international tax lawyers

Second Quarter of 2014 IRS Underpayment and Overpayment Interest Rates

/in , /by

On March 14, 2014, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning April 1, 2014. The rates will be:

three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

Minnesota Tax Attorneys: Corporate Deadlines on March 17, 2014

/in , /by

Minnesota tax attorneys and attorneys in other states warn their clients that there are two important IRS deadlines next Monday, March 17, 2014.

First, corporate income tax returns are due for corporations with fiscal year ending on December 31, 2013. Normally, the deadline would be on March 15, but because this date falls on Saturday, the deadline in 2014 is March 17.

If you are not ready to file corporate income tax return, you can request an extension using Form 7004 for an additional six months until September 15, 2014. Note, if you file an extension, you still must pay the corporate taxes due by March 17, 2014 (in such a case, Minnesota tax attorneys estimate the final tax liability of the corporation for 2013 and ask their corporate clients to pay the amount due with extension). As Minnesota tax attorneys advise, in most cases, EFTPS system should be used by the corporations to make such a payment.

Minnesota tax attorneys also warn about a second important deadline on March 17 ,2014. This deadline concerns the Subchapter S election for the corporations with tax years ending on December 31, 2013. The corporation can make such an election no later than two months and fifteen days after the beginning of the tax year in which the election is to take place. Again, since March 15 is Saturday, the deadline for this election is moved to March 17, 2014.

Whether your corporation may benefit from becoming an S-corporation is a question that depends on your particular facts. In such case, Minnesota tax attorneys weigh in multiple consideration, legal and tax, before giving an advice to their corporation clients.

Of course, corporations with fiscal years ending on a date other than December 31, 2013, have their own deadlines, but the rule behind calculating the deadlines in such cases are similar. Therefore, you should contact your Minnesota tax attorney to determine the exact due date of the income tax return of your corporation.

Foreign Partnership Tax Attorneys: Filing Form 8865 Schedule O (Part I)

/in , /by

Foreign Partnership Tax Attorneys should point out to their clients that Form 8865 should be used by US taxpayers to report the information required under IRC section 6038 (reporting regarding controlled foreign partnerships), section 6038B (reporting of transfers made to foreign partnerships), and/or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests).

This article will explain the basics of Part I (“Transfers Reportable Under Section 6038B”) for Schedule O– “Transfer of Property to a Foreign Partnership”, an additional form submitted with Form 8865 that must be completed by certain categories of taxpayers. This article is not intended to convey tax or legal advice. US-International partnership taxation can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.

Foreign Partnership Tax Attorneys: Who Must File Schedule O?

Schedule O is typically required to be filed by Category 3 filers under the Form 8865 instructions. In general, Category 3 filers are US persons who contributed property during their tax year to a foreign partnership in exchange for a partnership interest in the partnership (a section 721 transfer), if such persons either owned (directly or constructively) at least a 10% interest in the foreign partnership immediately after the contribution, or if value of the property contributed, when added to the value of any other property contributed to the partnership by such persons (including related persons), during the 12-month period ending on the date of the contribution is greater than $100,000.

Note, this is a general summary of Category 3 filers, and does not include all possibilities. It is very important to consult a foreign partnership tax attorney for help. Please see the instructions or contact Sherayzen Law Office for further details.

Foreign Partnership Tax Attorneys: Schedule O, Part I (“Transfers Reportable Under Section 6038B”)

Part I of Schedule O is used to report the contribution of property to a foreign partnership. In column (a), taxpayers must fill out the date of the property transfer (and if the transfer consisted of multiple transactions over a number of dates, the date the transfer was completed, would be entered). In Column (b), taxpayers list the number of items of property contributed, and in column (c), the fair market value of the property transferred, as of the date of the transfer, must be specified. Column (d) needs to be completed to detail the contributed property’s adjusted basis as of the date of transfer.

If appreciated property was contributed by a taxpayer, column (e) must be filled out, and the method (traditional, traditional with curative allocations, or remedial) used by the foreign partnership to make section 704(c) allocations with respect to each item of property must be specified (see Regulations section 1.704-3(b), (c), and (d) for more information). Also note that the instructions require that if appreciated property or intangible property is contributed, taxpayers must, “[P]rovide the information required in columns (a) through (g) separately with respect to each item of property transferred (except to the extent you are allowed to aggregate the property under Regulations sections 1.704-3(e)(2), (3), and (4)).” If gain was recognized by the taxpayer on the contribution of property, then column (f) must be completed. In Column (g), taxpayers need to state their percentage interest in the foreign partnership immediately after the property transfer (see the instructions for further information about specific types of percentage interest).

Finally, taxpayers may need to provide supplemental information, if required. Further, if property was contributed to a foreign partnership as part of a broader transaction, information about the transaction should be described.

Contact Sherayzen Law Office for Help With Foreign Partnership Compliance

If you have an ownership interest in a foreign partnership, please contact Sherayzen Law Office for help. Our experienced foreign partnership tax law firm will thoroughly review the facts and circumstances of your case, properly prepare all of the required tax compliance documents and offer further planning with respect to U.S. taxes.

New Deduction Phase-outs for 2013 Tax Returns

/in , /by

Upper-income US taxpayers should be aware that new deduction phase-out IRS rules in effect for 2013 tax returns to be filed in 2014 may increase their tax liabilities or reduce refunds. Two new important changes for high-earning individuals or couples are the new itemized deduction phase-outs and personal and dependent exemption deduction phase-outs. Because of these changes in the deduction phase-out rules, along with other new IRS rules that we have covered in previous articles, the necessity for proper tax planning will only increase in future years.

