TAX TIPS FOR INDIVIDUALS

IRS Offers New Simplified Option for ‘Office in the Home’ Deduction

July 3, 2013 by Admin

Beginning 2013, the Internal Revenue Service is offering a simplified method that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

The new optional deduction is capped at $1,500 per year based upon $5 a square foot for up to 300 square feet. This will serve to reduce the paperwork and recordkeeping burden on small businesses.

While the new safe-harbor may be more convenient, in many cases the traditional ‘office in the home’ deduction would yield a greater tax savings. Between mortgage interest, real estate tax and utilities, many taxpayers exceed the $1,500 cap of the new deduction. The new deduction also has the disadvantage that if it would result in a loss it cannot be taken. This is in contrast to a regular office in the home deduction, which can result in a loss carry-forward. The new deduction also cannot be combined with a loss that is carried forward from the previous year.

Hurricane Sandy Repairs Subject to NJ Sales Tax?

June 10, 2013 by Admin

After Hurricane Sandy hit, the NJ Division of Taxation was flooded (no pun intended) with inquiries regarding the taxability of repairs. As a result, a helpful “Sales and Use Tax – Frequently Asked Questions” page has been added to its website. This article has the answers, including whether charges for demolition services or tree removal are subject to NJ Sales Tax. To view the article, click here: NJ Division of Taxation FAQ

Take Advantage of our Updated Executor Checklist

June 7, 2013 by Admin

Urbach & Avraham, CPAs, is proud to offer an executor checklist to help alleviate the nightmare of financial affairs of a deceased relative. This comprehensive list, which is regularly updated to reflect the latest changes in estate tax regulation, will help you:

Ensure compliance with tax requirements
Take advantage of tax saving opportunities
Preserve the assets of the estate
Clarify the tax ramifications of distributions
To view the checklist, click here: Executor To-Do List

Reporting Foreign Assets: It Pays to do the Right Thing

April 29, 2013 by Admin

Two recent verdicts involving unreported foreign asset reporting highlight the same moral: do the right thing (or go to jail).

In one case, Michael Canale, a physician, pleaded guilty in New York federal court last December to willful failure to notify the IRS about Swiss bank accounts that in 2010 held nearly $1.5 million. While acknowledging that Canale “made a serious mistake,” attorney Robert Fink wrote that his client inherited the account from his father, who gave orders to keep it a secret. The defense lawyer characterized Canale as “a genuine American hero, who served his country selflessly as a combat military doctor”. The Manhattan U.S. Attorney’s office argued, however, that he evaded at least $216,000 in federal taxes on income form the Swiss accounts and “he could have, at any time, ceased his criminal conduct by disclosing the account or even simply closing the account.” Canale was sentenced to six months in federal prison, fined $100,000, ordered to pay more than $216,000 in restitution and perform 400 hours of community service. [Read more…] about Reporting Foreign Assets: It Pays to do the Right Thing

Got Unreported Assets Overseas? June 2013 Deadline Approaching

April 26, 2013 by Admin

The FBAR: Who Should File?

Do you have income overseas you forgot to report? Did Grandpa leave you his foreign bank account when he passed away? If you have foreign bank accounts holding more than $10,000 in the aggregate anytime during the year, you are required to file an FBAR (Report of Foreign Bank Accounts) by June 30^th of the following year. It doesn’t matter whether the foreign accounts generate income or not; just owning them, or having signature authority, requires you to file.

What’s the Big Deal?

Failure to file can result in serious consequences. The sanctions for not completing the FBAR include numerous severe civil penalties and potential prosecution followed by a term in federal prison.

New in 2011: Form 8938

Beginning in 2011, the IRS has added Form 8938 to the individual 1040 tax return, further tightening the noose on taxpayers failing to report ownership of overseas accounts.

If you fail to file Form 8938 or fail to report a specified foreign financial asset that you are required to report, the statute of limitations for the tax year may remain open for your income tax return (Form 1040) until three years after the date you file a complete and accurate Form 8938.

What Can I do Now?

In order to encourage taxpayers to correct previously filed returns that were false, or to remedy past failures-to-file tax returns, the IRS created in the early 1950s the “Voluntary Disclosure Policy” – a policy under which no criminal prosecution will be initiated if the taxpayer comes forward before the IRS is onto

him. In 2009, as the IRS became aware of increased offshore tax abuse, it initiated the formal Voluntary Disclosure Program for offshore accounts. While making a voluntary disclosure doesn’t guarantee immunity from prosecution, taxpayers making truly valid disclosures are rarely, if ever, prosecuted.

Time is Running out

It’s important to realize that the Voluntary Disclosure Program essentially sets up a race between you and the IRS. In order to avoid criminal prosecution you must come forth before the IRS comes knocking, so time is of the essence. Many experts are expecting dozens of banks worldwide to turn over the names of U.S. taxpayers within the next year, including Credit Suisse Group, Julius Baer Group, HSBC Holdings, and the three Israeli banks, Bank Hapoalim, Bank Leumi, and Mizrahi-Tefahot.

Better Safe than Sorry

While the current voluntary disclosure program is currently running indefinitely, the rules can change at any time. The FBAR penalty has been raised in 2012 to 27.5% of the largest balance during the period covered by the voluntary disclosure. Sounds like a steep price to pay? The penalties are far greater if you don’t “get with the program” and then get caught. In addition, disclosing now allows you to transfer the money to your American accounts as well as to implement gifting and other estate planning strategies. Finally, for a “Get Out of Jail Free Card” it’s a pretty good deal. Now you will be able to sleep at night!

NJ Accepting Credit Card Payments for Personal Income Taxes

February 16, 2013 by Admin

Taxpayers are now able to pay their New Jersey personal (Gross Income) tax via telephone. All they need to do is call 1-888-673-7694 and provide their credit card information. This new, convenient way of remitting payment will also be available for business taxes later this year.