Archive for the ‘IRS’ Category

S-Corp/Partnership/1042 Deadline Is Tomorrow

Wednesday, March 14th, 2018

Tomorrow is the deadline for calendar-year S-Corporations and partnerships to file their tax returns. In reality, most will file extensions. But let’s say you’re an S-Corp (or partnership) owner and you just realized there’s a deadline. What should you do?

“It’s better to extend than amend.” And the penalties for not filing an extension are, as President Trump would say, bigly.

That’s the answer–file an extension. Download Form 7004, follow the instructions, and mail the form using certified mail, return receipt requested, to the IRS. Or file your extension electronically.

Remember your state taxes. Some states have an automatic extension; some require a form to be filed. A few, such as Illinois and New York, have taxes on partnerships or S-Corporations. If you don’t know your income, make an estimate of what it is, calculate the tax, and send that with your extension.

The deadline is a postmark deadline, so as long as the extension is postmarked tomorrow you’re fine. If you are in an area hit by the recent winter storms (mainly in the northeast and mid-Atlantic), you have an extra five days (until March 20th) to file your extensions (or returns).

Tomorrow is also the deadline to file Forms 1042-S and 1042 with the IRS. These are reports of withholding to non-Americans. If you need to file those forms, make sure you get that done by tomorrow, too.

The deadline for individual tax returns, trust/estate returns, and calendar year C-Corporations is Tuesday, April 17th.

IRS Interest Rates Rise for Second Quarter

Wednesday, March 7th, 2018

The IRS today announced the interest rates for the second quarter of 2018.

The interest rates will be 5 percent for overpayments (4 percent in the case of a corporation), 2.5 percent for the portion of a corporate overpayment exceeding $10,000, 5 percent for underpayments, and 7 percent for large corporate underpayments.

The interest rate had been 4 percent for overpayments.

January 31st Tax Deadlines: 2016 Hurricane Extensions and Information Returns

Wednesday, January 24th, 2018

We’re one week away from the first tax deadline of the 2018 Tax Season along with the final tax deadline for filing 2016 tax returns.

Taxpayers on extension for filing 2016 tax returns because of Hurricanes Harvey, Irma or Maria have until next Wednesday, January 31st, to file their 2016 tax returns. Those tax returns can either be mailed, or beginning this coming Monday (January 29th) they can be electronically filed. This extension also holds for taxpayers impacted by the Northern California wildfires.

FBAR filers on extension because of Hurricanes Harvey, Irma, or Maria have until next Wednesday, January 31st, to file their 2016 FBARs. Those returns must be efiled through the BSA efiling system. This extension also holds for taxpayers impacted by the Northern California wildfires.

The deadline for mailing out most 1099s to recipients is next Wednesday, January 31st. That’s a postmark deadline, not a receipt deadline.

The deadline for filing 1099-MISC’s showing “Nonemployee Compensation” (box 7) with the IRS is next Wednesday, January 31st. Those 1099s can either be mailed (if mailed, Form 1096 must be included as a cover page) or efiled (if you’re an authorized e-filer of information returns) through the IRS FIRE system.

IRS & FTB Give Tax Relief to Wildfire and Mudslide Victims in Southern California

Monday, January 22nd, 2018

The IRS announced last week that they are giving tax relief to victims of the Southern California wildfires and mudslides. The IRS extended impacted taxpayers’ deadlines that fell (or will fall) between December 4, 2017 and April 29, 2018 to April 30, 2018. This includes the Form 1040 deadline of April 17th (it will be April 30th for impacted taxpayers). This impacts individuals and businesses who are in Los Angeles, San Diego, Santa Barbara, and Ventura Counties who were impacted by the disasters.

California’s Franchise Tax Board automatically follows federal tax disaster relief, so state tax deadlines will also be postponed on the state level for impacted taxpayers.

IRS Releases New 2018 Withholding Tables

Thursday, January 11th, 2018

The IRS announced today the release of new withholding tables reflecting the new tax law. These will be used for W-2s, and should be used no later than February 15th. The IRS is working on a new W-4 form that will reflect the new law. That will likely be out in February.

It’s 1099 Time

Tuesday, January 9th, 2018

It’s time for businesses to send out their annual information returns. These are the Form 1099s that are sent to to vendors when required. Let’s look first at who does not have to receive 1099s:

  • Corporations (except attorneys)
  • Entities you purchased tangible goods from
  • Entities you purchased less than $600 from (except royalties; the limit there is $10)
  • Where you would normally have to send a 1099 but you made payment by a credit or debit card

Otherwise, you need to send a Form 1099-MISC to the vendor. The best way to check whether or not you need to send a 1099 to a vendor is to know this before you pay a vendor’s invoice. I tell my clients that they should have each vendor complete a Form W-9 before they pay the vendor. You can then enter the vendor’s taxpayer identification number into your accounting software (along with whether or not the vendor is exempt from 1099 reporting) on an ongoing basis.

Remember that besides the 1099 sent to the vendor, a copy goes to the IRS. If you file by paper, you likely do not have to file with your state tax agency (that’s definitely the case in California). However, if you file 1099s electronically with the IRS you most likely will also need to file them electronically with your state tax agency (again, that’s definitely the case in California). It’s a case where paper filing might be easier than electronic filing.

If you wish to file paper 1099s, you must order the forms from the IRS. The forms cannot be downloaded off the Internet. Make sure you also order Form 1096 from the IRS. This is a cover page used when submitting information returns (such as 1099s) to the IRS.

