How to Prepare Before a Disaster Strikes

by NFS | Jul 11, 2011 | Archives

A home disaster can be stressful enough without reconstructing important records and accounting for belongings. The Internal Revenue Service encourages taxpayers to safeguard their financial and tax records before disaster strikes. Listed below are four simple tips for individuals on preparing for a disaster.

Recordkeeping Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents electronically and important documents like W-2s and tax returns can be scanned into an electronic format and stored on a flash drive or CD in a safe place. Keep it with other essential documents like home-closing statements, vehicle titles, insurance records and birth, death or marriage certificates and legal paperwork. Some online services can automatically back up computer files and store them offsite. Regardless of how you save your documents (whether it is electronically or on paper) ensure they are safe from the elements, but also encrypted and/or locked up to guard against disclosure or theft.
Document Valuables The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos or video in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims in the event of a disaster.
Update Emergency Plans Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches or if a fire occurs. Review your emergency plans annually.
Count on the IRS In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been affected by a federally declared disaster, you can receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return. Clearly indicate the official name of the disaster in red at the top of the form, to expedite processing and waive the usual fee for tax return copies.

If you need any additional information, please do not hesitate to contact my office.

Summer Day Camp Expenses May Qualify for a Tax Credit

by NFS | Jul 6, 2011 | Archives

Along with the lazy, hazy days of summer come some extra expenses, including summer day camp. But, the IRS has some good news for parents: those added expenses may help you qualify for a tax credit.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

The cost of day camp may count as an expense towards the child and dependent care credit.
Expenses for overnight camps do not qualify.
Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.
The credit can be up to 35 percent of your qualifying expenses, depending on your income.
You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information, please do not hesitate to contact our office at 800-560-4NFS.

‘Temporary’ FUTA Surtax Expires after 35 Years

by NFS | Jul 5, 2011 | Archives

The Federal Unemployment Tax Act surtax is set to expire Thursday after House Republicans refused to extend the 35-year-old “temporary” unemployment surtax.

“The death of any tax on jobs—no matter how big or small—is a historic moment and one to be celebrated,” Camp said in a statement. “The fact that it has taken 35 years for this ‘temporary’ tax to expire clearly illustrates the dangers of higher taxes—once in place, they are unlikely to ever go away. We need employers paying more salaries, not paying higher taxes. And when the surtax expires, job creators will get a little and long overdue relief.”

The original purpose of the “temporary” 0.2 percent surtax was to repay federal general revenues used to provide federal unemployment benefits paid in the wake of the 1973-75 recession. While the tax raised $27 billion (adjusted for inflation) and the general revenues were fully repaid by 1987, the 0.2 percent surtax remains on the books today. Since 1987, the tax has raised an additional $46 billion (adjusted for inflation) above and beyond what was needed at the inception of the tax in 1976.

The expiration of the surtax will reduce federal unemployment taxes by $1.4 billion per year, or about $14 per employee per year. That relief slightly offsets the effect of much larger state unemployment tax hikes imposed in recent years to pay for record unemployment benefit spending. Since unemployment benefits are not directly linked to the “temporary” federal tax, its expiration will not affect current or future unemployment benefit receipts.

Without the 0.2 percent surtax, the 6.2 percent FUTA tax rate will fall to 6.0 percent, according to CCH. It was last extended in 2009 as part of the Worker, Homeownership and Business Assistance Act.

Camp’s office provided a timeline of the successive extensions of the surtax.

by NFS | Jul 4, 2011 | Archives

Happy 4th of July!!!!
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IRS Sets Tax Filing Extension at 5 Months for Partnership, Estate and Trust Returns

by NFS | Jun 28, 2011 | Archives

WASHINGTON, D.C.

The Internal Revenue Service has issued final regulations shortening the automatic extension time period for partnership, trust and estate tax returns from six to five months, meaning the returns are due Sept. 15.

The final regulations in TD 9531 put in place a temporary change that was originally promulgated in July 2008. Those temporary and proposed regulations reduced the automatic six-month extension of time to file to five months for certain pass-through entities, including most partnerships, estates, and certain trusts.

As these pass-through entities were previously allowed to obtain an automatic six-month extension of time to file certain returns under 2005 regulations, the Treasury Department and the IRS requested comments on whether, and how, a five-month extension of time to file for these pass-through entities might increase or reduce overall taxpayer burden. Approximately 70 comments were received in response to the notice of proposed rulemaking. A public hearing was held on Jan. 13, 2009. Three speakers appeared at the public hearing and commented on the notice of proposed rulemaking.

