Tuesday, June 28, 2011

IRS Sets Tax Filing Extension at 5 Months for Partnership, Estate and Trust Returns

The Internal Revenue Service has issued final regulations shortening the automatic extension time period for partnership, trust and estate tax returns from six to five months, meaning the returns are due Sept. 15.

The final regulations in TD 9531 put in place a temporary change that was originally promulgated in July 2008. Those temporary and proposed regulations reduced the automatic six-month extension of time to file to five months for certain pass-through entities, including most partnerships, estates, and certain trusts.
As these pass-through entities were previously allowed to obtain an automatic six-month extension of time to file certain returns under 2005 regulations, the Treasury Department and the IRS requested comments on whether, and how, a five-month extension of time to file for these pass-through entities might increase or reduce overall taxpayer burden. Approximately 70 comments were received in response to the notice of proposed rulemaking. A public hearing was held on Jan. 13, 2009. Three speakers appeared at the public hearing and commented on the notice of proposed rulemaking.
Pass-through entities used to be entitled to an automatic three-month extension of the time to file certain returns by filing one form, and could also request a discretionary additional three-month extension of time to file by filing a second form. TD 9229 provided temporary regulations that simplified the extension process by allowing most taxpayers, including pass-through entities, to obtain a six-month automatic extension of time to file by filing one single form. In the 2008 final and temporary regulations, TD 9407, the Treasury Department and the IRS finalized rules granting an automatic six-month extension of time to file for non-pass-through entities and granting certain pass-through entities a five-month automatic extension of time to file certain returns. The five-month extension included in the 2008 final and temporary regulations for certain pass-through entities responded to comments received on the 2005 temporary regulations.
Commentators expressed concern that an automatic six-month extension for pass-through entities would unduly burden individual and corporate taxpayers with ownership interests in pass-through entities because individual and corporate taxpayers might not receive information returns from pass-through entities in sufficient time to complete their income tax returns in an accurate and timely manner.
Recognizing the inherent conflict between providing sufficient time for pass-through entities to prepare returns and ensuring that the owners and beneficiaries of pass-through entities timely receive information returns needed to file their own returns, the 2008 proposed and temporary regulations specifically requested comments on whether a shorter filing extension period for pass-through entities might increase or reduce overall taxpayer burden. The IRS received approximately 70 comments.
Several commentators suggested that the Treasury Department and the IRS should consider changing the filing and extension due dates for individual and corporate tax returns rather than shortening the extension period for pass-through entities. For example, some commentators suggested moving the individual taxpayer return due date to April 30th, or allowing individuals and corporations a seven-month extension of time to file returns. Other commentators suggested moving up the filing date for partnership, trust, and estate taxpayers to March 15th, thereby allowing these entities a full six-month extension of time to file until September 15th so that individual taxpayers with ownership interests in the entities would receive information timely.
However, the IRS said these suggestions are not viable options for a regulation project because the due dates for filing tax returns are determined by statute. Section 6081 of the Tax Code provides that, except in the case of taxpayers who are abroad, the maximum extension of time to file a tax return cannot exceed six months. Accordingly, without legislative action, the Treasury Department and the IRS cannot change the due date for filing tax returns or increase the maximum extension of time to file a tax return for pass-through entities, individuals or corporations.
Although the comments with regard to shortening the automatic extension period for these pass-through entities varied as to time periods, the majority of commentators agreed that a less than six-month extension period for pass-through entities would generally reduce overall taxpayer burden by allowing taxpayers with ownership interests in pass-through entities to receive information in a more timely fashion vis-à-vis preparation of their own individual or corporate income tax returns. There was no clear consensus, however, regarding what the optimal period of extension would be for reducing taxpayer burden.
The Treasury Department and the IRS considered several extension periods for pass-through entities, including a four-month and a five-month extension period, when drafting the proposed and temporary regulations. The Treasury Department and the IRS ultimately decided upon a five-month automatic extension period for the proposed and temporary regulations. Many comments were received supporting the five-month extension period. Some commentators noted, however, that the five-month extension period would not alleviate the burden on corporate taxpayers with ownership interests in pass-through entities. These commentators expressed a concern that even a five-month extension period for these entities would, in most cases, simply align the extended due date for pass-through entities with the extended due date for corporate returns, resulting in the same delay of information to corporate owners of these entities. That delay, the commentators contend, would greatly increase the need for filing amended returns.
Commentators suggested shortening the automatic extension for these entities to less than five months. In opting for the five-month extension, the Treasury Department and the IRS recognize that some corporations with ownership interests in pass-through entities may continue to experience delayed receipt of information needed to complete their own corporate returns. The Treasury Department and the IRS, however, continue to believe that a five-month extension period reduces the overall burden on taxpayers and strikes the most reasonable balance for all affected taxpayers. The five-month extension period allows pass-through entities, including complex and tiered entities, an adequate time for preparation of the required pass-through returns and also ensures the timely and accurate dissemination of information to a large number of taxpayers who require that information for completion of their own income tax returns.
Electing large partnerships required to file Form 1065-B, “U.S. Return of Income for Electing Large Partnerships,” for any taxable year will be allowed an automatic six-month extension of time to file the return, however, because these pass-through entities are statutorily required to furnish Schedules K-1 by March 15, regardless of any extension of time to file the return.

