Minnesota Tax Attorneys: Corporate Deadlines on March 17, 2014

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.

Phaseout of Deduction of Interest on Education Loans: 2013

In its Revenue Procedure 2013-15, the IRS stated that, for the 2013 taxable year, the $2,500 maximum deduction for interest paid on qualified education loans under IRC § 221 begins to phase out under IRC § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $60,000 ($125,000 for joint returns). It is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more ($155,000 or more for joint returns).

IRS Provides Penalty Relief to Farmers and Fishermen

On January 18, 2013, the IRS announced that it will issue guidance in the near future to provide relief from the estimated tax penalty for farmers and fishermen unable to file and pay their 2012 taxes by the March 1 deadline due to the delayed start for filing tax returns.

The delay stems from this month’s enactment of the American Taxpayer Relief Act (ATRA). The ATRA affected several tax forms that are often filed by farmers and fishermen, including the Form 4562, Depreciation and Amortization (Including Information on Listed Property). These forms will require extensive programming and testing of IRS systems, which will delay the IRS’s ability to accept and process these forms. The IRS is providing this relief because delays in the agency’s ability to accept and process these forms may affect the ability of many farmers and fishermen to file and pay their taxes by the March 1 deadline. The relief applies to all farmers and fishermen, not only those who must file late released forms.

Normally, farmers and fishermen who choose not to make quarterly estimated tax payments are not subject to a penalty if they file their returns and pay the full amount of tax due by March 1. Under the guidance to be issued, farmers or fishermen who miss the March 1 deadline will not be subject to the penalty if they file and pay by April 15, 2013. A taxpayer qualifies as a farmer or fisherman for tax-year 2012 if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either 2011 or 2012.

Farmers and fishermen requesting this penalty waiver must attach Form 2210-F to their tax return. The form can be submitted electronically or on paper. The taxpayer’s name and identifying number should be entered at the top of the form, the waiver box (Part I, Box A) should be checked, and the rest of the form should be left blank.

Will You be Subject to the AMT in the Tax Year 2012?

The Alternative Minimum Tax (AMT) is an additional tax that certain individuals must pay on top of their regular tax liability.  When the original “minimum tax” was enacted in 1969, its purpose was to limit the ability of high-income earners from paying little or no tax by using certain tax breaks.  Tax breaks that may trigger the AMT include various itemized deductions, accelerated depreciation, and incentive stock option benefits, among others.

Unfortunately, as many taxpayers have learned in the past few decades, the AMT can hit even middle-class individuals and those who do not take many tax breaks.  This problem is further exacerbated by the effects of inflation.

What about Tax Year 2012?

Congress has generally enacted a “fix” or “patch” to prevent non-high-earners from being subject to the AMT in past years.  Unfortunately, as it currently stands, Congress has not acted yet for the tax year 2012 Since this is an election year and the government is looking for more ways to increase revenues, there is doubt as to whether the Congress will actually adopt such a “fix”.  If it does not, tens of millions of additional taxpayers may face a much higher tax bill because of the AMT.  The Congressional Budget Office (CBO) has estimated that the average tax increase for such taxpayers will be $3,900, and some may pay over $8,000 in additional taxes.

If you believe you may be one of the many people subject to the AMT for tax year 2012, you may want to consult with an experienced tax attorney in order to minimize your potential tax liability.

Contract Sherayzen Law Office for AMT Tax Planning

If you believe that you are facing the AMT in the tax year 2012, contact Sherayzen Law Office.  Our experienced tax attorneys will analyze your situation and advise you on how shield yourself from over-taxation with proper tax planning pursuant to the Internal Revenue Code provisions.

Enterprise Value Tax Proposal

As the United States government has increasingly searched for needed revenues, and some members of Congress have called for higher taxes on hedge fund managers and various other new tax proposals have been suggested.  One such proposal is the “Enterprise Value Tax”, which passed in the House of Representatives in 2010 (as part of “H.R. 4213, the “American Jobs and Closing Tax Loopholes Act”),  and was included in the “American Jobs Act” of 2011, recently submitted to Congress late last year.

While there has been various demands for Congress to address the “carried interest”  tax advantages that private-equity, venture-capital, and certain hedge fund managers enjoy, the proposed Enterprise Value Tax (EVT) takes a slightly different form.  While some have argued that such a tax is necessary for raising revenues, critics have objected that the proposal leads to onerous taxes that will impede investment and entrepreneurship.

Under the EVT (proposed IRC Section 710), investment management partnerships (such as private equity, venture capital, hedge fund firms, or certain real estate investment groups) would be taxed at ordinary income rates, rather than at capital gains rates, for the net proceeds from sales of “investment services partnership interest”.  In general, an investment services partnership interest is defined to be any interest (direct or indirect) in an investment partnership, acquired or held by a person who in the conduct of an active trade or business provides a substantial quantity certain services (such as managing, purchasing, selling, and advising, among others) related to “specified assets” held by the partnership.  Specified assets include items such as partnership interests, securities and real estate holdings.

In other words, unlike the standard capital gains tax rates applicable to almost all other sales of assets  of a business, under the EVT, sales by partnerships targeted by this proposal would be taxed at ordinary income rates.

Will the EVT, or some variation of it, eventually be part of the Internal Revenue Code?  Only time will tell.  But anyone subject to these new requirements may want be on the alert for that possibility.