taxation law services

Tax Deadlines Extended for Certain Mississippi Storm Victims

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As a result of the FEMA’s state of disaster declaration, certain Mississippi Storm victims will now benefit from the extension of the 2015 tax return filing and tax payment deadlines. In particular, the residents of Benton, Coahoma, Marshall, Quitman and Tippah counties (as well as other counties that may be added at a later time) will have until May 16, 2016 to file their 2015 tax returns and pay any tax due. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief.

The extended deadline also affects the estimated tax payments; the IRS will waive all penalties associated with these deadlines for Mississippi Storm victims. Individual Mississippi Storm victims will now be able to benefit from this extended deadline with respect to January 15 and April 18 deadlines for making quarterly estimated tax payments.

Business Mississippi Storm victims will also benefit from this deadline extension, including February 1 and May 2 deadlines for quarterly payroll and excise tax returns. Furthermore, the deadline extension applies also to March 1 deadlines for farmers and fisherman who are Mississippi storm victims and choose to forego making estimated tax payments.

Additionally, the IRS will waive late-deposit penalties for federal payroll and excise tax deposits normally due on or after December 23 and before January 7 if the deposits are made by January 7, 2016. Details on available relief can be found on the disaster relief page on IRS.gov.

The IRS will automatically provide filing and penalty relief to any taxpayer with an IRS address of record located in the Mississippi disaster area. Thus, Mississippi storm victims need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

Furthermore, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the Mississippi disaster area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

Finally, individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred, or the return for the prior year. See Publication 547 for details.

US Income Tax Obligations of Green Card Holders: General Overview

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There is a common misconception among Green Card Holders (a common name for US permanent residents) that their US income tax obligations are limited in nature in comparison to US citizens. In this article, I seek to dispel this erroneous myth and provide some general outlines of the US income tax obligations of Green Card Holders.

US Income Tax Obligations of Green Card Holders: Worldwide Income Reporting

I receive a lot of phone calls from Green Card holders who believe that their US income tax reporting obligations are limited only to US-source income (sourcing of income, by the way, is also a very complex subject and I often see egregious mistakes committed even by experienced accountants).

This is not correct. In fact, US permanent residents and US citizens are both considered to be “tax residents of the United States.” US tax residents are required to report their worldwide income on US tax returns and pay US income taxes on foreign-source income (and, obviously, US-source income).

Thus, if you have a Green Card and you have foreign assets (such as foreign bank and financial accounts, foreign businesses, foreign trusts, et cetera), you must report the income from such foreign assets on your US tax returns.

Be careful! You must remember that all foreign income must be reported in US dollars and according to US tax laws. Leaving aside the issue of currency conversion (which is a topic for another article), the reporting of foreign income under US tax laws may be extremely challenging because foreign tax laws may treat this income in a different manner. Let me emphasize this point – the treatment of income under foreign local tax rules may not actually be the same as the treatment of the same income under US tax rules.

For example, Assurance Vie accounts in France may be completely tax-exempt if certain conditions are met. However, the annual income from these accounts must be reported on US tax returns.

Moreover, to make matters worse, these accounts may contain PFIC (Passive Foreign Investment Company) investments which are treated in a very complex and generally unfavorable manner under US tax laws. The calculation of US tax liability in this case may be extremely complex (especially since the French banks are not required to keep the kind of information that is necessary to properly calculation PFIC tax and interest).

US Income Tax Obligations of Green Card Holders: Reporting of Foreign Bank and Financial Accounts

As US tax residents, the Green Card holders are also required to disclose their ownership of certain foreign bank and financial accounts to the IRS. Many US permanent residents are shocked to learn about these requirements and the draconian penalties associated with failure to file the required information reports.

The top two bank and financial account reporting requirements are FinCEN Form 114 (known as “FBAR” – the Report of Foreign Bank and Financial Accounts) and Form 8938 (which was born out of FATCA). Other forms, such as Form 8621, may apply.

It is beyond the scope of this article to discuss these requirements in detail. However, it is impossible to overstate their importance, especially the FBAR, due to potentially astronomical non-compliance penalties (including criminal penalties). You can find more information about these requirements at sherayzenlaw.com.

US Income Tax Obligations of Green Card Holders: Reporting of Foreign Business Ownership

Many US permanent residents are surprised to find out that they may be required to provide detailed reports about their foreign businesses – corporations, partnerships and disregarded entities. Indeed, Green Card holders may be subject to burdensome and expensive US reporting requirements on Forms 5471, 8865, 926, 8938, et cetera. These forms may require Green Card holders to provide foreign financial statements translated under US accounting standards, including US GAAP (Generally Accepted Accounting Practices).

Again, you can find more information about these requirement at sherayzenlaw.com.

US Income Tax Obligations of Green Card Holders: Reporting of Foreign Trusts

Another complex trap for Green Card Holders is reporting of an ownership or a beneficiary interest in a foreign trust (generally, on Form 3520). This complicated topic is beyond the scope of this article, but you can find more information about these requirements at sherayzenlaw.com.

US Income Tax Obligations of Green Card Holders: Other Reporting Requirements

There are numerous other US income tax obligations of Green Card Holders that may apply. Moreover, US has multiple income tax treaties with various countries which may modify your particular tax situation. In order to fully determine your US tax obligations as a Green Card holder, it is best to consult with an experienced international tax attorney.

Contact Sherayzen Law Office for Help With Your US Income Tax Obligations

Sherayzen Law Office is a specialized international tax law firm which is highly experienced in helping US Permanent Residents with their US income tax obligations and reporting requirements. One of the unique features of our firm is that our tax team provides both legal and accounting services to our clients throughout the world.

