tax collections, Tax Current Events and News, Tax planning
Thursday, October 21st, 2010 by Moore McLaughlin
In Notice 2010-69, the IRS has announced that employers will not have to report the aggregate cost of employer-sponsored group health plan coverage on Forms W-2 issued for 2011. Reporting for 2011 will be optional, and employers taking advantage of the reprieve will not be treated as having failed to meet the wage and tax statement reporting requirements or be subject to any penalties. The IRS anticipates issuing guidance on this reporting requirement before the end of this year.
Background. For tax years beginning on or after January 1, 2011, Code Sec. 6051(a)(14), which was added by §9002 of the Patient Protection and Affordable Care Act of 2010 (Health Care Act, P.L. 111-148, 3/23/2010), generally provides that the aggregate cost of the applicable employer-sponsored health insurance coverage (as defined in Code Sec. 4980I(d)(1)) must be reported on Form W-2. For this purpose, the aggregate cost is to be determined under rules similar to the rules of Code Sec. 4980B(f)(4), referring to the definition of the “applicable premium” under the rules providing for COBRA continuation coverage.
Interim relief. Notice 2010-69 provides interim relief to employers with respect to reporting the cost of coverage under an employer-sponsored group health plan on Form W-2 under Code Sec. 6051(a)(14). Specifically, Notice 2010-69 provides that reporting the cost of this coverage is not mandatory for Forms W-2 issued for 2011. IRS has determined that this relief is necessary to provide employers with the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement.
In addition, IRS announced that it has issued a draft Form W-2 for 2011. The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan. The IRS will be publishing guidance on the new requirement later this year. The IRS stresses that the amounts reportable are not taxable, and that the new reporting requirement is intended to be informational only and to provide employees with greater transparency into overall health care costs. (IR 2010-103; click here to read more.)
Click here to view the draft Form W-2 (2011).
For tax years beginning after December 31, 2017, Form W-2 reporting of health insurance coverage will take on practical importance. Under Code Sec. 4980I, a 40% nondeductible excise tax will be levied on insurance companies and plan administrators for employer-sponsored health coverage to the extent that annual premiums exceed $10,200 for single coverage and $27,500 for family coverage. An additional threshold amount of $1,650 for single coverage and $3,450 for family coverage will apply for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions.
Tags: business tax, COBRA, health insurance, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Notice 2010-69, Patient Protection and Affordable Care Act of 2010, Providence, Rhode Island, tax, Tax planning, W-2
Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning
Friday, October 15th, 2010 by Moore McLaughlin
The following is the tenth in a series of blog posts providing a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
Simplified per diem rates lowered effective October 1, 2010.
Reimbursements of an employee’s business travel costs (lodging, meal and incidental expenses (M&IE)) at a per diem rate are payroll-and income-tax free if simplified substantiation is provided and the daily rate does not exceed the federal per diem rate (the maximum amount that the federal government reimburses its employees) for the locality of travel for that day. While the per diem rates vary by travel destination, employers can make reimbursements at the simplified “high-low” per diem rates, which assign one per diem rate to high-cost areas within the continental U.S., and another to non-high-cost areas. The IRS has issued the “high-low” simplified per diem rates for post-September 30, 2010, travel. An employer may reimburse up to $233 for high-cost localities ($168 for lodging and $65 for M&IE) and $160 for other localities ($108 for lodging and $52 for M&IE). The list of high-cost areas is also updated.
For more information, please contact Partner Moore McLaughlin at 401-421-5115 ext 212 or by e-mail at mmclaughlin@mclaughlinquinn.com.
Tags: employee's business travel costs, federal per diem rate, income tax, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, per diem, per diem rates, Providence, Rhode Island, tax, Tax planning, Thomas P. Quinn
Posted in Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning
Wednesday, October 13th, 2010 by Moore McLaughlin
The following is the seventh in a series of blog posts providing a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
Financial reform package changes mark-to-market rule.
