Posts

PATH Act and New January 31 Filing Deadline | Tax Attorney News

On October 28, 2016, the IRS reminded employers and small business owners of the new January 31, 2017 deadline as a result of the PATH Act.

PATH Act’s Impact on the Filing Deadlines for Forms W-2 and 1099-MISC

In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms. Starting 2017, the new strict W-2 filing deadline of January 31, 2017, will be enforced.

The reason for this change in the deadline is The Protecting Americans from Tax Hikes (PATH) Act of 2015. According to PATH, the employers will now have one filing deadline on January 31 for both employee copies of Forms W-2 and the filing of Forms W-2 with the Social Security Administration.

Moreover the PATH Act also affects the filing deadline for certain Forms 1099-MISC, particularly those reporting amounts in Box 7, Nonemployee Compensation. These Forms 1099-MISC will now also have to be filed on January 31, 2017.

PATH Act’s Impact on Requesting Form W-2 Filing Extension

The PATH Act also has an impact on the availability of Form W-2 filing extensions. Starting 2017, only one 30-day extension to file Form W-2 will be available and this extension is no longer automatic. If an extension is necessary, a Form 8809 “Application for Extension of Time to File Information Returns” must be completed as soon as you know an extension is necessary, but no later than January 31.

PATH Act May Delay Some Refunds Until February 15

The other major impact of the PATH Act that will be felt by many Americans is the potential hold on their refunds until February 15. The PATH Act requirest the IRS to hold the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC); the IRS must hold the entire refund, not just the portion related to the EITC or ACTC.

PATH Act is Meant to Help IRS Fight Fraud and Spot Tax Return Errors

The PATH Act was enacted by Congress and signed into law in December of 2015 in order to make it easier for the IRS to detect and prevent fraud associated with tax refunds. The idea is to give the IRS more time to identify fraudulent refunds through accelerated W-2 filing deadline for employers and holding refunds (which are frequently subject to fraud) until February 15.

Of course, the additional time will allow the IRS to also spot any errors on the tax returns.

SDOP Voluntary Disclosure Period and Tax Return Filing Deadline

A lot of tax professionals and taxpayers fail to recognize the vital connection between a tax return filing deadline (like April 18, 2016) and the determination of the SDOP Voluntary Disclosure Period. In this article, I will explain what the SDOP Voluntary Disclosure Period and how it is related to tax return filing deadlines.

SDOP Background

Streamlined Domestic Offshore Procedure exists in its current format since June 18, 2014, when the IRS announced the most dramatic changes to its Offshore Voluntary Disclosure Program (OVDP) since 2009 OVDP. In essence, SDOP is an alternative to OVDP and allows taxpayers to bring their tax affairs into full compliance with US tax laws in a simpler way with a lower penalty.

SDOP Voluntary Disclosure Period

One of the most important differences between SDOP and OVDP is the Voluntary Disclosure Period – i.e. how many tax years should the voluntary disclosure cover. While OVDP voluntary disclosure period covers the past eight years for FBARs and tax returns, SDOP voluntary disclosure period covers only six past years of FBARs and only three years of past tax returns.

Connection Between SDOP Voluntary Disclosure Period and the Tax Return Filing Deadline

There is an important connection between SDOP voluntary disclosure period and the Tax Return Filing Deadline. As it mentioned above, SDOP Voluntary Disclosure Period covers “past” three years of tax returns.

What does “past year” mean in this context? It means a year for which the U.S. tax return due date (or properly applied for extended due date) has passed. The connection between SDOP voluntary disclosure period and the tax return filing deadline now becomes clear.

Let’s illustrate it further with a hypothetical example. If SDOP is scheduled to be completed on April 1, 2016, the SDOP voluntary disclosure period will cover the most recent three years of U.S. tax returns for which the Tax Return filing Deadline has passed. As of April 1, 2016, the deadline for the 2015 tax return has not yet passed; this means that the SDOP voluntary disclosure period (for tax return purposes) will cover tax years 2012-2014.

If SDOP is scheduled to be completed on April 30, 2016 and the 2015 tax return was timely filed (if not and no extension was filed, the taxpayer will likely be disqualified from participating in SDOP), then the SDOP voluntary disclosure period will shift to the tax years 2013-2015.

What if SDOP is completed on April 30, 2016, and an extension was filed for the 2015 tax return? In this case, the SDOP voluntary disclosure period will remain limited to 2012-2014 tax years.

