Archive for the ‘Corporate Income Tax’ Category

Corporate Income Tax, Individual Income Tax

IRS Provides Tax Relief to Victims of Hurricane Isaac; Return filing and Tax Payment Deadline Extended to Jan. 11, 2013

September 5, 2012 at 4:07 pm

source: IRS.gov

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WASHINGTON –– The Internal Revenue Service is providing tax relief to individuals and businesses affected by Hurricane Isaac.

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Louisiana and Mississippi will receive tax relief, and other locations may be added in coming days based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred on or after Aug. 26. As a result, affected individuals and businesses will have until Jan. 11, 2013 to file these returns and pay any taxes due. This includes corporations and businesses that previously obtained an extension until Sept. 17, 2012, to file their 2011 returns and individuals and businesses that received a similar extension until Oct. 15. It also includes the estimated tax payment for the third quarter of 2012, normally due Sept. 17.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. In addition, the IRS is waiving failure-to-deposit penalties for federal employment and excise tax deposits normally due on or after Aug. 26 and before Sept. 10, if the deposits are made by Sept. 10, 2012. Details on available relief, including information on how to claim a disaster loss by amending a prior-year tax return, can be found on the disaster relief page on IRS.gov.

The tax relief is part of a coordinated federal response to the damage caused by the hurricane and is based on local damage assessments by FEMA. For information on disaster recovery, individuals should visit disasterassistance.gov.

So far, IRS filing and payment relief applies to the following localities:

In Louisiana: Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany parishes;
In Mississippi: Hancock, Harrison, Jackson and Pearl counties.

Corporate Income Tax, Health Care Reform

Health Insurance Tax Breaks for the Self-Employed

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March 15, 2012 at 12:32 pm

source: IRS.gov

If you’re self-employed and paying for medical, dental or long-term care insurance, the IRS wants to remind you about a special tax deduction for some insurance premiums paid for you, your spouse, and your dependents.

Starting in tax year 2011, this deduction is no longer allowed on Schedule SE (Form 1040), but you can still take it on Form 1040, line 29.

You must be one of the following to qualify:

A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., box 14, code A.
A shareholder owning more than 2 percent of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.

The insurance plan must be established under your business.

For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
For more-than-2-percent shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.

For more information see IRS Publication 535, Business Expenses, available on this website or by calling 800-TAX-FORM (800-829-3676).

Corporate Income Tax, Forms, Individual Income Tax

IRS Issues Rules for Providing K-1s Electronically

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February 20, 2012 at 3:40 pm

Source: IRS.gov

WASHINGTON — The IRS today issued guidance that now allows partnerships to provide Schedule K-1, Partner’s Share of Current Year Income, Deductions, Credits, and Other Items electronically to recipients. Certain entities, such as partnerships, are required annually to file K-1s with the IRS and provide a copy to their partners. The new rules can make it easier for partnerships to provide this necessary information to their partners, and will reduce the expense associated with printing and mailing K-1s to partners who elect to receive them electronically.

The guidance issued today is Revenue Procedure 2012-17, which provides rules describing when partnerships may provide K-1s electronically to partners. The partnership must receive the partner’s consent before providing K-1s electronically, instead of on paper. These new rules are similar to the rules governing the electronic furnishing of the 1099 and W-2s.

The revenue procedure addresses how the consent can be provided electronically — including secure e-mail and through the partnership’s internet page. The revenue procedure also addresses how partners are to be informed about changes in software, defines how the partnership is to provide instructions about accessing and printing electronic statements and the partnership’s responsibility if the K-1 is electronically undeliverable.

Generally, K-1s must be provided to recipients by the due date of Form 1065, U.S. Return of Partnership Income. For partnerships operating on a calendar year, the due date is April 17, 2012. The IRS estimates that partnerships filed almost 26 million K-1s during 2011.

Business Start-Ups and Closures, Corporate Income Tax, Individual Income Tax

Tax Tips for the Self-employed

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January 25, 2012 at 12:12 pm

Source: IRS.gov

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Corporate Income Tax, Individual Income Tax

2011 Changes Offer Tax Benefits to Almost Everyone; Special Tax Payment and Reporting Requirements Apply to Many

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January 7, 2012 at 3:54 pm

Source: http://www.irs.gov/newsroom/article/0,,id=251837,00.html

FS-2012-01, January 2012

Two Extra Days to File and Pay

Taxpayers across the nation will have until Tuesday, April 17, 2012, to file their 2011 income tax returns and pay any taxes due. Taxpayers have extra time because April 15 falls on Sunday, and Emancipation Day, a holiday in the District of Columbia, is observed the following day on Monday, April 16. By law, filing deadlines that fall on D.C. holidays are extended to the next day that is not a Saturday, Sunday, or holiday.

