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“Taxing” is a word synonymous with “onerous” and “wearing.” Bond Beebe, Accountants & Advisors, have created a user friendly blog called “It’s Taxing” to inform and educate our clients and business associates on timely topics related to tax, estates, accounting and finance. We hope our blog answers your questions and alleviates the heavy burden and anxiety related to understanding complicated tax laws and related matters.
The IRS has announced new procedures (IR-2012-65) to help some US Citizens residing overseas file their delinquent tax returns and Reports of Foreign Bank and Financial Accounts (FBARs) without being assessed large penalties or other enforcement action. In addition to tax returns and FBARs the IRS will allow submission of retroactive deferral elections of foreign retirement plans under the new procedures. All of this is scheduled to go into effect September 1, 2012.
These new procedures specifically target taxpayers who are low compliance risks which mean they owe $1,500 or less for any of the covered years. The covered years are the previous 3 years for information and tax returns and the past 6 years for FBARs.
To take advantage of these new procedures, taxpayers simply have to submit the delinquent tax returns and FBARs in the covered period with any payment of tax that is due. The IRS will then assess whether or not the submissions qualify as low risk under the new procedures.
DC has again passed legislation that further delays the taxation of non-DC municipal bond income. The new legislation ensures that income from all municipal bonds will not be taxable for DC residents in 2012. Starting in 2013, DC will subject municipal bonds from states other than DC acquired after January 1, 2013 to taxation. DC will continue to exclude Metropolitan Washington Regional Airport Authority bonds and under federal law Virgin Islands, Guam, Puerto Rico and American Samoa bond income. See the DC fact sheet for further information:
As Spring swiftly becomes Summer, and we’ve had a chance to plan for any required second quarter estimated tax payments, the next date circled on our calendar is June 30th. For those people who own and/or have signature authority over bank or financial accounts held outside of the United States, that date should resonate as well.
United States persons, including but not limited to citizens, trusts, estates, and domestic entities, are required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), by June 30th. This applies if the total value of assets held in these accounts exceeded $10,000 at any time during the 2011 calendar year.
2013 brings additional changes to HFSAs that are offered by many employers. As you may recall, not long ago these accounts were forced to discontinue reimbursements on a pre-tax basis for medication purchased “over the counter.”
Beginning in 2013, HFSAs will encounter further limitations. Starting next year, the maximum amount allowed as a salary reduction contribution to an individual employee’s HSFA will be $2,500. The IRS recently issued Notice 2012-40 which contains guidance as to how this new contribution limitation is to be applied. Your account administrator should fill you in on these details later this year.
IRS regulations require a contemporaneous written acknowledgement in a specified form from a qualified charity to support your donation of $250 or more. There is no alternative to this, and no accommodation is being given to taxpayers who don’t strictly follow the rules.
A proper and complete charitable acknowledgment receipt must be obtained at the time of donation, or no later than the earlier of the date the taxpayers return is due or filed. The receipt must be dated, describe the of property or amount of money donated, contain information that identifies the recipient, and must contain a statement of whether the recipient organization provided any goods or services in exchange for the donation. If any goods or services were provided the receipt must include a description and an estimate of the value of the provided items. If nothing was provided, which is the typical situation, the receipt should contain a statement that “no goods or services were provided in exchange for this donation.”
An estimated nine million people each year are subject to identity theft based on reports from the Federal Trade Commission. This is certainly an alarming figure and this type of fraud can take many forms. Thieves have been targeting victims to commit credit card, utilities and bank fraud. Most people are aware that checking your credit score and monitoring other online banking reports help to determine if your identity has been stolen.
Your tax returns can be subject to fraud, as well. Each year the IRS publishes the “Dirty Dozen Tax Scams” and the first scam on the list for 2012 was none other than Identity Theft. These thieves, typically, file a return under a stolen identity to claim a fraudulent refund. In a recent article in the NY Times written by Lizette Alvarez (link to the NY Times article), some light is being shed on the magnitude of this type of tax fraud. So, what is the IRS doing to help mitigate the theft?
Well, the IRS is taking this matter very seriously by going as far as creating a specific task force called the Identity Protection Specialized Unit and increasing their own internal reviews to discover these falsely filed returns. The IRS has joined forces with the Justice Department’s Tax Division and the U.S. Attorney’s office to help uncover these crimes across the entire U.S.
The Maryland Senate (on Tuesday) and the House (on Wednesday) passed a tax increase on individuals reporting income of more than $100,000 and joint filers reporting income of more than $150,000 in Maryland. The Governor is expected to sign the bill into law soon.
The increase is retroactive to January 1, 2012, and Maryland will issue new withholding tables in the coming weeks. The increase is a quarter of a percentage point (.25%) in tax on those higher-income earners. The tax increase does not affect local (county) taxes, just the state tax. Maryland local tax rates range from 1.25% to 3.2%.
Next year has the potential to bring big changes for taxpayers.
The Bush-era tax cuts are scheduled to expire on December 31, 2012 and a new Medicare tax will be established. However, there is great uncertainty as to what will actually happen because of the election in November and (in some economists' views) the potential adverse economic impact of large tax increases.