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Check out these tax credits to help offset the cost of college – presented below by the IRS from their tax tips series.
- American Opportunity Credit This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).
- Lifetime Learning Credit In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).
- Tuition and Fees Deduction This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).
- Student loan interest deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.
For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.
You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.
IRS Patrol – IRS Reminds Taxpayers that the Aug. 31 Deadline Is Fast Approaching for the Second Special Voluntary Disclosure Initiative of Offshore Accounts
WASHINGTON — U.S. taxpayers hiding income in undisclosed offshore accounts are running out of time to take advantage of a soon-to-expire opportunity to come forward and get their taxes current with the Internal Revenue Service.
The IRS today reminded taxpayers that the 2011 Offshore Voluntary Disclosure Initiative (OVDI) will expire on Aug. 31, 2011. Taxpayers who come forward voluntarily get a better deal than those who wait for the IRS to find their undisclosed accounts and income. New foreign account reporting requirements are being phased in over the next few years, making it ever tougher to hide income offshore. As importantly, the IRS continues its focus on banks and bankers worldwide that assist U.S. taxpayers with hiding assets overseas.
“The time has come to get back into compliance with the U.S. tax system, because the risks of hiding money offshore keeps going up,” said IRS Commissioner Doug Shulman. “Our goal is to get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems.”
The 2011 OVDI was announced on Feb. 8, 2011, and follows the 2009 Offshore Disclosure Program (OVDP). The 2011 initiative offers clear benefits to encourage taxpayers to come forward rather than risk detection by the IRS. Taxpayers hiding assets offshore who do not come forward will face far higher penalties along with potential criminal charges.
For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties in certain narrow circumstances.
Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. All original and amended tax returns must be filed by the deadline.
The IRS has made available the 2011 OVDI information in eight foreign languages for those taxpayers with undisclosed offshore accounts. The agency took this step to reach taxpayers whose primary language may not be English. These translations include the following languages: Chinese (Traditional and Simplified), Farsi, German, Hindi, Korean, Russian, Spanish and Vietnamese.
The IRS decision to open a second special disclosure initiative was based on the success of the first program and many more taxpayers coming forward after the program closed on Oct. 15, 2009. The first special disclosure initiative program closed with about 15,000 voluntary disclosures regarding accounts at banks in more than 60 countries. Many taxpayers came in after the first program closed. These taxpayers were deemed eligible to take advantage of the special provisions of the second initiative.
Further details about this initiative are provided in a series of questions and answers
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.
Even if you have been a bad taxpayer, California is willing to give you a break.
Voluntary Compliance Initiative 2 (VCI 2) is an opportunity for taxpayers who underreported their California income tax liabilities, through the use of abusive tax avoidance transactions (ATAT) or offshore financial arrangements (OFA), to amend their returns for 2010 and prior tax years and obtain a waiver of most penalties.
Filing period: August 1, 2011 to October 31, 2011
Applicable tax years: 2010 and prior
You are eligible to participate in VCI 2 if you (or one of your related entities):
- Filed a tax return that underreported your income or tax liability through the use of an ATAT or OFA.
You are eligible even if you:
- Are currently under FTB examination for an ATAT or OFA.
- Are currently under administrative protest or appeal for an ATAT or OFA.
- Participated in the IRS’s Offshore Voluntary Disclosure Initiative.
You must take the following steps to participate:
- File a completed Participation Agreement form with us between August 1, 2011 and October 31, 2011.
- Attach the form to your amended return to report all income from all sources, without regard to the ATAT and including all income from the OFA.
- Pay all tax and interest by October 31, 2011. See payment options for more information.
Participation in VCI 2 will allow you to avoid:
- The cost of litigation.
- Certain penalties and the associated interest.
- Criminal prosecution.
You can avoid the following penalties under VCI 2:
- Noneconomic Substance Transaction Understatement Penalty
- Accuracy Related Penalty
- Interest Based Penalty
- Fraud Penalty
If you are eligible but do not participate, you will be subject to the full range of penalties and interest, and may be subject to criminal prosecution.
The Large Corporate Understatement Penalty (LCUP) and the Amnesty Penalty cannot be waived under this initiative.
WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.
The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.
“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”
While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.
The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Mileage Rate Changes
|Purpose||Rates 1/1 through 6/30/11||Rates 7/1 through 12/31/11|
- Standard Mileage Rates (whiteheadcpas.wordpress.com)
- Representatives ask IRS for mid-year hike of standard mileage rates (dontmesswithtaxes.typepad.com)
- IRS not likely to bump up optional standard mileage deduction rates … yet (dontmesswithtaxes.typepad.com)
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)