Pass-through entities used to be entitled to an automatic three-month extension of the time to file certain returns by filing one form, and could also request a discretionary additional three-month extension of time to file by filing a second form. TD 9229 provided temporary regulations that simplified the extension process by allowing most taxpayers, including pass-through entities, to obtain a six-month automatic extension of time to file by filing one single form. In the 2008 final and temporary regulations, TD 9407, the Treasury Department and the IRS finalized rules granting an automatic six-month extension of time to file for non-pass-through entities and granting certain pass-through entities a five-month automatic extension of time to file certain returns. The five-month extension included in the 2008 final and temporary regulations for certain pass-through entities responded to comments received on the 2005 temporary regulations.

Commentators expressed concern that an automatic six-month extension for pass-through entities would unduly burden individual and corporate taxpayers with ownership interests in pass-through entities because individual and corporate taxpayers might not receive information returns from pass-through entities in sufficient time to complete their income tax returns in an accurate and timely manner.

Recognizing the inherent conflict between providing sufficient time for pass-through entities to prepare returns and ensuring that the owners and beneficiaries of pass-through entities timely receive information returns needed to file their own returns, the 2008 proposed and temporary regulations specifically requested comments on whether a shorter filing extension period for pass-through entities might increase or reduce overall taxpayer burden. The IRS received approximately 70 comments.

Several commentators suggested that the Treasury Department and the IRS should consider changing the filing and extension due dates for individual and corporate tax returns rather than shortening the extension period for pass-through entities. For example, some commentators suggested moving the individual taxpayer return due date to April 30th, or allowing individuals and corporations a seven-month extension of time to file returns. Other commentators suggested moving up the filing date for partnership, trust, and estate taxpayers to March 15th, thereby allowing these entities a full six-month extension of time to file until September 15th so that individual taxpayers with ownership interests in the entities would receive information timely.

However, the IRS said these suggestions are not viable options for a regulation project because the due dates for filing tax returns are determined by statute. Section 6081 of the Tax Code provides that, except in the case of taxpayers who are abroad, the maximum extension of time to file a tax return cannot exceed six months. Accordingly, without legislative action, the Treasury Department and the IRS cannot change the due date for filing tax returns or increase the maximum extension of time to file a tax return for pass-through entities, individuals or corporations.

Although the comments with regard to shortening the automatic extension period for these pass-through entities varied as to time periods, the majority of commentators agreed that a less than six-month extension period for pass-through entities would generally reduce overall taxpayer burden by allowing taxpayers with ownership interests in pass-through entities to receive information in a more timely fashion vis-à-vis preparation of their own individual or corporate income tax returns. There was no clear consensus, however, regarding what the optimal period of extension would be for reducing taxpayer burden.

The Treasury Department and the IRS considered several extension periods for pass-through entities, including a four-month and a five-month extension period, when drafting the proposed and temporary regulations. The Treasury Department and the IRS ultimately decided upon a five-month automatic extension period for the proposed and temporary regulations. Many comments were received supporting the five-month extension period. Some commentators noted, however, that the five-month extension period would not alleviate the burden on corporate taxpayers with ownership interests in pass-through entities. These commentators expressed a concern that even a five-month extension period for these entities would, in most cases, simply align the extended due date for pass-through entities with the extended due date for corporate returns, resulting in the same delay of information to corporate owners of these entities. That delay, the commentators contend, would greatly increase the need for filing amended returns.

Commentators suggested shortening the automatic extension for these entities to less than five months. In opting for the five-month extension, the Treasury Department and the IRS recognize that some corporations with ownership interests in pass-through entities may continue to experience delayed receipt of information needed to complete their own corporate returns. The Treasury Department and the IRS, however, continue to believe that a five-month extension period reduces the overall burden on taxpayers and strikes the most reasonable balance for all affected taxpayers. The five-month extension period allows pass-through entities, including complex and tiered entities, an adequate time for preparation of the required pass-through returns and also ensures the timely and accurate dissemination of information to a large number of taxpayers who require that information for completion of their own income tax returns.

Electing large partnerships required to file Form 1065-B, “U.S. Return of Income for Electing Large Partnerships,” for any taxable year will be allowed an automatic six-month extension of time to file the return, however, because these pass-through entities are statutorily required to furnish Schedules K-1 by March 15, regardless of any extension of time to file the return.