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Foreign Filing Requirements – Forms 8938 and TD F 90-22.1 Handy Chart

May 30, 2012 7:00 am / 2 Comments on Foreign Filing Requirements – Forms 8938 and TD F 90-22.1 Handy Chart

Stacie Kitts, CPA Tax Partner Katherman Kitts & Co. LLP

May is almost over and June represents another big filing deadline for persons who have foreign bank accounts and investments. So here is your reminder. Your FBAR Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts is due at the IRS office – not mailed by – but received in their office by June 30. Don’t forget, the penalty for not filing this form is scary.

Also, if you are doing it yourself or hired a person who is not familiar with foreign reporting requirements, you might want to familiarize yourself with the chart below – prepared by our friendly IRS for your viewing pleasure.

The new Form 8938 Statement of Specified Foreign Assets is due with your tax return but not later than the extended due date should you decide for some crazy reason that you don’t want to file your tax return by the due date. Don’t blow this off either, as the penalty for not filing is just as scary as the FBAR.

Comparison of Form 8938 and FBAR Requirements

The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts). Individuals must file each form for which they meet the relevant reporting threshold.

	Form 8938, Statement of Specified Foreign Financial Assets	Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)
Who Must File?	Specified individuals, which include U.S citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold	U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold
Does the United States include U.S. territories?	No	Yes, resident aliens of U.S territories and U.S. territory entities are subject to FBAR reporting
Reporting Threshold (Total Value of Assets)	$50,000 on the last day of the tax year or $75,000 at any time during the tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad) ** I added more details below – you’re welcome	$10,000 at any time during the calendar year
When do you have an interest in an account or asset?	If any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported, included, or otherwise reflected on your income tax return	Financial interest: you are the owner of record or holder of legal title; the owner of record or holder of legal title is your agent or representative; you have a sufficient interest in the entity that is the owner of record or holder of legal title.Signature authority: you have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.See instructions for further details.
What is Reported?	Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets	Maximum value of financial accounts maintained by a financial institution physically located in a foreign country
How are maximum account or asset values determined and reported?	Fair market value in U.S. dollars in accord with the Form 8938 instructions for each account and asset reportedConvert to U.S. dollars using the end of the taxable year exchange rate and report in U.S. dollars.	Use periodic account statements to determine the maximum value in the currency of the account.Convert to U.S. dollars using the end of the calendar year exchange rate and report in U.S. dollars.
When Due?	By due date, including extension, if any, for income tax return	Received by June 30 (no extensions of time granted)
Where to File?	File with income tax return pursuant to instructions for filing the return	Mail to:Department of the Treasury Post Office Box 32621 Detroit, MI 48232-0621For express mail to: IRS Enterprise Computing Center ATTN: CTR Operations Mailroom, 4th Floor 985 Michigan Avenue Detroit, MI 48226 Certain individuals may file electronically at BSA E-Filing System
Penalties	Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply	If non-willful, up to $10,000; if willful, up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply
Types of Foreign Assets and Whether They are Reportable
Financial (deposit and custodial) accounts held at foreign financial institutions	Yes	Yes
Financial account held at a foreign branch of a U.S. financial institution	No	Yes
Financial account held at a U.S. branch of a foreign financial institution	No	No
Foreign financial account for which you have signature authority	No, unless you otherwise have an interest in the account as described above	Yes, subject to exceptions
Foreign stock or securities held in a financial account at a foreign financial institution	The account itself is subject to reporting, but the contents of the account do not have to be separately reported	The account itself is subject to reporting, but the contents of the account do not have to be separately reported
Foreign stock or securities not held in a financial account	Yes	No
Foreign partnership interests	Yes	No
Indirect interests in foreign financial assets through an entity	No	Yes, if sufficient ownership or beneficial interest (i.e., a greater than 50 percent interest) in the entity. See instructions for further detail.
Foreign mutual funds	Yes	Yes
Domestic mutual fund investing in foreign stocks and securities	No	No
Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor	Yes, as to both foreign accounts and foreign non-account investment assets	Yes, as to foreign accounts
Foreign-issued life insurance or annuity contract with a cash-value	Yes	Yes
Foreign hedge funds and foreign private equity funds	Yes	No
Foreign real estate held directly	No	No
Foreign real estate held through a foreign entity	No, but the foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate	No
Foreign currency held directly	No	No
Precious Metals held directly	No	No
Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles	No	No
‘Social Security’- type program benefits provided by a foreign government	No	No