Contact Us Now To Secure Professional Help and Avoid (or Rectify) Costly Mistakes!

Tax Year 2016 Business Income Tax Deadlines

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With the commencement of the new year, it is very important for business owners and corporate executives to focus on the main 2016 business income tax deadlines. In this short review of 2016 business income tax deadlines, I will focus only on the most common income tax deadlines of a corporation that operates on a calendar-year basis (i.e. the corporate fiscal year is the same as the calendar year).

It is important to keep in mind that other 2016 business income tax deadlines (such as employment tax deadlines) may apply to your particular situation. Furthermore, one must remember that the exact deadlines will change if the corporation does not operate on the calendar-year basis, but on its own fiscal year.

Keeping in mind these two important exceptions, here are the most common 2016 business income tax deadlines:

March 15, 2016: Forms 1120 and 1120S for tax year 2015 are due. Schedules K-1 (for S-corporations) are due at that time as well. If, however, the corporation does not wish to file its tax return at that time, it can file Form 7004 by March 15, 2016 to obtain an automatic six-month extension to file 2015 Forms 1120 or 1120S. (However, the estimated 2015 tax liability must still be paid by March 15, 2016). Moreover, electing large partnerships must also furnish Schedule K-1 (Form 1065-B) at that time.

April 18, 2016: There are three major 2016 business income tax deadlines associated with April 18, 2016. (Normally, the deadline would be on April 15, but April 15 2016 falls on a Saturday and April 17 is a federal holiday; therefore, in 2016, the due date shifts to April 18). First, partnerships must file their 2015 Forms 1065 and supply Schedules K-1 to each partner. If a partnership wishes to file its Form 1065 later, it must file Form 7004 by April 18, 2016, in order to obtain an automatic five-month filing extension.

Second, Electing Large Partnerships must file their 2015 Forms 1065-B. Similarly, Form 7004 must be filed by April 18, 2016, if the Electing Large Partnership wishes to obtain an automatic five-month filing extension.

Third, corporations must make their first corporate estimated tax payments by April 18, 2016.

June 15, 2016: Second corporate estimated tax payments are due.

September 15, 2016: There are three major 2016 business income tax deadlines associated with September 15, 2016. First, all partnerships that filed Form 7004 must file their 2015 Forms 1065 by September 15, 2016.

Second, all corporations that obtained six-month extension by filing Form 7004 must file their 2015 Forms 1120 and 1120S by September 15, 2016.

Third, corporations must make their third corporate estimated tax payments by September 15, 2016.

October 17, 2016: Electing Large Corporations must file their extended 2015 Forms 1065-B.

December 15, 2016: Fourth corporate estimated tax payments are due.

Individual IRS Tax Deadlines in the Calendar Year 2016

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As the New Year festivities are drawing to an end, the attention of hundreds of millions of US taxpayers focuses more and more on its annual US tax compliance in the calendar year 2016. In this brief article, I would like to summarize some of the most important deadlines of the calendar year 2016. Obviously, other calendar year 2016 deadlines may also apply to you depending on your situation; please, consult your tax attorney for a detailed review of your US tax requirements.

January 15, 2016: Form 1040-ES for the final installment of estimated tax payments for the tax year 2015.

February 1, 2016: If you did not make your final estimated tax payment by January 15, 2016, you can still avoid the penalty by filing your 2015 US tax return by February 1, 2016.

April 18, 2016: Three important deadlines fall on this date.

First, due to the fact that April 15 falls on Saturday and the following Monday (April 17) is a federal holiday, the US taxpayers will receive a few extra days to file their 2015 individual tax returns by April 18, 2016.

Second, April 18 is also the deadline for the first installment of 2016 estimated tax payments that should be filed with Form 1040-ES.

Third, April 18 is the deadline for filing the automatic 6-month extension to file 2015 income tax return. The extension is done by filing Form 4868 with the IRS. Remember, the estimated tax liability must still be paid by April 18 (i.e. the extension applies to the return filing deadline, not to the actual income tax payment).

June 15, 2016: this is a dual deadline for US individual taxpayers who reside outside of the United States. First, June 15 is the 2015 income tax return filing deadline for such individuals. Second, if these US individual taxpayers do not yet desire to file their 2015 individual income tax returns, then they can file an automatic four-month extension by June 15, 2016. Similar to April 18 extensions, however, the estimated 2015 income tax liability must still be paid by June 15, 2016.

Furthermore, June 15, 2016, is the deadline for the second installment for 2016 estimated tax payments.

June 30, 2016: FinCEN Form 114, commonly known as FBAR (Report of Foreign Bank and Financial Accounts), is due for the calendar year 2016. This is one of the most important international tax deadlines and no extensions are allowed.

September 15, 2016: this is the deadline for the third installment for 2016 estimated tax payments.

October 17, 2016: if the filing extensions to file 2015 individual income tax returns were properly filed, these returns will be due on October 17, 2016 (normally, the deadline would be on October 15, but it falls on a Saturday in the 2016 and the deadline shifts to the following Monday).

Interest Rates for the Fourth Quarter of 2015 and First Quarter of 2016

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The IRS underpayment and overpayment interest rates are highly important in US tax law in general, and offshore voluntary disclosures in particular. Not only do these rates determine the interest on additional tax liability on the amended tax returns, but the same rates are sued to determine the PFIC interest rate on “excess distributions”. During the fourth quarter of 2015 and the first quarter of 2016, the IRS underpayment and overpayment interest 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 (IRC), the interest rates are 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.