IRS to Hold Webinar on May 25 to Assist International Taxpayers; June Filing Deadlines Nearing for Most Americans Abroad

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WASHINGTON — The Internal Revenue Service on Wednesday will hold a free online, web-based information session to assist U.S. overseas taxpayers in understanding their filing obligations.

The webinar will take place on May 25, 2016, from 1-3 p.m. EDT, (18:00-2100 hours UTC-0). To attend this webinar, taxpayers or tax professionals interested in learning more about these requirements, should log in using the Overseas Taxpayers webinar link. It is recommended attendees log in 10 minutes prior to the start time.

The session will be recorded and made available at a later time.

The IRS also today reminded U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2015, that they may have a U.S. tax liability and a filing requirement in 2016. The IRS encourages taxpayers with foreign assets, even relatively small amounts, to check if they have an FBAR and/or FATCA filing requirement.

Most People Abroad Need to File

A filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit , that substantially reduce or eliminate their U.S. tax liability. These tax benefits are not automatic and are only available if an eligible taxpayer files a U.S. income tax return.

The filing deadline is Wednesday, June 15, 2016, for U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, and for those serving in the military outside the U.S. and Puerto Rico. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for details.

Nonresident aliens who received income from U.S. sources in 2015 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 18, 2016, or June 15, 2016, depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.

Special Reporting for Foreign Accounts and Assets

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2015 must file with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). It is due to the Treasury Department by June 30, 2016, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).

In addition, under the Foreign Accounts Tax Compliance Act (FATCA), certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets.  Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

Expatriate Reporting

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2015 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates under Section 877A, for further details.

We are here for all your Tax and Accounting needs all year round. For further information or assistance, please call us at 310.820.1080 or Toll Free at 877.305.1040 or you may also email us at info@onts9.com

Things You Should Know about the AMT

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You may not know about the Alternative Minimum Tax because you’ve never had to pay it before. However, your income may have changed and you may have to pay it this year. The AMT is an income tax imposed at nearly a flat rate on an adjusted amount of taxable income above a certain threshold. If you have a higher income, you may be subject to the AMT.

Here are two things you should know about the AMT:

1-Know when the AMT applies. You may have to pay the AMT if you’re taxable income, plus certain adjustments, is more than your AMT exemption amount. Your filing status and income define the amount of your exemption. In most cases, if your income is below this amount, you will not owe the AMT.

2. Know exemption amounts. The 2015 AMT exemption amounts are:

• $53,600 if you are Single or Head of Household.

• $83,400 if you are Married Filing Jointly or Qualifying Widow(er).

• $41,700 if you are Married Filing Separately.

You will reduce your AMT exemption if your income is more than a certain amount.

Call us or email us with any questions in regards to your Tax and accounting needs

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What You Need to Know About the Child and Dependent Care Tax Credit

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Don’t overlook the Child and Dependent Care Tax Credit. It can reduce the taxes you pay. Here are the facts from the IRS about this important tax credit:

1. Child, Dependent or Spouse. You may be able to claim the credit if you paid someone to care for your child, dependent or spouse last year.

2. Work-Related Expense. The care must have been necessary so you could work or look for work. If you are married, the care also must have been necessary so your spouse could work or look for work. This rule does not apply if your spouse was disabled or a full-time student.

3. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be your child under age 13. A qualifying person can also be your spouse or dependent who lived with you for more than half the year and is physically or mentally incapable of self-care.

4. Earned Income. You must have earned income for the year, such as wages from a job. If you are married and file a joint tax return, your spouse must also have earned income. Special rules apply to a spouse who is a student or disabled.

5. Credit Percentage / Expense Limits. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income. Your allowable expenses are limited to $3,000 if you paid for the care of one qualifying person. The limit is $6,000 if you paid for the care of two or more.

6. Dependent Care Benefits. If your employer gives you dependent care benefits, special rules apply.

7. Qualifying Person’s SSN. You must include the Social Security number of each qualifying person to claim the credit.

8. Care Provider Information. You must include the name, address and taxpayer identification number of your care provider on your tax return.

 Contact us today at (877)305-1040 or (310)820-1080 or email us at info@onts9.com to make sure all your Tax credits are done correctly.

We are here all year round to help you with all your Tax and Accounting needs.

Tax Savings from Higher Education Costs

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Money you paid for higher education in 2015 can mean tax savings in 2016. If you, your spouse or your dependent took post-high school coursework last year, there may be a tax credit or deduction for you. Here are some facts from the IRS about key tax breaks for higher education.