**Unmarried taxpayer living in the United States. If you are not married and not living abroad, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

Married taxpayers filing a joint income tax return and living in the United States. If you are married and you and your spouse file a joint income tax return and do not live abroad, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

Married taxpayers filing separate income tax returns and living in the United States. If you are married, file a separate income tax return from your spouse, and do not live abroad, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

Taxpayers living abroad. If your tax home is in a foreign country and you meet one of the presence abroad tests described next, you satisfy the reporting threshold if you are not filing a joint return and the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year. If you are married and file a joint income tax return, you satisfy the reporting threshold only if the total value of all specified foreign financial assets you or your spouse owns is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

More On IRS Form 8938 vs. FBAR (forbes.com)
Is Closing Foreign Bank Accounts An Alternative To Disclosure? (forbes.com)
Last week at my other blog: Foreign account reporting; E-file fears grow (dontmesswithtaxes.typepad.com)
Relinquishing U.S. Citizenship (forbes.com)

HeLp fOr PeOpLe iN DiSaStEr SiTuAtIoNS

October 7, 2011 6:40 am / Leave a comment

Help in Disaster Situations

Reprinted from the IRS

Tax Relief for Victims of Aug. 30 Wildfires in Texas

Updated 9/29/11 to include Anderson, Caldwell, Fayette, Henderson, Hill and Rusk counties.
Updated 9/27/11 to include Harrison, Smith and Upshur counties.
Updated 9/20/11 to include Cass and Marion counties.
Updated 9/19/11 to include Gregg, Grimes, Montgomery, Walker and Waller counties.
Updated 9/15/11 to include Colorado, Houston, Leon, Travis and Williamson counties.

TX-2011-64, Sept. 12, 2011

HOUSTON — Victims of wildfires that began on Aug. 30, 2011 in parts of Texas may qualify for tax relief from the Internal Revenue Service.

The President has declared the following counties a federal disaster area: Anderson, Bastrop, Caldwell, Cass, Colorado, Fayette, Gregg, Grimes, Harrison, Henderson, Hill, Houston, Leon, Marion, Montgomery, Rusk, Smith, Travis, Upshur, Walker, Waller and Williamson. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 30 and on or before Oct. 31 have been postponed to Oct. 31. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 30 and on or before Sept. 14, 2011, as long as the deposits were made by Sept. 14, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 30 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 30 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 30 and on or before Sept. 14 provided the taxpayer made these deposits by Sept. 14.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Texas/Wildfires” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

Disaster Assistance and Emergency Relief for Individuals and Businesses

Recent IRS Disaster Relief Announcements

*************************************************

Tax Relief for Victims of Hurricane Irene in Puerto Rico

Updated 9/29/11 to add the municipalities of Adjuntas, Ciales, Guaynabo.Updated 9/13/11 to add the municipalities of Fajardo, Gurabo, Las Piedras, Naguabo, Naranjito, Río Grande, San Lorenzo, Trujillo Alto, Vega Baja, Vieques and Villalba.Updated 9/6/11 to add the municipalities of Arroyo, Aguas Buenas, Cidra, Coamo, Comerio, Humacao, Jayuya, Juncos, Orocovis, Patillas and Ponce.

SP-FL-2011-14, Aug. 30, 2011

MIAMI — Victims of Hurricane Irene that began on Aug. 21, 2011 in parts of Puerto Rico may qualify for tax relief from the Internal Revenue Service.

