IRS E-Signature Basics

Infographic from Signix, a provider of e-signature services, about the basics of e-signatures as pertains to IRS tax returns.  Yes, this infographic is partially advertising for their services, but it’s interesting, and coming soon to your tax return process.

irsesigninfographic

“IRS” Scam Phone Calls

IRS Scam AlertI’m including the entire notice by the IRS, below.  This actually happened to me – I received a very threatening phone call from someone claiming to be from the IRS and telling my that I had been reported to local law enforcement, and a warrant for my arrest had been issued for unpaid taxes.

As an attorney in small community, I know all my local LEOs, and I immediately called one of my contacts at the local sheriff’s office to report the scam.

To share the information with the community, he contacted the local newspaper, who published this article about my experience:  Fake IRS Calls Received in County.

Fore more information, check out the IRS website:  Tax Scams

IR-2014-84, Aug. 28, 2014

WASHINGTON — The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

“These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

  1. Call you about taxes you owe without first mailing you an official notice.
  2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  4. Ask for credit or debit card numbers over the phone.
  5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

  • If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
  • If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
  • If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Remember, too, the IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.

Refunds for 2010 expiring SOON!

Uncle Sam - Money BagAnother report from the IRS notes that $760M in refunds from 2010 are unclaimed because taxpayers have failed to file a return.  The table identifies available refunds by state, with California (not unexpected) leading the pack with an estimated 86,500 taxpayers and a potential payout of $69M.  Texas is a close second with 80,600 taxpayers and a potential payout of $75M.  As expected the other high-population states also have larger expected outstanding refunds.

Indiana ranks 18th in this lineup, with an estimated 19,600 taxpayers and $15M in potential refunds.

Unclaimed 2010 Federal Refunds

The clock is ticking, people – on April 15, 2014, these available refunds evaporate as the three-year limit on taxes expires for tax year 2010.  Get them while they’re hot!

Source:  IRS.gov

 

2014 March – IRS Filing Statistics

More than half of all individual tax returns have been received as of March 14, 2014.

2014 FILING SEASON STATISTICS

Cumulative statistics comparing 3/15/13 and 3/14/14

Individual Income Tax Returns:20132014% Change
Total Receipts74,882,00075,100,0000.3
Total Processed69,153,00073,157,0005.8
E-filing Receipts:
TOTAL68,029,00068,966,0001.4
Tax Professionals40,117,00039,413,000-1.8
Self-prepared27,912,00029,553,0005.9
Web Usage:
Visits to IRS.gov218,469,657195,637,190-10.4
Total Refunds:
Number60,243,00061,645,0002.3
Amount$172.494 Billion$179.793 Billion4.2
Average refund$2,863$2,9171.9
Direct Deposit Refunds:
Number52,414,00052,770,0000.7
Amount$157.786 Billion$158.983 Billion0.8
Average refund$3,010$3,0130.08

 

Source:  IRS.gov

 

Disappearing Deductions – 2014 Edition

Disappearing Deductions

A number of tax benefits either expire or are reduced after December 31, 2013.  Don’t lose an opportunity to reduce your 2013 taxes by taking your last-chance advantage of these deductions:

Some of the Expiring Deductions Include:

•    K-12 Teacher $250 deduction for purchase of school supplies for classroom.
•    Deduction of qualified mortgage insurance premiums
•    $500 credit for qualified home energy improvements to principal residence
•    Election to deduct state and local general sales tax instead of income tax (Schedule A Deduction)
•    Qualified tuition and fees deduction
•    Qualified Charitable Donations – tax-free transfers from an IRA directly to a charity does not count toward required minimum distribution, but does not qualify as a charitable contribution
•    Off-the-shelf computer software qualification for Section 179 treatment
•    Section 179 treatment up to $250K for qualified leasehold/retail improvements
•    50% Special Depreciation allowance for qualified vehicles
•    374(d)(7) S corp built-in gains provision

Other deductions are reduced, limited, or “rolled back” to previous levels:

•    Extended benefits for qualified conservation easement contributions (50% of AGI/15 year carry-forward rolls back to 30% and 5 year carry-forward)
•    Qualified Small Business Stock (QSBS) 100% gain exclusion rolls back to 50% gain exclusion
•    Qualified leasehold improvements and retail improvements 15-year recovery period rolls back to a 39-year recovery period
•    Section 179 qualifying property limits of $500K per item and $2M total rolls back to $25K per item and $200K total
•    Sec. 1367(a)(2) S corp shareholder basis adjustment for charitable contributions provision

This is not an exclusive list!  If you have been taking other credits or deductions, please check with your tax preparer to see if you might be losing deductions for next year.

For more information, check out: the following articles:

WSJ Online: Consumer Finance: Some Tax Deductions are Disappearing
Tax Pro Today: Disappearing Tax Deductions

Renting Farm Buildings to Your Farm Corp

Question from a Client:

I am looking into building another building on my farm and looking at options. I was curious about the lease option for a building and the tax benefits associated with that method. My question is what is the lease residual that I need to maintain in order to keep it as a true lease for taxes?

Answer:

You need to be sure that the “rental business” can cash-flow itself. When there is rental income between related parties, the IRS rules are backwards – that is, losses are not fully deductible (limited to $25K per year), and profits are not passive (meaning, profits will be subject to SE tax).

The popular thinking is that you can rent a building you own to your operational entity and have passive income (not subject to self-employment tax) or be able to claim losses that are a tax benefit to you. Both assumptions are incorrect (or, more accurately, “incomplete”).

As you structure the relationship between yourself and your operational entity, be sure you can cash flow with a loss of no more than $25,000 per year.  $25,000 sounds like a lot, but remember that there is building depreciation to add to the cash flow profile, and an expensive agriculture building might generate a depreciation deduction approaching $25K per year.

Any loss you cannot deduct is carried over into the next year (and so on, for 15 years or until used up, whichever comes first), so if you run the lease agreement too “lean” you might generate losses that are difficult to use.

Finally, be sure that any rents and terms are “reasonable.” Unreasonable rental agreements between related parties are frowned upon by the IRS, and they will reverse any “benefit” you might think you are getting by over- or under-charging rent.

If you are trying to decide whether to launch an entity just to own a building that you rent to yourself, note that there are reasons for having a building in another name from your operational entity other than for a tax benefit to the rental entity:
– sheltering the building from the liability that might be incurred by the operational entity,
– allowing flexibility in use (expansion, sale, whatever) of the building that is independent of the operational entity,
– and giving some deductible expenses to the operational entity in the form of deductible lease payments.