The American Opportunity Credit (AOTC) is:

  • Worth up to $2,500 per eligible student.
  • Used only for the first four years at an eligible college or vocational school.
  • For students earning a degree or other recognized credential.
  • For students going to school at least half-time for at least one academic period that started during or shortly after the tax year. Claimed on your tax return using Form 8863, Education Credits.

The Lifetime Learning Credit (LLC) is:

  • Worth up to $2,000 per tax return, per year, no matter how many students qualify.
  • For all years of higher education, including classes for learning or improving job skills.
  • Claimed on your tax return using Form 8863, Education Credits.

The Tuition and Fees Deduction is:

  • Claimed as an adjustment to income.
  • Claimed whether or not you itemize.
  • Limited to tuition and certain related expenses required for enrollment or attendance at eligible schools.
  • Worth up to $4,000.

 

             Call us today at 310.820.1080 or Toll Free at 877.305.1040

            We are here for all you Tax and accounting needs all year round.

What You Need to Know about Taxable and Non-Taxable Income

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All income is taxable unless a law specifically says it isn’t.

Here are some basic rules you should know to help you file an accurate tax return:

  • Taxable income.  Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is normally taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance.  Proceeds paid to you upon the death of an insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount you get that is more than the cost of the policy is taxable.
  • Qualified scholarship.  In most cases, income from a scholarship is not taxable. This includes amounts used for certain costs, such as tuition and required books. On the other hand, amounts you use for room and board are taxable.
  • Other income tax refunds.  State or local income tax refunds may be taxable. You should receive a Form 1099-G from the agency that paid you. They may have sent the form by mail or electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some items that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

As always we hope these information are valuable for you and hope you can share and help us in our mission to help more people. Do not hesitate to contact with us for any Tax and Accounting needs.

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Advance Payments of the Premium Tax Credit

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When you enroll in coverage through the Marketplace during Open Season, which runs through Jan. 31, 2016, you can choose to have monthly advance credit payments sent directly to your insurer. If you get the benefit of advance credit payments in any amount, or if you plan to claim the premium tax credit, you must file a federal income tax return and use Form 8962.

Form 8962, Premium Tax Credit (PTC), reconciles the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit. You must file an income tax return for this purpose even if you are otherwise not required to file a return.

Here are four things to know about advance payments of the premium tax credit:

  • If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported in the ‘Payments’ section of Form 1040.
  • If the advance credit payments are more than the amount of the premium tax credit you are allowed, you will add all or a portion of the excess advance credit payments made on your behalf to your tax liability by entering it in the ‘Tax and Credits’ section of your tax return. This will result in either a smaller refund or a larger balance due.
  • If advance credit payments are made on behalf of you or an individual in your family, and you do not file a tax return, you will not be eligible for advance credit payments or cost-sharing reductions to help pay for your Marketplace health insurance coverage in future years.
  • The amount of excess advance credit payments that you are required to repay may be limited based on your household income and filing status.

If your household income is 400 percent or more of the applicable federal poverty line, you will have to repay all of the advance credit payments. Repayment limits by household income as a percentage of the federal poverty line are listed below.

Repayment Limitation

If your household income is less than 200 percent of the Federal Poverty Line, the limitation amount is $300 for single filers and $600 for all other filing statuses.

If your household income is at least 200 percent, but less than 300 percent of the Federal Poverty Line the limitation amount is $750 for single filers and $1,500 for all other filing statuses.

If your household income is at least 300 percent, but less than 400 percent of the Federal Poverty Line the limitation amount is $1,250 for single filers and $2,500 for all other filing statuses.

If your household income is more than 400 percent of the Federal Poverty Line, there is no limitation amount for any filing status.

Need help with tax planning in 2016?

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The Premium Tax Credit – The Basics

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 If you – or anyone on your federal tax return enrolled in health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit.

Here are some basic facts about the premium tax credit.

What is the premium tax credit?

The premium tax credit is a credit that helps eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace.

What is the Health Insurance Marketplace?

The Health Insurance Marketplace is the place where you will find information about private health insurance options, purchase health insurance, and get help with premiums and out-of-pocket costs, if you are eligible. Learn more about the Marketplace at HealthCare.gov.

How do I get the premium tax credit?

When you apply for coverage, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year, using information you provide about your family composition and projected household income. Based upon that estimate, you can decide if you want to have all, some, or none of your estimated credit paid in advance directly to your insurance company to be applied to your monthly premiums.