SDOP Voluntary Disclosure Period’s Relationship to Tax Filing Deadline Offers Planning Opportunities

This relationship between SDOP voluntary disclosure period and the tax filing deadline offers plenty of planning opportunities for SDOP disclosures which are completed around the tax filing deadline because it allows the taxpayer’s attorney (who is doing SDOP on behalf of his client) exercise a certain degree of control over which years will be included in the SDOP voluntary disclosure period.

For example, if a taxpayer has a large tax liability in the tax year 2012 if the return is amended and a small tax liability in the tax year 2015, then the taxpayer’s attorney will likely choose to prepare and file timely 2015 tax return. On the other hand, there are situations where the taxpayer would like to include tax year 2012 in the SDOP voluntary disclosure period (for example, if there is a large foreign capital loss), then the taxpayer’s attorney would opt for filing an extension for the 2015 tax return.

It is important to emphasize that a decision with respect to SDOP voluntary disclosure period should always rest with an international tax attorney who is handling the SDOP disclosure. There may be complex reasons for excluding and including years within SDOP voluntary disclosure period and only an experienced tax professional should make these decisions.

Contact Sherayzen Law Office for Professional Help with Your Voluntary Disclosure

Offshore Voluntary Disclosures with respect to unreported foreign income and foreign assets can be extraordinarily complex, especially in light of draconian IRS penalties that U.S. taxpayers often face. This is why these matters should always be handled by an experienced international tax attorney.

Sherayzen Law Office is one of the most experienced international tax laws firms, especially when it comes to offshore voluntary disclosures. We have helped clients around the world to participate in every major voluntary disclosure program, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures and other related voluntary disclosure options. Not only did we help our clients to go through these complex legal procedures and prepared all of their tax forms (including those related to foreign business ownership, trust ownership and PFICs), but we also saved our clients millions in potential penalties and tax liabilities!

We can help You! Contact Us Today to Schedule Your Confidential Consultation!

Preparing Individual Tax Returns: Top Five Errors

Before filing your tax return, you should review it to make sure it is correct and complete. Here are the five most common errors on an individual tax return:

1. Incorrect or missing Social Security numbers.
2. Incorrect tax entered based on taxable income and filing status.
3. Withholding and/or estimated tax payments entered on the wrong line.
4. Math errors in addition and subtraction.
5. Computation errors in figuring out the taxable income, tax credits, standard deduction for age sixty-five or over or blind.

These are just few of the most common errors on a tax return – there are many more possible. The strong possibility of committing these errors make is imperative to review the entire tax return prior to filing it with the IRS. Remember, any errors on a tax return may result in processing delays and hold up any refund you may be entitled to.

Tax Lawyers Minneapolis | 7 Reasons To File Tax Return Even if You Do Not Have to Do It

In some case, you may want to file a tax return even though you do not have to. Here are the top seven reasons for this course of action for the tax year 2010.

1. Tax Refund. If federal income tax was withheld from your paycheck, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax, you may be entitled to a tax refund. You will only be able to get it if you file a tax return.

2. Making Work Pay Tax Credit. You may be able to take this credit if you had earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.

3. Earned Income Tax Credit (“EITC”). You may qualify for EITC if you worked, but did not earn a lot of money. Remember, EITC is a refundable tax credit; this means you could qualify for a tax refund.

4. Additional Child Tax Credit. This is also a refundable tax credit. It may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

5. American Opportunity Tax Credit. The maximum credit per student is $2,500 and the first four years of post-secondary education qualify.

6. First-Time Homebuyer Tax Credit. In order too qualify for the credit, you must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010. The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. If you bought a home as your principle residence in 2010, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.

7. Health Coverage Tax Credit. Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit. The credit is worth 80% of monthly health insurance premiums when you file your 2010 tax return.

If you have questions with respect to whether you should file your tax return, contact Sherayzen Law Office NOW and discuss your case with an experienced Minneapolis tax attorney!

Eugene Sherayzen re-appointed to the Publications Committee of the MSBA

On June 30, 2010, Eugene Sherayzen, Esq., was re-appointed for the second time to the Minnesota State Bar Association Publications Committee. The Committee is responsible for overseeing the budget and publication of the most important Minnesota legal journal, “Bench & Bar”.