Given below are timely articles to keep you informed of tax law changes and related matters. Please note that all news articles are for informational purposes only and are not meant as tax advice. Please consult your tax consultant to know how any of these articles impact your specific situation.
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EA is the professional designation for an IRS Enrolled Agent. Unlike attorneys and Certified Public Accountants (CPA), who may or may not choose to specialize in taxes, all EAs specialize in tax issues.
EAs are licensed directly by the US Treasury Department to represent taxpayers during IRS audit, appeal, collection, and penalties matters. CPAs and attorneys are licensed by the states. Because of their federal license, EAs can represent taxpayers in all 50 states and U.S. Territories, whereas CPAs and attorneys must meet the reciprocity requirements of any state they wish to practice in.
EA status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to high ethical standards as well as continuing education requirements.
Only an EA, an Attorney or a CPA can represent you before the IRS without your being present.
- The end of Obamacare’s individual mandate to buy health insurance
You should file your tax return on time, with or without a payment — the IRS charges penalties for filing late. The IRS also charges daily interest on unpaid tax bills.
If you can pay the full amount now:
You can pay with an electronic funds transfer or with a credit or debit card, or with a check by mailing it or bringing it to your local IRS office.
If you can’t pay the full amount now, but can pay it within 120 days:
If you can’t pay in full immediately, the IRS offers additional time (up to 120 days) to pay in full. This option has:
A penalty of 0.5% per month on the unpaid balance
Interest of short-term federal rate plus 3% (interest might change each quarter)
For more information on the additional time up to 120 days, call the IRS toll-free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).
If you want to request an installment agreement:
Request an installment agreement with one of these:
Online payment agreement (OPA)
Form 9465 -- If your liability is more than $50,000, you’ll need to file Form 9465 instead of using the online agreement. You must agree to pay the full amount within three to five years.
Pay an application fee of $120 ($52 if you make your payments by direct debit). You might qualify to pay a reduced fee of $43 if your income is below a certain level.
If you can’t make any sort of payment now:
If the IRS agrees that you can’t pay your taxes and also pay your reasonable living expenses, it may place your account in a status called Currently Not Collectible. The IRS will not seek to collect payment from you while your account is in Currently Not Collectible status, but the IRS debt does not go away, and penalties and interest will continue to grow.
You can take a tax deduction for any money or property you donate to a qualified charitable organization (not to individuals and political organizations). Charitable nonprofit organizations have to apply to the IRS to become “qualified.”
Donation (contribution) more than $250 in cash or by check or credit card are not tax deductible unless proved by one of the following:
1. A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. Bank records may include: a canceled check, a bank or credit union statement or a credit card statement.
2. A receipt (or letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution.
3. Payroll deduction records. The payroll records must include a pay stub, Form W-2 or other document furnished by the employer that shows the date and the amount of the contribution, and a pledge card or other document prepared by or for the qualified organization that shows the name of the organization.
For a more detailed understanding of the tax rules about deductions and recordkeeping, review IRS publication 526, which talks all about charitable contributions.
Here is a list you can use to notify when you change your address. Note: the list is not all-inclusive:
- The IRS-use Form 8822-and state and local taxing authorities
- The U.S. Post Office
- Insurance agents (home, auto, and life)
- Debtors and creditors-mortgage holders, car lien holders, other lenders
- Credit card companies
- Clubs and services to which you subscribe
- The Social Security Administration
- Any organization that periodically mails you a check
- Doctors, dentists, veterinarians
- Motor vehicle departments
- Places of worship and non-profit organizations you are involved with
- The registrar of voters
- Utilities, telephone service, answering service, and trash collectors
- Your accountant, attorney, and broker
Here is a list that you can use:
- Certified copies of the death certificate (at least 10). You can purchase them through the funeral director or directly from the County Health Department.
- Copies of all insurance policies, which may be located in the deceased's safe deposit box or among his or her personal belongings.
- Social Security numbers of the deceased, the spouse, and any dependent children.