If you choose to have all or some of your credit paid in advance, you will be required to reconcile on your income tax return the amount of advance payments that the government sent on your behalf with the premium tax credit that you may claim based on your actual household income and family size. You must file an income tax return for this purpose even if you are otherwise not required to file a return.

You’ll file Form 8962, Premium Tax Credit, with your tax return to claim or reconcile the credit. Failing to file your tax return will prevent you from receiving advance credit payments in future years. Filing electronically is the easiest way to file a complete and accurate tax return.

What happens if my income or family size changes during the year?  

 The actual premium tax credit for the year will differ from the advance credit amount estimated by the Marketplace if your family size and household income as estimated at the time of enrollment are different from the family size and household income you report on your return. The more your family size or household income differs from the Marketplace estimates used to compute your advance credit payments, the more significant the difference will be between your advance credit payments and your actual credit.

Contact US today at (877)305-1040 or email us at info@onts9.com for more detailed information and let us make sure you are in great hands.

 

The Individual Shared Responsibility Provision and Your 2015 Income Tax Return

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The Affordable Care Act requires you, your spouse and your dependents to have qualifying health care coverage for each month of the year, qualify for a health coverage exemption, or make an Individual Shared Responsibility Payment when filing your federal income tax return. If you had coverage for all of 2015, you will simply check a box on your tax return to report that coverage.
However, if you don’t have qualifying health care coverage and you meet certain criteria, you might be eligible for an exemption from coverage. Most exemptions are can be claimed when you file your tax return, but some must be claimed through the Marketplace.
If you or any of your dependents are exempt from the requirement to have health coverage, you will complete IRS Form 8965, Health Coverage Exemptions and submit it with your tax return. If, however, you are not required to file a tax return, you do not need to file a return solely to report your coverage or to claim an exemption.
For any months you or anyone on your return do not have coverage or qualify for a coverage exemption, you must make a payment called the individual shared responsibility payment. If you could have afforded coverage for yourself or any of your dependents, but chose not to get it and you do not qualify for an exemption, you must make a payment. You calculate the shared responsibility payment using a worksheet included in the instructions for Form 8965 and enter your payment amount on your tax return.
Whether you are simply checking the box on your tax return to indicate that you had coverage in 2015, claiming a health coverage exemption, or making an individual shared responsibility payment, your tax professional can prepare and file your tax return electronically.
 
Make sure all your documents are in place and contact with us with any other questions you might have, we are here to help you get the best experience in Tax Preparation Services. Call us @ 310.820.1080 or email @ info@onts9.com

IRS to Increase Audits of Prior- and Subsequent-Year Tax Returns

The Internal Revenue Service needs to strengthen its correspondence audit selection process by auditing more of the prior- and subsequent-year tax returns of noncompliant income tax filers, according to a new government report.

The report, by the Treasury Inspector General for Tax Administration, noted that the IRS relies heavily on the correspondence audit process to examine individuals who are suspected of underreporting their tax liabilities.

The correspondence audits often result in significant additional tax assessments, and the IRS has found them to be more economical than other types of audits. Statistics indicate that in fiscal year 2012, the IRS conducted 1.1 million correspondence audits and recommended approximately $9.2 billion in additional taxes.

For its report, TIGTA set out to determine the effectiveness of the filing checks made during the correspondence audit process in the IRS’s Small Business/Self-Employed Division. Filing checks are used, in part, by the SB/SE Division to determine whether the same pattern of noncompliance identified on an audited tax return is present on the prior- and subsequent-year tax returns, and if those tax returns also warrant an audit. When they are properly completed, filing checks enable the IRS to better leverage its auditing resources by increasing the overall compliance coverage of every audit.

TIGTA evaluated a statistical sample of 102 out of 7,470 single-year correspondence audits in which the taxpayers involved agreed that they understated their tax liabilities by at least $4,000. Similar tax issues also existed on the prior- and/or subsequent-year tax returns for 43 of the 102 taxpayers. TIGTA found that 32 of the 43 individuals did not have those tax returns audited and, as a result, may have avoided additional assessments ranging from $2,343 to $18,874.

TIGTA pointed out in its report that one factor that may have contributed to the limited number of prior- and/or subsequent-year tax audits in the sample it examined is the emphasis the IRS places on keeping its audit inventories free of older tax years so there is enough time to complete audits and assess any resulting taxes within the three-year assessment statute of limitations. There are also some control issues involving how current-year audit results are used to decide whether to audit any prior- and subsequent-year tax returns.