The President has declared the following municipalities a federal disaster area: Adjuntas, Arroyo, Aguas Buenas, Caguas, Canóvanas, Carolina, Cayey, Cidra, Ciales, Coamo, Comerío, Fajardo, Guaynabo, Gurabo, Humacao, Jayuya, Juncos, Las Piedras, Loíza, Luquillo, Naguabo, Naranjito, Orocovis, Patillas, Ponce, Río Grande, San Juan, San Lorenzo, Trujillo Alto, Vega Baja, Vieques and Villalba. Individuals who reside or have a business in these municipalities may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 21, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 21, and on or before Sept. 6, as long as the deposits are made by Sept. 6, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The municipalities listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 21 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 21 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 21 and on or before Sept. 6 provided the taxpayer makes these deposits by Sept. 6.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.
Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Puerto Rico/Hurricane Irene” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

SP-FL-2011-14SP, Alivio Tributario a Víctimas del Huracán Irene en Puerto Rico
Disaster Assistance and Emergency Relief for Individuals and Businesses
Recent IRS Disaster Relief Announcements

***************************************

Tax Relief for Victims of Tropical Storm Lee in Pennsylvania

Updated 9/27/11 to include Berks, Bucks, Chester, Delaware, Montgomery, Northampton and Philadelphia counties.PA-34-2011, Sept. 13, 2011PHILADELPHIA — Victims of Tropical Storm Lee that began on Sept. 3, 2011 in parts of Pennsylvania may qualify for tax relief from the Internal Revenue Service.

The President has declared the following counties a federal disaster area: Adams, Berks, Bradford, Bucks, Chester, Columbia, Cumberland, Dauphin, Delaware, Lancaster, Lebanon, Luzerne, Lycoming, Montgomery, Montour, Northampton, Northumberland, Perry, Philadelphia, Schuylkill, Snyder, Sullivan, Susquehanna, Union, Wyoming and York. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Sept. 3, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Sept. 3, and on or before Sept. 19, as long as the deposits are made by Sept. 19, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Frustration grows for Texas fire evacuees (cbsnews.com)
Two Die As Texas Wildfires Destroy Homes (news.sky.com)
What’s Your Natural Disaster? (casasugar.com)

Be Sure To Get Your Refund

October 5, 2011 6:16 am / Leave a comment

Refund Refund Refund

By Stacie Kitts, CPA

Unbelievably, there are people who never bother to check up on their tax refunds. Really.

If you move be sure to complete a change of address Form 8822 and check out this info from the IRS

Unclaimed Refunds

Some people earn income and may have taxes withheld from their wages but are not required to file a tax return because they have too little income. In this case, you can claim a refund for the tax that was withheld from your pay. Other workers may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit, but must file a return to claim it.

To collect this money a return must be filed with the IRS no later than three years from the due date of the return.

If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury.

There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

Current and prior year tax forms and instructions are available on the Forms and Publications page of www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Information about the Earned Income Tax Credit and how to claim it is also available on www.irs.gov.

Undeliverable Refunds

Were you expecting a refund check but didn’t get it?

Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.

You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.

You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.

Fixing Your Tax Return If You Messed It Up

October 2, 2011 6:55 am / Leave a comment

By Stacie Kitts, CPA

So you filed your tax return and now you’ve discovered that it’s all wrong or you simply forgot to include something. Not to fret, there is a way to fix it all up.

Ultimately, the IRS will “fix” it for you if you forget to add a W2 or a Form 1099. However, if you wait for the IRS to find and correct the error, and you owe additional tax, they are going to charge you interest on the taxes that are due until you pay them. If you are going to owe a large amount of tax, you should consider filing an amended return and paying what you owe as soon as possible.

The Form you use to amend your return is Form 1040X. Be sure to read the instructions carefully before you begin to complete this form.

You are required to explain the reason for the amendment and the effect on the tax return – there is a place for this on the form. Plus, additional attachments will likely be required to be filed with the Form 1040X including updated / corrected Form 1040, the originally filed Form 1040 and associated schedules.

Here are ten facts from the Internal Revenue Service about amending your federal tax return:

When to amend a return You should file an amended return if your filing status, your dependents, your total income or your deductions or credits were reported incorrectly.

