New Form 1040-SR for Seniors | US Tax Lawyers & Attorneys

For the very first time, the IRS has created a new tax form called Form “1040-SR”. “SR” here standards for “seniors”. The idea is that the new form will be used by senior taxpayers. Let’s discuss Form 1040-SR in more detail.

Form 1040-SR: Reasons for Its Creation

The reason for the creation of Form 1040-SR was the Bipartisan Budget Act of 2018. The Act obligated the IRS to create a new form for seniors.

Form 1040-SR: Eligibility

Taxpayers born before Jan. 2, 1955 (i.e. those who are 65 years old or older), have the option to file Form 1040-SR whether they are working, not working or retired. Married couples filing a joint return can use the new form regardless of whether one or both spouses are age 65 or older or retired.

Form 1040-SR: Differences from Regular Form 1040

The principal difference between the regular Form 1040 and Form 1040-SR is a larger font and better readability.

Otherwise, all lines and checkboxes on the new form mirror the Form 1040, and both forms use all the same attached schedules and forms. The new form allows income reporting from other sources common to seniors such as investment income, Social Security and distributions from qualified retirement plans, annuities or similar deferred-payment arrangements. Both forms use the same “building block” approach introduced last year that can be supplemented with additional Schedules 1, 2 and 3 as needed.

Many taxpayers with basic tax situations can file Form 1040 or 1040-SR with no additional schedules. However, taxpayers with international tax exposure will most likely need additional schedules.

Seniors can use Form 1040-SR to file their 2019 federal income tax return, which is normally due on April 15, 2020 but has been extended to July 15, 2020 because of the Coronavirus. The revised 2019 Form 1040 Instructions cover both versions of Form 1040.

Seniors With Foreign Assets and Foreign Income Still Need to Comply With US International Tax Requirements

Sherayzen Law Office wishes to warn seniors that using Form 1040-SR does not relieve seniors of their obligation to comply with US international tax reporting requirements concerning their foreign assets and foreign income.

US tax residents must disclose their worldwide income on their US tax returns even if they are filing Form a 1040-SR this year. Similarly, all US international information returns must be filed with the senior version of Form 1040. Finally, foreign accounts must be disclosed not only on FBAR, but also on Schedule B of Form 1040-SR and possibly Form 8938.

If you have undisclosed foreign assets and foreign income for prior years, should contact Sherayzen Law Office for professional help with the offshore voluntary disclosure of your past noncompliance with US international tax reporting requirements. We have successfully helped hundreds of US taxpayers resolve their prior US tax noncompliance issues, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

IRS Announces More Flexible Offer-in-Compromise Terms

The IRS announced today that it is expanding its “Fresh Start” initiative to provide for more flexible terms to its Offer in Compromise (OIC) program.  In general, an OIC is an agreement between a taxpayer and the IRS, settling the taxpayer’s tax liabilities for less than the full amount due (subject to compliance with the terms of the OIC).  The IRS noted that it will alter its focus on the financial analysis used to determine which taxpayers qualify for an OIC, as well as enable certain taxpayers to resolve their tax problems in as few as two years, as compared to four or five years in previous years.

Other announced changes for certain taxpayers include: 1) Revising the calculation for the taxpayer’s future income, 2) Allowing taxpayers to repay their student loans, 3) Allowing taxpayers to pay state and local delinquent taxes, and 4) Expanding the Allowable Living Expense allowance category and amount.

OIC’s generally will not accepted if the IRS believes, after examining a taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential, that the liability can be paid in full as a lump sum or a through installment payments.  Under the new “Fresh Start” changes, however, when the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months (down from four years), and two years of future income for offers paid in six to 24 months (down from five years.)

Under the new program, all OIC’s must be fully paid within 24 months of the date of acceptance of the offer. (Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, have been revised to reflect the changes).

Business seeking to make a business OIC will also likely benefit from revisions to the program narrowing the parameters and clarifying when a dissipated asset will be included in the calculation of reasonable collection potential. Additionally, in general, calculation of reasonable collection potential will not include equity in income producing assets for on-going businesses.

Contact Sherayzen Law Office for Making a Business Offer in Compromise

Making an Offer in Compromise can be a potentially complex process for both individuals and businesses.  If you find yourself or your business in this situation, contact Sherayzen Law Office for legal help.

Underpayment and Overpayment Interest Rates for the First Quarter of 2012

On November 29, 2011, the Internal Revenue Service announced that underpayment and overpayment interest rates will remain the same for the calendar quarter beginning January 1, 2012. 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
  • 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.

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

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.

Tax Lawyers St Paul: Tax Filing Deadline Extended to April 18, 2011

On January 4, 2011, IRS extended the tax filing and tax payment deadline for individual taxpayers until April 18, 2011.  The extension is made due to the Emancipation Day, a holiday observed in the District of Columbia, which falls this year on Friday, April 15, 2011.

Taxpayers who request an extension will have until October 17, 2011, to file their 2010 tax returns.

This year, the IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.

The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties. IRS Commissioner Doug Shulman stated earlier that the IRS “will continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts.”

Sherayzen Law Office is an experienced tax law firm that has helped numerous clients in Minnesota and across the United States to bring their affairs, including proper reporting of foreign financial accounts, into full compliance with the U.S. tax laws.

Contact Sherayzen Law Office NOW to discuss your case with an experienced St Paul tax lawyer!

Tax Attorney St Paul | Who Must Wait to File 2010 Tax Return

While for most taxpayers, the 2011 tax filing season starts on schedule. Due to tax law changes enacted by Congress in December, however, some taxpayers need to wait until mid – to late February of 2011 to file their 2010 tax returns in order to give the IRS time to reprogram its processing systems. This is mostly due to the renewal of the three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 on December 17, 2010.

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. Meanwhile, the affected taxpayers should not submit their returns until IRS systems are ready to process the new tax law changes; however, the affected taxpayers can start working on their tax returns. For taxpayers who must wait before filing, the delay affects both paper filers and electronic filers.

The most common types of taxpayers who may need to wait to file their tax returns include:

1. Taxpayers Claiming Itemized Deductions on Schedule A

Due to the tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes.

2. Taxpayers Claiming the Higher Education Tuition and Fees Deduction

This is primarily concerns those taxpayers who claim their deduction on Form 8917. The deduction, which covers up to $4,000 of tuition and fees paid to a post-secondary institution, can be claimed by parents and students.

Note, however, that this delay does not concern those taxpayers who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.

3. Taxpayers Claiming the Educator Expense Deduction

This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

Sherayzen Law Office can help you deal with and take advantage of the recent tax law changes. Call or e-mail Sherayzen Law Office to discuss your case with an experienced St Paul tax attorney!