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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.
IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
The District of Columbia has enacted legislation to require that, beginning with the 12-month period ending September 30, 2012, any employer required to file a District withholding return, but not required to collect and remit sales taxes, must file an annual use tax return. The annual use tax return is due October 20, 2012.
The Facts about Medicare Contribution Tax on Unearned Income and the "Home Sale" Exclusion
There has been a great deal of misunderstanding and misinformation circulating with regards to elements of the health care reform legislation passed in 2010. In particular, there has been a rash of internet stories and chain emails purporting that the legislation includes a 3.8% “real estate tax” that would apply to the sale of a principal residence. Although there have been no changes to the rules for excluding a substantial amount of the gain on the sale of a principal residence, the act does include tax on net investment income that can apply to the taxable portion of a home sale for some taxpayers.
Well, the truth of the matter is self-employed individuals have been celebrating since 2010. However, it was only recently that the IRS published Chief Counsel Advice legitimizing a business deduction of medicare premiums paid for self-employed individuals. Under CCA 201228037, all of the medicare parts are permissible as medical care insurance as described in IRC 162(I) and therefore are deductible.
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.”