The April 17 deadline applies to any return or payment normally due on April 15. It also applies to the deadline for requesting a tax-filing extension and for making 2011 IRA contributions.

Tax Benefits Extended

Legislation, enacted in December 2010, extended several popular tax benefits, including the American opportunity credit for parents and students, the enhanced child tax credit and the expanded Earned Income Tax Credit. Details on these and many other deductions and credits are in Publication 17.

Limited Nonbusiness Energy Property Credit Available in 2011

This credit generally equals 10 percent (down from 30 percent the past two years) of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $500 (down from the $1,500 combined limit that applied for 2009 and 2010). In addition, the energy standards are increased for most property; windows, exterior doors and skylights, for example, must meet Energy Star Program requirements.

Because of the way the credit is figured, in many cases, it may only be helpful to people who make energy-saving home improvements for the first time in 2011. That’s because homeowners must first subtract any nonbusiness energy property credits claimed on their 2006, 2007, 2009 or 2010 returns before claiming this credit for 2011.

The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items do not. See Form 5695 and its instructions for details.

Repayment of First-Time Homebuyer Credit

Taxpayers who claimed the first-time homebuyer credit for a home bought in 2008 must generally make the second of 15 annual repayment installments on their 2011 return. Report this repayment on Form 1040 Line 59b.

Separately, a repayment requirement also applies where a taxpayer purchased a home and claimed the credit on a prior year return and then sold it or stopped using it as a main home in 2011. Use Form 5405 to report the repayment.

Though the credit has expired for most homebuyers, certain members of the armed forces and some other taxpayers who bought a home early in 2011 may still qualify for the credit on their 2011 return. See Form 5405 and its instructions for details.

New Way to Report Capital Gains and Losses

In most cases, taxpayers now use new Form 8949 to report capital gain and loss transactions. Schedule D, the form traditionally used to show these individual transactions, is now used as a summary sheet, reporting amounts for total sales price, basis and other adjustments for all individual transactions, and for figuring the tax. For securities both bought and sold in 2011, the Form 1099-B, issued by the broker, normally shows the taxpayer’s basis. The information on this form will help taxpayers correctly fill out Form 8949. See theinstructions for Form 8949 and Schedule D for details.

Reporting Roth Conversions

As in 2010, income limits no longer apply to rollovers or conversions to Roth IRAs from other retirement plans. However, unlike 2010 conversions, all of the income resulting from a 2011 conversion must be included on the taxpayer’s 2011 return. See Form 8606 and itsinstructions for details.

For 2010 conversions, only half of the resulting income must be included in income in tax-year 2011 and the other half is reported in 2012, unless the taxpayer chose to include all of it in income for 2010. For those who did not make this choice, report the taxable amount on either Line 15b or Line 16b of Form 1040 for 2011. See the instructions to Form 1040 for details.

Standard Mileage Rates Up in 2011

The standard mileage rate for business use of a car, van, pick-up or panel truck is 51 cents a mile for miles driven during the first six months of 2011 (January through June) and 55.5 cents a mile for the rest of the year, up from 50 cents for 2010.

The rate for the cost of operating a vehicle for medical reasons or as part of a deductible move is 19 cents a mile from January through June and 23.5 cents a mile after that, up from 16.5 cents per mile in 2010.

The rate for using a car to provide services to charitable organizations is set by law and remains at 14 cents a mile.

AMT Exemption Increased

For tax-year 2011, the alternative minimum tax exemption increases to the following levels:

$74,450 for a married couple filing a joint return and qualifying widows and widowers, up from $72,450 in 2010.
$37,225 for a married person filing separately, up from $36,225.
$48,450 for singles and heads of household, up from $47,450.

Health Insurance Deduction for Self-Employed People

In 2011, eligible self-employed individuals and S corporation shareholders can use the self-employed health insurance deduction to reduce their income tax liability. Eligible taxpayers still claim this deduction on Form 1040 Line 29. Premiums paid for health insurance covering the taxpayer, spouse and dependents generally qualify for this deduction. In addition, premiums paid to cover an adult child under age 27 at the end of the year, also qualify, even if the child is not the taxpayer’s dependent. However, the deduction from self-employment income for determining self-employment tax, which was available only in tax-year 2010, no longer applies.