- Military discharge papers, if the deceased was a veteran. If you cannot find a copy, write to The Department of Defense, National Personnel Record Center, 1 Archives Drive, St. Louis, MO 63138.
- Marriage Certificate, if the spouse of the deceased will be applying for benefits. Copies of marriage certificates are available at the Office of the County Clerk where the marriage license was issued.
- Birth Certificates of dependent children. Copies are available at either the State or the County Public Health offices where the child was born.
- The Will, which may be with the deceased's lawyer.
- A complete list of all property including real estate, stocks, bonds, savings accounts and personal property of the deceased.
The deceased is considered covered by Social Security if he or she paid into Social Security for at least 40 quarters. Check with your local Social Security office or call 800-772-1213 to determine if the deceased was eligible. If the deceased was eligible, there are two types of possible benefits.
One-Time Death Benefit
Social Security pays a death benefit toward burial expenses. Complete the necessary form at your local Social Security office, or ask the funeral director to complete the application and apply the payment directly to the funeral bill. This payment is made only to eligible spouses or to a child entitled to survivors benefits.
Survivors Benefits for a Spouse or Children.
If the spouse is age 60 or older, he or she will be eligible for benefits. The amount of the benefit received before age 65 will be less than the benefit due at age 65 or over. Disabled widows age 50 or older are eligible for benefits. The spouse of the deceased who is under the age of 60 but who cares for dependent children under the age of 16 or cares for disabled children may be eligible for benefits. The children of the deceased who are under the age 18 or are disabled may also be entitled to benefits.
Here is a summary of the various taxes that may have to be paid on the death of a family member:
Federal Estate Tax. Amounts passing to a surviving spouse, and amounts passing to charity, are generally exempt from estate tax. Estate tax is generally only due on estates which, after reduction for what goes to spouse and charity, exceed the unified credit exemption equivalent, which in 2016 is $5,450,000.
Contact the IRS for a Form 706 if you need to file an estate tax return. A federal estate tax return must be filed and taxes paid within nine months of the date of death absent extension.
State Death Taxes. State laws vary. Many states impose estate taxes, which may apply in addition to federal estate taxes, or may apply even when federal estate taxes don't. Some states impose inheritance taxes, which are on individuals who receive inheritances, rather than on the estate.
Income Taxes. The federal and state income taxes of the deceased are due for the year of death. The taxes are due on the normal filing date of the following year unless an extension is requested. The spouse of the deceased may file a joint federal income tax return for the year of death. A spouse with a dependent child may file jointly for two additional years. The IRS's Publication 559, "Survivors, Executors, and Administrators" will be helpful.
There are several ways of owning property after marriage, but keep in mind that they may vary from state to state. Here are the most common:
- Sole Tenancy. Ownership by one individual. At death the property passes according to your will.
- Joint Tenancy, with right of survivorship. Equal ownership by two or more people. At death property passes to the joint owner's. This is an effective way of avoiding probate.
- Tenancy in Common. Joint ownership of property without the right of survivorship. At death your share of the property passes according to your will.
- Tenancy by the Entirety. Similar to Joint Tenancy, with right of survivorship. This is only available for spouses and prevents one spouse from disposing of the property without the others permission.
- Community Property. In some states, referred to as community property states, married people own property, assets, and income jointly; that is, there is equal ownership of property acquired during a marriage. Community property states are AZ, CA, ID, LA, NV, NM, TX, WA, and WI.
After divorce each individual will file their own tax return. However, there are several areas where transactions between former spouses can result in tax consequences. The most common areas are:
Child support is not deductible by the payer and is not taxable to the recipient. A payment is considered to be child support if it is specifically designated as such in a divorce or separation agreement or if it is reduced by the occurrence of a contingency related to the child (such as attaining a certain age).
Alimony is deductible by the payer and is taxable to the recipient. Alimony is a payment made pursuant to a divorce decree other than child support or designated as something in the instrument as other than alimony. Similar treated is accorded separate maintenance payments made pursuant to a separation agreement. In order to qualify, payments must also cease upon the death of the recipient and must not be front-loaded.