When NOT to amend a return In some cases, you do not need to amend your tax return. The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return. [ya, I don’t completely agree with this – see my comments above]

Form to use Use Form 1040X, Amended U.S. Individual Income Tax Return, to amend a previously filed Form 1040, 1040A or 1040EZ. Make sure you check the box for the year of the return you are amending on the Form 1040X. Amended tax returns cannot be filed electronically.

Multiple amended returns If you are amending more than one year’s tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS processing center.

Form 1040X The Form 1040X has three columns. Column A shows original figures from the original return (if however, the return was previously amended or adjusted by IRS, use the adjusted figures). Column C shows the corrected figures. The difference between Column A and C is shown in Column B. There is an area on the back of the form to explain the specific changes and the reason for the change.

Other forms or schedules If the changes involve other schedules or forms, attach them to the Form 1040X.

Additional refund If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.

Additional tax If you owe additional tax, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges.

When to file Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.

Processing time Normal processing time for amended returns is 8 to 12 weeks.

IRS Patrol – New: Surviving Spouses to Benefit from Portability Election; Estate Tax Return Required to Make this Choice For Some, Form 706 Due as Early as Oct. 3

October 1, 2011 7:13 am / Leave a comment

Katherman Kitts & Co. LLP Protect Your Castle

By Stacie Kitts

Folks – here is info on the new portability election eliminating the need for spouses to retitled property and create trusts solely to take advantage of each spouses exclusion amount. Read on…..

IR-2011-97, Sept. 29, 2011

WASHINGTON — The Internal Revenue Service today reminded estates of married individuals dying after 2010 that they must file an estate tax return to pass along their unused estate & gift tax exclusion amount to their surviving spouse.

Available for the first time this year, the new portability election allows estates of married taxpayers to pass along the unused part of their exclusion amount, normally $5 million in 2011, to their surviving spouse. Enacted last December, this provision eliminates the need for spouses to retitle property and create trusts solely to take full advantage of each spouse’s exclusion amount.

The IRS expects that most estates of people who are married will want to make the portability election, including people who are not required to file an estate tax return for some other reason. The only way to make the election is by properly and timely filing an estate tax return on Form 706. There are no special boxes to check or statements needed to make the election.

The first estate tax returns for estates eligible to make the portability election (because the date of death is after Dec. 31, 2010) are due as early as Monday, Oct. 3, 2011. This is because the estate tax return is due nine months after the date of death. Estates unable to meet this deadline can request an automatic six-month filing extension by filing Form 4768. The IRS emphasized that estates of those who died before 2011 are not eligible to make this election.

The IRS plans to issue regulations providing further guidance on this election and welcomes public comment on a number of issues. There are three ways to submit comments:

E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Notice 2011-82” in the subject line.

Mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2011-82), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Hand deliver to: CC:PA:LPD:PR (Notice 2011-82), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline is Oct. 31, 2011. Further details are in Notice 2011-82, posted today on IRS.gov.

Tax Guidance – Election of Reduced Research Credit

September 24, 2011 6:48 am / Leave a comment

TD 9539 contains final regulations that amend the regulations concerning the election to claim the reduced research credit. The final regulations simplify how taxpayers make the election and affect taxpayers that claim the reduced research credit.These final regulations simplify the section 280C(c)(3) election to have the provisions of section 280C(c)(1) and (c)(2) not apply by requiring the election to be made on Form 6765, “Credit for Increasing Research Activities.” The form must be filed with an original return for the taxable year filed on or before the due date (including extensions) for filing the income tax return for such year. An election, once made for any taxable year, is irrevocable for that taxable year.

Do You Have A Family Member Serving In The Military? Here Are Some Special Tax Considerations

August 4, 2011 10:05 am / Leave a comment

Tax Tips For the Military Katherman Kitts & Co. LLP

Stacie Clifford Kitts CPA is a tax partner at Katherman Kitts & Co. LLP

Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit “at ease” when it comes to their taxes.

Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.
Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.
Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.
Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.
Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.
Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.
ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.
Tax Help Most military installations offer free tax filing and preparation assistance during the filing season.