As before, the insurance plan must be set up under the taxpayer’s business, and the taxpayer cannot be eligible to participate in an employer-sponsored health plan. For details see Publication 17 and the instructions to Form 1040 (including a worksheet).

Change for HSAs and MSAs

Starting in 2011, the additional tax on distributions from a health savings account (HSA), not used for qualified medical expenses, increases from 10 percent to 20 percent. Report on Form 8889. Similarly, the additional tax on distributions from an Archer medical savings account (MSA), not used for qualified medical expenses, rises from 15 percent to 20 percent. Report on Form 8853.

New Form for Reporting Foreign Financial Assets

Taxpayers must report specified foreign financial assets on new Form 8938, if the aggregate value of those assets exceeds certain thresholds. This new requirement is designed to improve tax compliance by taxpayers with offshore financial assets. Form 8938 is separate from and does not replace the existing requirement that U.S. persons with financial accounts located in a foreign country report those accounts to the Treasury Department using Form TD F 90-22.1. Unlike Form TD F 90-22.1, Form 8938 is attached to a taxpayer’s income tax return. Individuals who do not have an income tax return filing requirement need not file Form 8938.

The Form 8938 filing requirement applies to U.S. citizens and resident aliens, nonresident aliens who elect to file a joint income tax return and certain nonresidents who live in a U.S. territory. Form 8938 is required when the total value of specified foreign assets exceeds certain thresholds. For example, a married couple living in the U.S. and filing a joint tax return would only file Form 8938 if their total specified foreign assets exceed $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

The thresholds for taxpayers who live abroad are higher. For example, a married couple living abroad and filing a joint return would file Form 8938 if the value of specified foreign assets exceeds $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

The instructions to Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted, and what information must be provided.

Corporate Income Tax

IRS Expands and Makes Permanent Its Compliance Assurance Process (CAP) for Large Corporate Taxpayers

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April 19, 2011 at 2:03 am

Source: IRS.gov

WASHINGTON — Internal Revenue Service officials announced today that the six-year-old Compliance Assurance Process (CAP) pilot program for large corporate taxpayers is being expanded and made permanent.

“This marks another important step in our evolving relationship with corporate taxpayers,” said IRS Commissioner Doug Shulman. “Through greater cooperation and transparency, CAP taxpayers and the IRS both benefit.”

Under CAP, participating taxpayers work collaboratively with an IRS team to identify and resolve potential tax issues before the tax return is filed each year. With the major potential tax issues largely settled before filing, taxpayers are generally subject to shorter and narrower post-filing examinations.

With the CAP program growing in popularity, it is being expanded to include two additional components. A new pre-CAP program will provide interested taxpayers with a clear roadmap of the steps required for gaining entry into CAP. A new CAP maintenance program is intended for taxpayers who have been in CAP, have fewer complex issues, and have established a track record of working cooperatively and transparently with the IRS.

“CAP is a program where the tax system is at its best — when the taxpayer and the IRS are transparent and issues are resolved before a return is filed,” Shulman said.

Details of the permanent program, including the new pre-CAP program and CAP maintenance program, are included in a revision to the Internal Revenue Manual, a revised application and memorandums of understanding (MOU) that corporations are required to submit to participate in pre-CAP and CAP.

The CAP pilot began in 2005 with 17 taxpayers and in FY 2011 there are 140 taxpayers participating. Only taxpayers with assets of $10 million or more are eligible to participate.

For more information on the Compliance Assurance Process (CAP), visit the CAP page on IRS.gov.

Corporate Income Tax, Individual Income Tax, Penalties and Interest, Tax Payments

Eight Facts on Penalties

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February 10, 2011 at 1:02 am

Source: IRS.gov

When it comes to filing a tax return – or not filing one – the IRS can assess a penalty if you fail to file, fail to pay or both. Here are eight important points the IRS wants you to know about the two different penalties you may face if you do not file or pay timely.

1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and explore other payment options in the meantime. The IRS will work with you.