Property settlements are not taxable events when pursuant to divorce or separation. Transfers of assets between spouses in this event do not result in taxable income, deductions, gains or losses. The cost basis of the property carries over to the recipient spouse.
Not necessarily. Certain relatives may qualify as dependents even if they don't live with you:
- Children (including legally adopted), stepchildren, foster children, or any of their descendants
- Siblings, including half and step siblings
- Parents and their direct ancestors (excluding foster parents)
- Aunts and uncles, nieces and nephews
- Fathers-in-law, mothers-in-law, sons-in-law, daughters-in-law, brothers-in-law, and sisters-in-law
- Any of these relationships that were established by marriage and not ended by divorce or death.
To be claimed as a dependent, your relative must also:
- Have been a U.S. citizen or resident, or a resident of Canada or Mexico for at least part of the year;
- Received less than $4,050 gross income (except nontaxable Social Security benefits) in 2016;
- Received more than 50% of their support from you (this is why incarcerated relatives almost never qualify);
- Not be claimed as a dependent by another taxpayer;
- Not file a joint return with another taxpayer.
In addition, children that were under age 19 at the end of 2016 (under age 24 if they attended school full time for at least part of five calendar months of the year) must have lived with you for more than half of the year to be claimed. There are special rules for children of divorced or separated parents and for persons receiving support from two or more individuals.
If ALL of the statements below are true, you can claim a boyfriend, girlfriend, domestic partner, or friend as your dependent on your 2017 tax return:
Relationship: The person lives in your home for the entire year as a member of your household.
Income: Their income is less than $4,050 (not including Social Security and welfare) in 2017.
Support: You must provide more than half the person's support.
Marital status: Generally, a dependent can't do their taxes with a spouse (married filing jointly). They also can't be eligible to be claimed as a dependent on someone else's return.
Nationality: The person is a United States citizen; or a resident or national of the U.S., Canada or Mexico.
If you were still legally married as of December 31, you are considered unmarried (and therefore eligible for Head of Household) if all 5 of these conditions apply:
You won't be filing jointly with your spouse; and
Your spouse didn't live in your home after June (temporary absences due to illness, school, vacation, business, or military service don't count); and
Your home was your child's, stepchild's, or foster child's main home for more than half the year; and
You paid more than half the costs of keeping up your home during the tax year; and
You meet the qualifications to claim the child as your dependent, even if the other (noncustodial) parent is actually claiming the child as a dependent on their return.
You can also be "considered unmarried" for Head of Household if your spouse was a nonresident alien at any time during the tax year and you're not treating them as a resident alien.
Married filers who are "considered unmarried" cannot file with Head of Household status if their dependent is somebody other than a child, for example, a parent.
- AICPA: 2019 Form W-4 needs to be simplified on July 12, 2018 at 7:20 pm
- Tax practitioners are warned to safeguard client data on July 10, 2018 at 8:03 pm
- Form 1040 to be shorter but with more schedules on June 27, 2018 at 7:45 pm
- Supreme Court overturns Quill’s physical presence requirement on June 21, 2018 at 9:15 pm
- Disguised-sale partnership regs. withdrawn on June 18, 2018 at 7:03 pm
- AICPA advocates for IRS tax guidance priorities on June 15, 2018 at 8:20 pm
- Draft 2019 Form W-4 and instructions posted on June 8, 2018 at 6:15 pm
- Sec. 965 transition tax penalty relief issued on June 5, 2018 at 5:15 pm
- AICPA recommends IRS FAQs on virtual currency taxation on May 30, 2018 at 7:45 pm
- Standard mileage rates, depreciation amounts updated on May 25, 2018 at 7:44 pm
- IRS warns tax practitioners of new phishing scam on May 25, 2018 at 3:20 pm
- IRS to clarify rules on payments in lieu of state and local taxes on May 23, 2018 at 10:10 pm
- Charitable contribution procedures updated on May 17, 2018 at 6:00 pm
- AICPA recommends flexibility in partnership audits on May 16, 2018 at 4:20 pm
- IRS issues HSA contribution limits for 2019 on May 10, 2018 at 9:00 pm