Tax Information IRS Publication 3, Armed Forces’ Tax Guide, summarizes many important military-related tax topics. Publication 3 can be downloaded from www.irs.gov or may be ordered by calling 1-800-TAX-FORM (800-829-3676).
Links:

Tax Information for Members of the U.S. Armed Forces
IRS Publication 3, Armed Forces’ Tax Guide (PDF)

YouTube Videos:

Military Tax Tips: English | Spanish | ASL

Preparer Competency Examination Update – It’s Time to Put In Your 2Cents

June 7, 2011 8:51 am / Leave a comment

Katherman Kitts & Co. LLP Certified Public Accountants

If you want to tell the IRS exactly what you think the content of the competency exam should be, now is the time. Notice 2011-48 invites comments.

Notice 2011-48 invites public comments on the content and administration of the registered tax return preparer competency examination (competency examination). The Treasury Department and the Internal Revenue Service have published final regulations (TD 9527, 76 FR 32286) under 31 CFR Part 10 that require certain individuals to pass a competency examination to become a registered tax return preparer. The IRS has selected a vendor to support the IRS in developing and administering the competency examination for the Form 1040 series tax returns and accompanying schedules.

Notice 2011-48 will be published in Internal Revenue Bulletin 2011-26 on June 27, 2011.

IRS Patrol – FBAR Filing Deadline Extended for Certain Financial Professionals

May 31, 2011 1:15 pm / 1 Comment on IRS Patrol – FBAR Filing Deadline Extended for Certain Financial Professionals

Financial Crimes Enforcement Network

WASHINGTON — The Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) today announced that a small subset of individuals with only signature authority required to file the Report of Foreign Bank and Financial Accounts (FBARs) will receive a one-year extension beyond the upcoming filing date of June 30, 2011.

FinCen today issued Notice 2011-1 that extends the deadline until June 30, 2012, for the following individuals:

An employee or officer of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a “controlled person”).
An employee or officer of a controlled person of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.

All other U.S. persons required to file an FBAR this year are required to meet the June 30, 2011, filing date. Unlike with federal income tax returns, extensions of time to file are not available.

Today’s notice was issued to facilitate more accurate compliance of FBAR filings in the wake of recent finalization of regulations. The FBAR filing requirements, authorized under one of the original provisions of the Bank Secrecy Act, have been in place since 1972.

On Feb. 24, 2011, FinCEN published a final rule that amended the Bank Secrecy Act regarding FBARs.

The FBAR form is used to report a financial interest in, or signature or other authority over, one or more financial accounts in foreign countries.

U.S. persons are required to file FBARs Form TD F 90-22.1 annually if they have a financial interest in or signature authority over financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.

Report of Foreign Bank and Financial Accounts (FBAR) (bespacific.com)
Avoiding the Foreign-Account Penalty (online.wsj.com)

Happy Valentines! A Gift of Tax Filing For Your Sweetheart

January 20, 2011 3:22 pm / 1 Comment on Happy Valentines! A Gift of Tax Filing For Your Sweetheart

By Stacie Clifford Kitts, CPA

Feb. 14 is the magic filing date.

Well, I guess the IRS finally figured it out and reprogrammed their computer system to accommodate the new tax changes.. If you file Schedule A that is you itemize, or you will take the hirer education tuition and fees deduction on Form 8917, or even the educator expenses deduction, you will be able to file your tax return (hopefully) starting on Valentines Day. How romantic, a gift of tax filing for your sweetheart.

Read on for more info:

WASHINGTON — The Internal Revenue Service plans a Feb. 14 start date for processing tax returns delayed by last month’s tax law changes. The IRS reminded taxpayers affected by the delay they can begin preparing their tax returns immediately because many software providers are ready now to accept these returns.

Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction. Based on filings last year, about nine million tax returns claimed any of these deductions on returns received by the IRS before Feb. 14.

People using e-file for these delayed forms can get a head start because many major software providers have announced they will accept these impacted returns immediately. The software providers will hold onto the returns and then electronically submit them after the IRS systems open on Feb. 14 for the delayed forms.