Monday, June 27, 2011

Mileage Rates to Increase

Just recently the IRS issued Announcement 2011-40 releasing news that the business standard mileage rate will increase to 55.5 cents a mile for all business miles from July 1, 2011, through December 31, 2011. This is an increase of 4.5 cents a mile from the 51 cents rate for the first six months of 2011.

The medical and moving mileage rates will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute and remains at 14 cents a mile.

Tuesday, June 21, 2011

Photos from the NFS $15,000 Hole In One Giveaway @ WYBSA Golf Tourney http://ping.fm/A7OGJ
Photos from the NFS $15,000 Hole In One Giveaway @ WYBSA Golf Tourney

Monday, June 20, 2011

Women Sentenced in $1.4M Tax Refund Fraud Scheme

A pair of women in Alabama were sentenced to prison time and ordered to pay more than $1.4 million for conspiring to file false claims for tax refunds.

Betty Washington was sentenced Thursday to 21 months in prison and ordered to pay restitution of more than $1,440,632. Wendy Delbridge was sentenced to five days in jail and six months of home confinement for her role and ordered to pay restitution of $45,219. Both women pleaded guilty in January 2011.
According to court documents, between October 2009 and September 2010, Washington conspired with others to fraudulently obtain tax refunds. The conspiracy involved using stolen identities to file false income tax returns claiming refunds. At the behest of co-conspirator Alchico Grant, Washington opened up a bank account at a local bank to receive tax refunds from the scheme. Sixteen different refunds, issued in the name of 16 different individuals, were deposited into the bank account.
When the bank closed the account because of the suspicious nature of the deposits, Washington opened new bank accounts at a credit union in her name and in the name of Central Alabama Financial Services. Over the course of several months, more than 300 false refunds were deposited into these bank accounts, totaling more than $1.4 million in fraudulent refunds. To distribute the fraudulent refunds, Washington wrote checks and obtained official checks payable to various co-conspirators and associates and withdrew refund money in cash as well. She retained a portion of the refunds for herself.
Delbridge played a similar role. At co-conspirator Veronica Dale’s direction, she also set up a bank account at a local bank to receive fraudulent refunds. When the bank closed the account because it was receiving tax refunds that were not in Delbridge’s name, she opened a new bank account at a credit union. Between February 2010 and June 2010, the two bank accounts received more than $50,000 in false tax refunds, which Delbridge withdrew in cash and provided to Dale. In return, Delbridge was paid a portion of the fraudulently obtained refunds.
Along with three other co-defendants, Dale and Grant were indicted in December 2010 for their roles in the conspiracy. Grant was indicted a second time in April 2011 for again being involved in a scheme to fraudulently obtain tax refunds using stolen identities. On April 28, 2011, Grant’s pretrial release was revoked and he was ordered detained. Both Dale and Grant are currently awaiting trial.

Thursday, June 9, 2011

WYBSA Golf Tournament - NFS will be giving away $15,000 for a Hole In One Winner!!

Northeast Financial Strategies Inc (NFS) will be giving away $15,000 for a Hole In One Winner @ this year's WYBSA Golf Tournament.

On Friday, June 17th 2011, the 2nd Annual Wrentham Youth Baseball & Softball Association Charity Fundraiser Golf Tournament is taking place at the New England Country Club in Bellingham MA. NFS will award $15,000 to the person who sinks a HOLE IN ONE on the Par 3 Hole #4 during the tournament.

In addition to the $15,000 give away on Hole 4, we will be giving away prizes to the 7 closest to the pin  players and also awarding auxiliary prizes for a HOLE IN ONE on one of the other Par 3 holes. These prizes include a Flat Screen Television, Visa Gift Cards or Golf Equipment.

Lastly, every participant will receive a $50 Gift Card to 100ThingsToBuy.com.

Following the tournament, we will be available during the Dinner, Award Ceremony and Raffle where we have donated a gift certificate for FREE INCOME TAX PREPARATION.

Please join us for this great event!!

Wednesday, June 8, 2011

Developing a Family Disaster Plan - Check out NFS Financial Facts

You Can Work Till You're 80 and Still Run Short

Even if Social Security makes good on benefits promises, and even if low-income workers keep working till they’re 80, about 38% of those low-income workers could go broke when they finally do retire.  