The “Restoring American Financial Stability Act of 2010” was signed into law on July, 21, 2010. This landmark financial reform package contained a tax provision broadening the list of contracts that are excepted from mark-to-market treatment. Taxpayers must report gains and losses from regulated futures contracts and other “Section 1256 contracts” on an annual basis under the “mark-to-market” rule. The term Section 1256 contract means: regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts. It does not include any securities futures contract or option on such a contract unless the contract or option is a dealer securities futures contract. Under the new law, for tax years beginning after July 21, 2010, all of the following also are excepted from the definition of a Section 1256 contract: any interest rate swap; currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement.
For more information, please contact Partner Moore McLaughlin at 401-421-5115 ext 212 or by e-mail at mmclaughlin@mclaughlinquinn.com.
Tags: 1031 exchange real estate investment, basis swap, business tax, Capital gains tax, commodity swap, corporate tax, credit default swap, currency swap, equity index swap, financial reform, futures contracts, interest rate cap, interest rate swap, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mark-to-market, mark-to-market treatment, mclaughlin & quinn, Moore McLaughlin, Providence, regulated futures contracts, Restoring American Financial Stability Act of 2010, Rhode Island, Section 1256 contracts, tax, Tax planning
Posted in Asset Protection Planning, Bankruptcy, Current Events, Financial workout, IRS and state tax collections, Tax Current Events and News, Tax planning
Wednesday, October 13th, 2010 by Moore McLaughlin
The following is the sixth in a series of blog posts providing a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
Legislation ends foreign loopholes and advance EITC.
The Education Jobs and Medicaid Assistance Act, which was signed into law on August 10, 2010, includes provisions closing a number of foreign-tax-credit related loopholes and repealing the advanced earned income tax credit (EITC). Specifically, this legislation tightens the rules on the use of foreign tax credits that multinationals use to lower their U.S. tax bill. In general, these provisions attempt to (1) make foreign tax credits (FTCs) available only when the income to which the FTCs relate is actually taxed by the U.S., (2) prevent artificial inflation of foreign source income, and (3) modify the resourcing rules to limit FTCs. Also, under the new law, starting in 2011, eligible low- and moderate-income workers who qualify for the EITC will no longer be able to elect to receive the credit in advance.
For more information, please contact Partner Moore McLaughlin at 401-421-5115 ext 212 or by e-mail at mmclaughlin@mclaughlinquinn.com.
Tags: asset protection, Asset Protection Planning, assisted living facilities, business tax, Capital gains tax, corporate tax, earned income tax credit, Education Jobs and Medicaid Assistance Act, EITC, elder law, elderlaw, Estate Planning, foreign tax credit, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, Rhode Island, state taxes, tax, tax credit, Tax planning
Posted in Bankruptcy, Current Events, Elderlaw/Law For Life, Financial workout, IRS and state tax collections, Tax Current Events and News, Tax planning
Tuesday, October 12th, 2010 by Moore McLaughlin
The following is the fifth in a series of blog posts providing a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
Regulations on election to defer COD income.
For debt discharges in tax years ending after December 31, 2008, a taxpayer may elect to have any cancellation of debt (COD) income from the reacquisition of an applicable debt instrument after December 31, 2008, and before January 1, 2011, included in gross income ratably over five tax years. The IRS has issued two sets of regulations on this rule: one applies to C corporations, the other applies to partnerships and S corporations. The regulations cover many complicated issues that arise with the election. For example, the C corporation regulations cover topics such as acceleration of deferred cancellation of debt (COD) income and deferred original issue discount deductions, and the calculation of earnings and profits as a result of making an election.
For more information, please contact Partner Moore McLaughlin at 401-421-5115 ext 212 or by e-mail at mmclaughlin@mclaughlinquinn.com.
Tags: asset protection, Asset Protection Planning, cancellation of indebtedness income, Capital gains tax, COD, corporate tax, debt cancellation, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, Rhode Island, Small Business Act, Small Business Jobs Act, Small Business Jobs Act of 2010, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, Bankruptcy, Current Events, Financial workout, IRS and state tax collections, Tax Current Events and News, Tax planning