TIGTA recommended that the IRS develop and implement procedures that instruct its auditors how they should use current-year correspondence audit results when deciding whether the prior- or subsequent-year tax returns also warrant an audit. To ensure that the instructions are followed,

TIGTA also recommended that the procedures should include instructions for monitoring how well current-year correspondence audit results are used in deciding to audit prior- and/or subsequent-year tax returns.

The IRS agreed with TIGTA’s recommendation and plans to develop an Internal Revenue Manual section to address the case selection and delivery process, in addition to the duties and roles of IRS analysts and examiners.

“We agree that, in certain circumstances, it makes sense to audit the prior- and/or subsequent-year return; however, we need to consider various factors when making that determination,” wrote Ruth Perez of the IRS’s Small Business/Self-Employed Division, in response to the report. “For instance, when deciding whether to select a prior-year return, both the burden on the taxpayer and the administrative responsibilities of the IRS must be considered when there is limited time remaining on the statute of limitations. In addition, to best use our limited resources, we select the next best case for examination which may not be the prior or subsequent year of the taxpayer under examination. We will create procedures for selecting prior-year returns taking these items into consideration.”

The SB/SEC Division has already developed and implemented procedures for addressing all subsequent-return filings on the agreed and default discretionary workloads that are delivered by the IRS’s Campus Reporting Compliance unit, she pointed out.

“We will ensure those procedures are properly documented and monitored,” Perez added. “We agree that there may be some measurable benefit derived from your recommendations. However, we believe the outcome measure, as calculated, does not take into account the impact of our model of working the next best case or our procedures to ensure we only work cases with sufficient time on the statute of limitations for assessment.”

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Man Arrested for Using Dead Preparer’s Identity to File Tax Returns

An Essex County, N.J., tax return preparer who allegedly filed hundreds of phony federal income tax returns using the identity of a dead return preparer whose business he bought was arrested by federal agents early Thursday morning.

 

Todd P. Halpern, 46, of Livingston, N.J., was charged with one count of tax fraud and one count of identity theft. Halpern was arrested at his home by agents of the FBI and IRS, according to U.S. Attorney Paul J. Fishman’s office.

Halpern was scheduled to make his initial appearance before U.S. Magistrate Judge Michael A. Shipp in Newark federal court.

Halpern prepared and filed 657 fraudulent federal income tax returns with the IRS in 2009 and 2010 using the Electronic Filing Identification Number of a deceased tax return preparer, according to documents filed in the case by the IRS and prosecutors. Halpern prepared and filed the tax returns using stolen identities of actual taxpayers, without their knowledge. The tax returns contained fraudulent income and deduction amounts, which allowed Halpern to receive tax refunds deposited directly into his personal bank account.

In late 2008, Halpern purchased A & V Financial, a tax preparation business located in Guttenberg, N.J., from the widow of the prior owner, V.R., who died in March 2008. Halpern received the company’s computers and all of its client records. As part of the purchase agreement, Halpern was to obtain a new EFIN number in his own name for A & V.

Instead, he continued to file tax returns using V.R.’s EFIN number, even though V.R. was dead, because Halpern’s criminal record prevented him from obtaining an EFIN.

In one case, Halpern prepared and filed a fraudulent 2008 1040 form for an individual identified only as “B.G.” Halpern used the name V.R. at A & V in the preparer portion of the tax return. The tax return contained fraudulent income and deductions, which generated a refund that was directly deposited into Halpern’s personal bank account.

B.G. later told IRS agents she does not file tax returns because she has no income. Her Social Security number appears on her son’s tax returns, because she is a dependent. B.G.’s son used Halpern to prepare his tax returns.

In another case, Halpern prepared and filed a fraudulent 1040 form for an individual identified as “J.P., generating a refund that was deposited directly into Halpern’s bank account.

J.P. later told IRS agents he had never heard of Halpern and did not authorize Halpern to prepare and file his tax returns.

IRS agents determined that $373,938 in refunds from fraudulent tax returns were wired into Halpern’s personal bank account between July 2009 and August 2009. Halpern used these funds to make purchases at Prada, Chanel, Saks Fifth Avenue, and Bloomingdales, to acquire season tickets to the New York Giants, to purchase thousands of dollars in jewelry, gold coins, and silver certificates, to make car payments on multiple luxury vehicles, including a 2007 Cadillac Escalade and a 2008 Lexus GX-470, and to buy car parts for his classic 1957 Chevy Bel Air.

The charges of tax fraud and identity theft are each punishable by a maximum potential penalty of five years in prison and a fine of $250,000.

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