Researchers at the Employee Benefit Research Institute (EBRI), Washington, present that warning in a new analysis of data from EBRI’s Retirement Security Projection Model database.

The latest version of the database lets users study what will happen if householders defer retirement age past age 65.

The researchers consider whether individuals have a 50% chance of being able to meet basic retirement living expenses and uninsured health care costs.

Many workers – and some policymakers – are hoping workers can overcome gaps in public retirement programs and shortfalls in private savings by working past age 65.

One problem is that employers are not necessarily clamoring to hire and retain workers ages 65 and older, experts say.

Another challenge is that even workers who are able to work past age 65 may live long past age 65.

Workers in the top quartile of income have about a 76% shot at having adequate retirement income if they retire at age 65, and that percentage rises to 81% for top-quartile workers who keep working to age 69, EBRI researchers say.

Only 30% of workers in the lowest quartile have a 50% overall chance of having enough retirement resources. That percentage rises to 35% for workers who retire at 69, to 62% for workers who retire at age 80, and to 90% for workers who retire at age 84.

“What really makes a positive difference, we found, is if people who continue to work after 65 also continue to contribute to a defined contribution retirement plan,” Jack VanDerhei, a report co-author, says in a statement about the analysis.
Access to retirement plan benefits can dramatically increase the likelihood that an individual will be able to afford retirement, VanDerhei says.

By Allison Bell

Tuesday, June 7, 2011

Congress Proposes Marijuana Tax Legislation

A coalition of Republican and Democratic lawmakers has introduced a trio of bills aimed at protecting access to medical marijuana under tax and banking laws, and changing the existing laws to reflect the medical efficacy of marijuana.

The bills were authored by Rep. Pete Stark, D-Calif., Barney Frank, D-Mass., and Jared Polis, D-Colo.
Stark’s bill, HR 1978, the Small Business Tax Equity Act, would allow medical marijuana dispensaries to take the full range of business expense deductions on their federal tax returns, just like every other legal business is permitted to do under the law. His bill is co-sponsored by Rep. Dana Rohrabacher, R-Calif., and Ron Paul, R-Texas, as well as Frank and Polis.
"Our Tax Code undercuts legal medical marijuana dispensaries by preventing them from taking all the deductions allowed for other small businesses,” Stark said in a statement Wednesday. “While unfair to these small business owners, the Tax Code also punishes the patients who rely on them for safe and reliable access to medical marijuana prescribed by a doctor. The Small Business Tax Equity Act would correct these shortcomings.”
The States’ Medical Marijuana Patient Protection Act, authored by Frank and co-sponsored by Stark, Polis and Rohrabacher, would make individuals and entities immune to federal prosecution when acting in compliance with state medical marijuana laws. It would also direct the administration to initiate the process of rescheduling marijuana under the Controlled Substances Act so that it is placed in a schedule other than Schedules I or II.
“The time has come for the federal government to stop preempting states’ medical marijuana laws,” Frank said. “For the federal government to come in and supersede state law is a real mistake for those in pain for whom nothing else seems to work. This bill would block the federal prosecution of those patients who reside in those states that allow medical marijuana.”
Polis’ Small Business Banking Improvement Act, which is cosponsored by Stark, Frank and Paul, would ensure that medical marijuana businesses that are state-certified have full access to banking services by amending the Bank Secrecy Act.
“When a small business, such as a medical marijuana dispensary, can’t access basic banking services they either have to become cash-only—and become targets of crime—or they’ll end up out-of-business,” said Polis. “In states that have legalized medical marijuana, and for businesses that have been state-approved, it is simply wrong for the federal government to intrude and threaten banks that are involved in legal transactions.”
Stark and Polis welcomed Congressman Paul’s support for their bills.
“It is time to get the federal government out of state criminal matters, so states can determine sensible drug policy for themselves,” said Paul. “It is quite obvious the federal war on drugs is a disaster. Respect for states’ rights means that different policies can be tried in different states and we can see which are the most successful. This legislation is a step in the right direction as it removes a major federal road block impeding businesses that states have determined should be allowed within their borders.”

Monday, June 6, 2011

Retiring? Five common mistakes

Five Common Mistakes Made When Preparing for Retirement
Retirement is rapidly approaching for many baby boomers. Some of them will make mistakes in preparing financially for that stage of life. Don't let yourself fall into these common traps when setting up your nest egg.

1. Retiring With Too Much Debt: Financial planners generally recommend that individuals don’t retire until credit card, mortgage and other forms of debt are paid off. These monthly payments can quickly cut into savings. Increasingly, Americans are entering traditional retirement years with heavy debt.