Taxpayers using commercial software can check with their providers for specific instructions. Those who use a paid tax preparer should check with their preparer, who also may be holding returns until the updates are complete.

Most other returns, including those claiming the Earned Income Tax Credit (EITC), education tax credits, child tax credit and other popular tax breaks, can be filed as normal, immediately.

The IRS needed the extra time to update its systems to accommodate the tax law changes without disrupting other operations tied to the filing season. The delay followed the Dec. 17 enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which extended a number of expiring provisions including the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Filing Valentine from the IRS (dontmesswithtaxes.typepad.com)
Taxpayers who itemize can start filing returns on Feb. 14 (usatoday.com)
Some Tax Payers Will Need to File Their 1040 Later Rather Than Sooner This Coming Filing Season (staciesmoretaxtips.wordpress.com)
Valentine’s Day marks start of tax season for many (sfgate.com)
When can you file your 2010 tax return? (mnn.com)

Picking Apart the IRS’ Top 10 Tax Time Tips

January 10, 2011 1:51 pm / 2 Comments on Picking Apart the IRS’ Top 10 Tax Time Tips

By Stacie Clifford Kitts, CPA

The IRS has started their seasonal “Tax Tip” campaign. I do like these tips. They cover many of the general questions that taxpayers ask. In the interest of having a little fun, let’s pick apart Tax Tip 2011-01

Start gathering your records – I agree. Waiting to the last minute can cost you deductions. Lost receipts or forgotten documents are the bane of tax preparation. Give yourself time to get it together before the filing deadline gets here.
Be on the lookout for w-2 and 1099’s – well duh IRS, this kind of falls into item number 1 don’t ya think? If you are owed a 1099 or W2, these are delivered or mailed to you by January 31, 2011. So if it’s March and you don’t have your forms, better start making some calls because something is wrong.
Use free file – This option is cool, but a bit deceiving. Free file is a great product to prepare your federal income return if your income is less than $58,001. Free file is sponsored by brand name – for profit- tax software companies. So keep in mind, you still pay for the use of the software when you prepare your state tax return (only the federal part is prepared for free).
IRS e-file – Personally I like efiling. It is convenient, fast, accurate, and paperless. Besides, here’s a heads up, E-file is mandatory for some taxpayers. It’s a new age, time to get on the ball and accept modern technological advances.
Consider other filing options – Yes there are other options – you could prepare your return yourself (not recommended). And, if you qualify, there are ways to get your return filed that don’t cost money. Consider checking out your local VITA program. The IRS Volunteer Income Tax Assistance Program (VITA) and the Tax Counseling for the Elderly (TCE) Programs offer free tax help for taxpayers who qualify.
Consider direct deposit – I still get taxpayers who want to have their refund checks mailed to them. I can’t really get my head around this one. Generally, there isn’t a good reason to have a check mailed versus having your refund direct deposited.
Visit the IRS website again and again – okay, lots of helpful information here. No reason not to. I say, do it.
Remember to checkout IRS publication 17. Well, yes if you want to learn all about income tax by all means here is a publication that will help. Helpful stuff includes: a) What’s new for 2010, b) Reminder, c) When you should file a return, d) When to paper file vs. efile, c) Yada yada yada
Review! Review! Review! – Well ya check for mistakes. But people really, if you’re not a tax expert, you really aren’t going to know if you blew it. Might I suggest you have a tax professional review your return before you file.
Don’t panic! – Unless you want too of course – or waited until the last minute. When all else fails, the IRS says you can give them a call at 800-829-1040.

Tax tip: It’s time to get started; here’s a few things you can do (seattletimes.nwsource.com)
Some Tax Payers Will Need to File Their 1040 Later Rather Than Sooner This Coming Filing Season (staciesmoretaxtips.wordpress.com)
Important 2011 tax filing deadlines: Jan. 14, mid-February, April 18, Oct. 17 (dontmesswithtaxes.typepad.com)
IRS Delays Start of Filing Season for Some Taxpayers (businessweek.com)

Tag Archives: Tax return (United States)

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