Note also that sole proprietors fall under the same rules for sending out 1099s. Let’s say you’re a professional gambler, and you have a poker coach that you paid $650 to last year. You must send him or her a Form 1099-MISC. Poker players who “swap” shares or have backers also fall under the 1099 filing requirement.

Remember, the deadline for submitting 1099-MISCs for “Nonemployee Compensation” (e.g. independent contractors) to the IRS is now at the end of January: Those 1099s must be filed by Wednesday, January 31st.

Here are the deadlines for 2017 information returns:

  • Wednesday, January 31st: Deadline for mailing most 1099s to recipients (postmark deadline);
  • Wednesday, January 31st: Deadline for submitting 1099-MISCs for Nonemployee Compensation to IRS;
  • Wednesday, February 28th: Deadline for filing other paper 1099s with the IRS (postmark deadline);
  • Thursday, March 15th: Deadline for mailing and filing Form 1042-S; and
  • Tuesday, April 2nd: Deadline for filing other 1099s electronically with the IRS.

Remember, if you are going to mail 1099s to the IRS send them certified mail, return receipt requested so that you have proof of the filing.

Start Your 2018 Mileage Log Now

Thursday, January 4th, 2018

I’m going to start the new year with a few reposts of essential information. Yes, you do need to keep a mileage log:

Tuesday was the first business day of the new year for many. You may have resolved to keep good records this year (at least, we hope you have). Start with keeping an accurate, contemporaneous written mileage log (or use a smart phone app–with periodic sending of the information to yourself to prove that the log is contemporaneous).

Why, you ask? Because if you want to deduct all of your business mileage, you must do this! IRS regulations and Tax Court rulings require this. Written is defined as ink, so that means you need a paper log or must be able to prove your smart phone log is contemporaneous.

The first step is to go out to your car, and note the starting mileage for the new year. So go out to your car, and jot down that number (mine was 80,008). That should be the first entry in your mileage log. I use a small memo book for my mileage log; it conveniently fits in the center console of my car. It’s also a good idea to take a picture of the odometer;

Here’s the other things you should do:

On the cover of your log, write “2018 Mileage Log for [Your Name].”

Each time you drive for business, note the date, the starting and ending mileage, where you went, and the business purpose. Let’s say you drive to meet a new client, and meet him at his business. The entry might look like:

1/5 80315-80350 Office-Acme Products (1234 Main St, Las Vegas)-Office,
Discuss requirements for preparing tax return, year-end journal entries

It takes just a few seconds to do this after each trip, and with the standard mileage rate being $0.545/mile, the 35 miles in this hypothetical trip would be worth a deduction of $19. That deduction does add up.

Some gotchas and questions:
1. Why not use a smartphone app? Actually, you can but the current regulations require you to also keep a written mileage log. You can transfer your computer app nightly to paper, and that way you can have the best of both worlds. Unfortunately, current regulations do not guarantee that a phone app will be accepted by the IRS in an audit.

That said, if you backup (or transfer) your phone app on a regular basis, and can then print out those backups, that should work. The regular backups should have identical historical information; the information can then be printed and will function as a written mileage log. I do need to point out that the Tax Court has not specifically looked at mileage logs maintained on a phone. A written mileage log (pen and paper) will be accepted; a phone app with backups should be accepted.

2. I have a second car that I use just for my business. I don’t need a mileage log. Wrong. First, IRS regulations require documentation for your business miles; an auditor will not accept that 100% of the mileage is for business–you must prove it. Second, there will always be non-business miles. When you drive your car in for service, that’s not business miles; when you fill it up with gasoline, that’s not necessarily business miles. I’ve represented taxpayers in examinations without a written mileage log; trust me, it goes far, far easier when you have one.

3. Why do I need to record the starting miles for the year?
There are two reasons. First, the IRS requires you to note the total miles driven for the year. The easiest way is to note the mileage at the beginning of the year. Second, if you want to deduct your mileage using actual expenses (rather than the standard mileage deduction), the calculation involves taking a ratio of business miles to actual miles.

4. Can I use actual expenses? Yes. You would need to record all of your expenses for your car: gas, oil, maintenance, repairs, insurance, registration, lease fees (or interest and depreciation), etc., and the deduction is figured by taking the sum of your expenses and multiplying by the percentage use of your car for business (business mileage to total mileage driven). Note that once you start using actual expenses for your car, you generally must continue with actual expenses for the life of the car.

So start that mileage log today. And yes, your trip to the office supply store to buy a small memo pad is business miles that can be deducted.

IRS Announces Tax Filing Season Begins January 29th

Thursday, January 4th, 2018

The IRS today announced that the 2018 Tax Filing Season will begin on Monday, January 29th. This year’s deadline for individual returns is Tuesday, April 17th.

2018 Standard Mileage Rates Released

Thursday, December 14th, 2017

The IRS today announced the standard mileage rates for 2018:

  • $0.545/mile for business miles driven (up from $0.535/mile in 2015);
  • $0.18/mile for medical or moving purposes (up from $0.17/mile in 2015); and
  • $0.14/mile in service of a charitable organization (unchanged; set by statute).

You can either use this standard mileage rate or use actual expenses. Either way, it’s important to keep a mileage log!

IRS Interest Rates Unchanged for First Quarter of 2018

Wednesday, December 6th, 2017

The IRS announced that interest rates for the first quarter of 2018 remain unchanged:

The rates will be:

• four (4) percent for overpayments [three (3) percent in the case of a corporation];
• 1 and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000;
• four (4) percent for underpayments; and
• six (6) percent for large corporate underpayments.

The IRS notice is published in Revenue Ruling 2017-25.