2. Lack of Insurance: Although most individuals over the age of 65 are eligible for Medicare, they will still have healthcare costs that are left uncovered by Medicare. Many items, including premiums, deductibles, coinsurance, eye glass coverage, hearing aids or long-term nursing home care for longer than 100 days, are typically not covered by Medicare. Guidance from a professional is recommended if the family has significant assets to protect.

3. Ignoring Inflation: Inflation will slowly erode an investor’s savings, no matter how carefully they saved. That said, there are steps that can be taken to avoid this. Social security, some annuities and pensions are adjusted for inflation annually. Treasury Inflation-Protected Securities are a government bond that promises a rate of return that exceeds inflation.

4. Relying Too Heavily on One Income Source: A certified financial planner may recommend having four to six sources of retirement income without counting on just one. By diversifying, retirees can avoid losing all their income if one source loses value. Guaranteed sources can include Social Security, pensions and annuity payments. Other common sources can be 401(k), IRA, CDs, personal investments, cash investments, rental properties and royalty income.

5. Not Protecting Savings: About five to ten years before retirement, individuals should start to focus on protecting their savings. People can reduce risk by shifting assets to more conservative investments, avoiding borrowing or taking early withdrawals and minimizing fees and taxes deducted from savings. More funds should be placed in low-cost investments and traditional and Roth retirement accounts. : Inflation will slowly erode an investor’s savings, no matter how carefully they saved. That said, there are steps that can be taken to avoid this. Social security, some annuities and pensions are adjusted for inflation annually. Treasury Inflation-Protected Securities are a government bond that promises a rate of return that exceeds inflation.

Thursday, June 2, 2011

Government Contractors Owed $757 Million in Back Taxes

More than $24 billion in stimulus funds went to contractors and grantees who owed the government hundreds of millions of dollars in tax debts, according to a new report from the Government Accountability Office.

The GAO identified 3,700 contractors and grantees who received stimulus funds, despite collectively owing the government $757 million in back taxes. The investigative report, which came at the request of Senators Tom Coburn, R-Okla., Carl Levin, D-Mich., Charles Grassley, R-Iowa, Max Baucus, D-Mont., and Orrin Hatch, R-Utah, will be released at a hearing Tuesday of the Senate Permanent Subcommittee on Investigations.
“For many years now, we’ve known that a small percentage of federal contractors and grantees who get paid with taxpayer dollars shirk their responsibility to pay their taxes,” Levin said in a statement.  “We’ve strengthened the levy program to recover more funds from them, and the executive branch has made it clear nonpayment of tax can be grounds for denying a specific contract or debarring a contractor from bidding on any contract. Now the executive branch should get on with it and actually debar the worst of the tax cheats from the contractor workforce.”
The report found that of the 63,000 contractors and grantees examined, 3,700 were found to owe $757 million in back taxes, but also received $24 billion in stimulus awards.  This represents 5.9 percent of all the awardees that the GAO analyzed. GAO investigators noted that the findings of the investigation likely understate the full extent of the problem. The subcommittee will examine possible solutions, including the need for legislation to prevent those with known significant tax debts from obtaining federal grants and contracts.
If all 80,000 awardees were examined and the same proportion held, 4,500 awardees owing $909 million would have received $29 billion in contracts. That would represent more than 10 percent of all stimulus money designated for contracts and grants ($275 billion).
The GAO study identified 15 cases of individual contractors or grantees involving “abusive or potentially criminal activity” and has referred those cases to the IRS for further investigation.  GAO indicated that those 15 cases represent only a small number of the cases that it could have referred.
Although a federal levy program is in place to catch tax cheats that get federal payments, many awardees escaped this review because money was disbursed at the state and local level or by a prime contractor.
Approximately 35 percent of all unpaid taxes were for old debts incurred prior to 2003, indicating that many of the awardees were known tax cheats, and not persons with new debts. The bulk of the tax debts were from unpaid corporate and payroll taxes.
The GAO uncovered several specific examples that were particularly egregious. One construction firm owed nearly $400,000 in back taxes, but received a contract worth more than $1 million. One engineering services firm had a $6 million delinquent tax debt and was called by the IRS an “extreme case of noncompliance.” It got a stimulus contract worth over $100,000.
One security firm owed $9 million and was repeatedly cited not only for being uncooperative with the IRS, but also had frequent labor violations. It received a stimulus contract worth more than $100,000.
One nonprofit organization owed more than $2 million from years of unpaid payroll taxes, while at the same time its CEO made numerous trips to a casino. This organization received more than $1 million in stimulus funds.
“Many companies pay their taxes, so there’s no reason for the government to deal with companies that don’t,” said Grassley. “The businesses that should be excluded first from government business are those that have tax debts outstanding over several years and haven’t done anything to try to pay off the debt. A substantial amount of the estimated unpaid federal taxes owed by stimulus program contractors are in this category. A government contract is something to be earned, not something to be taken for granted.”