3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

6. If you timely filed a request for an extension of time to file and you paid at least 90 percent of your actual tax liability by the original due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.
Link: Avoiding Penalties and the Tax Gap

Corporate Income Tax, Employers, Health Care Reform

Small Business Health Care Tax Credit for Small Employers

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January 19, 2011 at 12:05 pm

Corporate Income Tax, Individual Income Tax, Tax Payments

IRS Expands Use of Electronic Payments, Discontinues Paper Coupons

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August 23, 2010 at 12:58 pm

Source: Journal of Accountancy, AICPA

August 21, 2010

The IRS has issued proposed regulations that would eliminate paper coupons for deposits of employment taxes, corporate income and estimated taxes, and many other taxes (REG-153340-09). The paper coupon payment system will be shut down at the end of this year.

With this change, taxpayers will be required to use the IRS’ Electronic Federal Tax Payment System (EFTPS) to make federal tax deposits of various withheld and estimated taxes. The preamble to the proposed regulations notes that over 97.5% of all federal tax deposits are already deposited electronically through EFTPS.

The proposed regulations do continue the exception under Temp. Treas. Reg. § 31.6302-1T(f)(4) for businesses that are depositing a minimal amount of withheld income and FICA taxes. Businesses that qualify can make their payments with their tax returns. Employers with a deposit liability of less than $2,500 for a return period can remit employment taxes with their quarterly or annual return.

The proposed regulations will require the following taxes to be deposited electronically:

1. Corporate income and corporate estimated taxes under Treas. Reg. § 1.6302-1;

2. Unrelated business income taxes of tax-exempt organizations under IRC § 511 under Treas. Reg. § 1.6302-1;

3. Private foundation excise taxes under IRC § 4940 under Treas. Reg. § 1.6302-1;

4. Taxes withheld on nonresident aliens and foreign corporations under Treas. Reg. § 1.6302-2;

5. Estimated taxes on certain trusts under Treas. Reg. § 1.6302-3;

6. FICA taxes and withheld income taxes under Treas. Reg. § 31.6302-1;

7. Railroad retirement taxes under Treas. Reg. § 31.6302-2;

8. Nonpayroll taxes, including backup withholding, under Treas. Reg. § 31.6302-4;

9. Federal Unemployment Tax Act (FUTA) taxes under Treas. Reg. § 31.6302(c)-3; and

10. Excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, under Treas. Reg. § 40.6302(c)-1.

As proposed, the new rules would be effective for payments made on or after the date the final regulations are published in the Federal Register, but no earlier than Jan. 1, 2011, and the IRS says it expects to finalize the regulations before then.

The IRS has invited comments on the proposal, which can be submitted electronically at regulations.gov (IRS REG-153340-09). A public hearing will be held at the IRS Building in Washington on Sept. 21.

AFSG, Corporate Income Tax, Retirement

Tax Savings Tips for Small Business

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August 23, 2010 at 12:40 pm

Taxpayers have many options available to save and lower their tax liability before the year-end. Often, it comes down to planning, saving, and working with your tax professional.

One way to use tax planning is to find out what your taxable income is prior to year-end and what tax bracket you are going to be in so you can plan for the tax liability to come. The current year final estimated tax payment is due January 15th of the following year. If you save money and pay the majority of your planned tax bill at that time, you will not have such a large burden at the due date of your income tax return.

Some more ways to save a significant amount in tax and to defer your tax liability is to contribute to a retirement plan by year-end or by the due date of your tax return. As a business owner, there are many more retirement product options for you such as SEP IRAs, SIMPLE, Keogh accounts, HSAs, and Solo or Regular 401(k) Plans. These type of accounts have significantly higher contribution limits (sometimes up to or over $49,000) and, depending on your adjusted gross income (AGI) and age, can lower your tax bracket and definitely decrease your current year income tax.

One final recommendation for taxpayers is to use a strategy called “bunching”. An example of bunching expenses is paying for an expense during November or December that you would normally pay in January or February. This way if you are a cash-basis taxpayer you can write-off the expense in the current year. Another way to use bunching is, for example with property taxes, wait to pay the current year tax in January of the next year and pay the next year’s tax on time. That way you “double-up” on that expense in the following year. Increasing this expense will directly lower your taxable income, thus saving you on tax in the next year.

There are many other ways to reduce tax liability and plan for taxable transactions. It is recommended that you speak with your tax professional and investment advisor to take advantage of these tax savings tips and to discuss your specific situation.

Written By Lauryn Charles, President of Accountable Financial Services Group, Inc.

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