This article will briefly explain the changes in the deduction phase-out rules; it is not intended to convey tax or legal advice. Please consult a tax attorney if you have further questions. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs.

New Itemized Deduction Phase-Out Changes

Under the new US tax rules, the amount of itemized deductions that high-earning individuals or couples may take on Form 1040 is subject to a phase-out limitation. Specifically, allowable itemized deductions will be reduced by 3% of the amount of adjusted gross income (AGI) above the certain income thresholds (however, this reduction will not exceed 80% of the original total amount of a taxpayer’s itemized deductions).

The income thresholds are the following: $250,000 for single individuals, $300,000 for married filing jointly couples, $150,000 for married filing separately couples, and $275,000 for heads of households. As an example, consider a married couple filing jointly with AGI of $500,000, and $50,000 of original itemized deductions for Schedule A. Because their AGI is $200,000 over the income threshold, their allowable itemized deductions will be reduced by 3% of the excess ($200,000 multiplied by 3%, equaling $6,000). Thus, their allowable itemized deductions will be reduced to $44,000.

New Personal and Dependent Exemption Deduction Phase-Out Changes

While under the general IRS rule, the amount that taxpayers may deduct for each applicable exemption increased from 2012 (at $3,800) to 2013 (now $3,900), certain taxpayers may lose some or all of the benefit of their exemptions if their AGI exceeds certain thresholds under the new Personal Exemption Phase-out (PEP). Under this rule, the dollar amount of each personal exemption must be reduced from its original value by 2 percent for each $2,500 or part of $2,500 ($1,250 for married filing separately) that AGI is above the above specified income thresholds.
For 2013 tax year returns, the phase-out starts at the following amounts: $250,000 for single individuals, $300,000 for married filing-jointly couples and qualifying widowers, $150,000 for married filing separately returns, and $275,000 for heads of households. If taxpayer’s AGI exceeds these applicable amounts by more than $122,500 ($61,250 for married filing separately returns), their deductions for exemptions amount will be reduced to zero.

Contact Sherayzen Law Office for Help With Your Tax and Estate Planning

Combined with the new 3.8% Medicare surtax on investment income and the new 0.9% Medicare surtax on salaries and self-employment income earned by certain high-earning individuals, and the increased threshold amount for Schedule A itemized medical expense deductions, the new phase-out rules detailed in this article will dramatically impact many taxpayers. Professional tax planning may help lower your future tax liabilities.

This is why you need to contact the experienced tax law firm of Sherayzen Law Office to help you create a thorough tax plan aimed at taking advantages of the various provisions of the U.S. tax code.

Tax Year 2013 Changes to the Itemized Deduction for Medical and Dental Expenses

/in , /by

US taxpayers who itemize their deductions on Schedule A of Form 1040 should be aware that new IRS rules are in effect for 2013 tax returns to be filed in 2014. Under the new rules, the threshold for unreimbursed medical and dental expenses paid by taxpayers for themselves, spouses or dependents have increased for most individuals.

This article will briefly explain the change in the rules; it is not intended to convey tax or legal advice. Please consult a tax attorney if you have further questions. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs.

Taxpayers under the Age of 65 in 2014

For married couples, with both spouses under the age of 65, unreimbursed medical and dental expenses will now only be deductible provided that they exceed 10 percent of the couple’s adjusted gross income (AGI) from Form 1040, line 38.

Taxpayers over the Age of 65 in 2014

For taxpayers over the age of 65, or a married couple with one spouse over the age of 65, the existing 7.5 percent threshold is still in effect for tax year 2013. Note however, that the exemption will only apply to tax years beginning after December 31, 2012, and ending before January 1, 2017, if a spouse attained age 65 during or before the tax year.

Taxpayers Turning 65 in 2014

For taxpayers who turn 65 in the year 2014, (assuming they are not married to a spouse who is already 65), the 10 percent threshold should be used for calculating allowable medical and dental expenses for their 2013 tax returns. When such taxpayers turn 65 years old in 2014, the 7.5 percent threshold may then be used for filing the next year’s tax return. (Further, as noted above, beginning with the tax year 2017 return and years following, the 10 percent threshold must be used).

Taking the Medical and Dental Expenses Deduction

Generally, taxpayers may deduct medical and dental expenses paid for themselves, their spouses and their dependents. (See IRS Publication 502, “Medical and Dental Expenses” for more information). Taxpayers should keep sufficient records for each medical expense consisting of amount and date of each payment, and the name and address of each medical care provider that received payment. Also, taxpayers are advised to keep statements and/or invoices showing who received medical treatment for the claimed expense, a description of the type of medical care received, and the nature and purpose of all medical expenses.

According to the IRS, “Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness.” Such expenses generally include, “[P]ayments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.” Accordingly, expenses that are “merely beneficial to general health, such as vitamins or a vacation” (as well as expenses such as teeth whitening, health club dues, and cosmetic surgery) are not deductible.

Contact Sherayzen Law Office for Help With Your Tax and Estate Planning

As the new tax law changes are being implemented in 2013 and subsequent years, the necessity for proper tax planning will only increase with each year. Such planning should be conducted by an experienced tax attorney. This is why you are advised to contact the experienced tax law firm of Sherayzen Law Office to help you create a thorough tax plan aimed at taking advantages of the various provisions of the U.S. tax code.