Thursday, January 18, 2018

Taxpayer was liable for million dollar FBAR penalty

The Ninth Circuit found that a taxpayer willfully failed to file a Report of Foreign Bank and Foreign Accounts (FBAR) where IRS assessed a penalty of approximately $1.2 million penalty against the taxpayer for failing to disclose her financial interests in an overseas account. The Court rejected a variety of the taxpayer's arguments, ranging from the contention that the imposition of the penalty violated the U.S. Constitution's excessive fines, due process, and ex post facto clauses, to assertions that it was barred by statute of limitations or treaty provisions.
U. S. v. Bussell, (CA 9 10/25/2017)

Monday, January 15, 2018

IRS Releases Updated 2018 Withholding Tables

The IRS has released updated withholding tables for 2018. The tables reflect major changes made by the Tax Cuts and Jobs Act (TCJA), including an increase in the standard deduction, elimination of personal exemptions, and modification of tax rates and brackets. Employers should begin using the updated tables as soon as possible, but no later than 2/15/18

In addition, the IRS is now revising, for a late February release, the “withholding tax calculator” on . IRS has not published a 2018 Form W-4, which notifies an employer of an employee’s withholding requirement. 

Employees are not required to do anything at this time. However, employees are encouraged to use 2017 Form W-4 to update Payroll records on file with their employer, check their actual withholding against the withholding tax calculator when available,  and adjustment withholding early this year to avoid any surprises when filing their 2018 income tax returns.

Monday, January 8, 2018

2018 Tax Filing Season to Begin January 29

In a recent News Release, the IRS announced that the 2018 tax filing season will begin on Monday, 1/29/18, which means that electronic and paper returns will be accepted beginning on that day. However, the IRS will begin processing paper returns in mid-February as its systems continue to update. Also, by operation of law, refunds on returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) cannot be issued before mid-February [ IRC Sec. 6402(m) ]. The IRS expects the earliest EITC/ACTC related refunds to be available starting on 2/27/18 (if direct deposit is chosen and there are no other issues with the return). Tax returns are due on April 17 because of a weekend and the Emancipation Day holiday. News Release IR 2018-1.

Sunday, January 7, 2018

Masters Degree Expenses Determined Not Deductible

The taxpayer was an uncredentialed speech pathologist who was hired by the school district under a temporary waiver. As a condition of the waiver, she was required to complete her master's degree within seven years to be qualified as a medical speech pathologist. The taxpayer enrolled in a master's degree program and claimed deductions for her tuition, books, and supplies as unreimbursed employee business expenses that were disallowed by the IRS. The Tax Court agreed, concluding that the expenses were not deductible because they qualified the taxpayer to meet the minimum education requirement for employment and also qualified her for a new trade or business. Under IRC Sec. 162(a) , education expenses are deductible by the taxpayer when incurred to maintain or improve skills required in business or employment, or to meet the requirements of the employer or the law. However, they are not deductible if incurred to meet the minimum requirements for the taxpayer's present employment. Mary A. Colliver, TC Summ. Op. 2017-93 (Tax Ct.)

Thursday, December 28, 2017

IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017

The Internal Revenue Service advised tax professionals and taxpayers today that pre-paying 2018 state and local real property taxes in 2017 may be tax deductible under certain circumstances. 
The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018.  A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.  State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed. 

The following examples illustrate these points.

Example 1:  Assume County A assesses property tax on July 1, 2017 for the period July 1, 2017 – June 30, 2018.  On July 31, 2017, County A sends notices to residents notifying them of the assessment and billing the property tax in two installments with the first installment due Sept. 30, 2017 and the second installment due Jan. 31, 2018.   Assuming taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on Dec. 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.  

Example 2:  County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018.  County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019.  However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year.  Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.

The IRS reminds taxpayers that a number of provisions remain available this week that could affect 2017 tax bills. Time remains to make charitable donations. See IR-17-191 for more information. The deadline to make contributions for individual retirement accounts - which can be used by some taxpayers on 2017 tax returns - is the April 2018 tax deadline. 

Friday, December 22, 2017

Identity Theft—New Phishing Scam Targets Hotmail Accounts

The IRS is warning taxpayers and tax practitioners about a new email scam targeting Hotmail users. The subject line of the phishing email reads: "Internal Revenue Service Email No. XXXX / We're processing your request soon / TXXXXXX-XXXXXXXX." The message prompts recipients to sign in to a fake Microsoft page, which asks for personal and financial information. To date, the IRS has received over 900 complaints about this new phishing scheme. The IRS reminds taxpayers that it generally doesn't initiate contact by email to request personal or financial information. Those receiving the email should forward it to  and then delete it. 

Thursday, December 21, 2017

ICYMI: Florida Minimum Wage Change, January 1, 2018

The 2018 minimum wage in Florida is $8.25 per hour, effective January 1, 2018, with a minimum wage of at least $5.23 per hour for tipped employees, in addition to tips.