Misconceptions About the Unlimited Marital Deduction

by NFS | Jan 11, 2012 | Archives

Misconceptions About the Unlimited Marital Deduction
http://archive.constantcontact.com/fs088/1102707121899/archive/1109072114396.html

IRS Offshore Programs Produce $4.4 Billion to Date for Nation’s Taxpayers; Offshore Voluntary Disclosure Program Reopens

by NFS | Jan 10, 2012 | Archives

WASHINGTON — The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.

The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of
international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.

“As we’ve said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”

The third offshore effort comes as Shulman also announced today the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program.

The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.

More details will be available within the next month on IRS.gov. In addition, the IRS will be updating key Frequently Asked Questions and providing additional specifics on the offshore program.

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Can I move my company funds to a Roth IRA or Roth 401(k)?

by NFS | Jan 9, 2012 | Archives

Q: I participate in a company 401(k) and have accumulated a large sum over the years. I would like to convert this money into either a Roth IRA or a Roth 401(k), neither of which is offered by my company for the employees. Is there any way (short of hardship or borrowing) to access this money?

A: If your company does not offer a Roth 401(k) plan option, you cannot
use a Roth 401(k). It is that simple. Your 401(k) plan document or summary plan description will state under what conditions you can withdraw from the plan. If you are eligible to take a withdrawal (watch out for adverse consequences), you can convert to a Roth IRA. A hardship withdrawal will not be eligible for conversion to a Roth IRA or for rollover to an IRA. You will, of course, pay income tax on the pretax dollars at the time of the conversion. It is always preferable to pay any income tax due on the conversion with outside money rather than using the IRA funds.

More Innocent Spouses Qualify for Relief Under New IRS Guidelines

by NFS | Jan 6, 2012 | Archives

• E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Notice 2012-8” in the subject line.
• Mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2012-8), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
• Hand deliver to: CC:PA:LPD:PR (Notice 2012-8), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

IRS EXTENDS TAX-FILING DEADLINE TO APRIL 17

by NFS | Jan 5, 2012 | Archives

The Internal Revenue Service opened the 2012 tax season on Wednesday by extending the tax-filing deadline until April 17.

Taxpayers will have until Tuesday, April 17 to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays affect tax deadlines in the same way that federal holidays do, giving all taxpayers two extra days to file this year. Taxpayers requesting an extension will have until Oct. 15 to file their 2011 tax returns. The IRS will begin accepting e-file and Free File returns on Jan. 17, 2012.

The IRS also announced a number of improvements to help make this tax season easier for taxpayers. This includes new navigation features and helpful information on IRS.gov and a new pilot program to allow taxpayers to use interactive video to get help with tax issues.

The IRS has updated the front page of the IRS Web site to make it easier for taxpayers to get key forms, information and file tax returns. The front page also has links to taxpayer-friendly videos on the IRS YouTube channel. More improvements are planned for IRS.gov in the months ahead.

“At the IRS, we’re working hard to make the process of filing your taxes as quick and easy as possible,” IRS Commissioner Doug Shulman said in a statement. “Providing quality service is one of our top priorities. It not only reduces the burden on taxpayers, but also helps in filing an accurate return right from the start.”