Aug 312015
 
The Kiddie Tax - Part One

The Kiddie Tax – Part One Internal revenue code section 1(g) taxes unearned children’s income as if it belonged to the parents. This is known as the Kiddie tax. This income is taxed at the parents’ tax rates. Generally, the Kiddie tax rules apply to income of any child who is under age 18, turns 18, or is a full-time student who turns 19 – 23 before the end of the year. Generally, children’s income is taxed as follows. The tax on the income of a child who is subject to the “Kiddie tax” rules is the greater of: A. More…

Sep 202012
 
IRS Treatment Of Forgiven Student Loan Debt Causing Concerns

In the wake of the housing market collapse, many people have become familiar with the concept of cancellation of debt (COD) income.  The basis for COD income is found in IRC § 61(a)(12) which states that gross income includes “income from the discharge of indebtedness.”  Understanding the logic of this provision can be tricky.  When a loan is given, neither the lender nor the borrower have any gain or loss.  The lender has no loss because it expects to be repaid and the borrower has no gain because it expects to have to repay loan.  Thus, at this point, there More…

Sep 122012
 
IRS $104 Million Whistleblower Payment Should Make Foreign Account Holders Nervous

Bradley Birkenfeld, a former UBS AG bank executive, was instrumental in helping U.S. authorities expose tax evasion facilitated by the Swiss banking giant.  The information Birkenfeld provided led to an investigation that ultimately resulted in a 2009 settlement between the United States and UBS, with the latter agreeing to pay $780 million in fines and to turn over the names of thousands of Americans suspected of using Swiss bank accounts to evade taxes.  This settlement would be the precursor to the breaking of the backbone of the Swiss banking industry as a haven for tax-dodgers.  On Tuesday, Birkenfeld got his More…

Sep 072012
 
Church May Have Violated IRC By Endorsing Romney For President

St. Raphael Catholic Church of El Paso Texas appears to have violated the IRC by endorsing Mitt Romney in its bulletin.  “I am asking all of you to go to the polls and be united in replacing our present president with a president that will respect the Catholic Church in this country,” the entry in the church’s August 5 bulletin says. “Please pass this on to all of your Catholic friends.” 501(c)(3) organizations are strictly prohibited for engaging in political activity under several provisions of the IRC.  The rules that apply with respect to lobbying activities are set forth in More…

Sep 062012
 
IRS To Offer Relief To Taxpayers Affected By Hurricane Isaac

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS has announced that it will extend tax relief to individuals and businesses affected by Hurricane Isaac.  As of now, affected taxpayers in Louisiana and Mississippi will be eligible to receive tax relief. Currently, IRS filing and payment relief applies to the following localities: In Louisiana: Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany parishes; In Mississippi: Hancock, Harrison, Jackson and Pearl counties. Other locations may be announced in the coming days based on additional damage More…

Aug 312012
 

A Florida Miccosukee Indian tribe is learning that not even sovereign Indian nations can escape the long arm of the IRS.  An attorney for the tribe appeared in front of a three-judge panel of the 11th U.S. Circuit Court of Appeals on Thursday to argue that the IRS has no explicit authority to subpoena banks for tribal records.  The judges did not seem to be impressed with the tribe attorney’s argument that, “”when it comes to Indian tribes there has to be specific mention in the statute that applies to them,” pointing out that Indian tribes are included in broad More…

Aug 292012
 
What To Do If You Are A Victim Of Tax-Related Identity Theft

Tax-related identity theft is on the rise, especially in Florida.  According to a July, 2012 report by the Treasury Inspector General for Tax Administration (TIGTA), an analysis of tax returns processed during the 2011 filing season identified approximately 1.5 million returns with characteristics of identity theft, which caused the IRS to issue refunds in excess of $5.2 billion.  Based on this analysis, TIGTA conservatively estimated that the IRS could issue approximately $21 billion in fraudulent tax refunds resulting from identity theft over the next five years.  Obviously, this type of crime is paying, and so it is reasonable to expect More…

Aug 212012
 
Tax Tips For Charitable Giving

Contributing money and property to a charitable organization is one of the ways that a taxpayer can support a charitable cause while simultaneously reducing their income tax burden.  However, in order for the donation to be tax-deductible, certain conditions must be met.  The IRS recently put forward the following tips for taxpayers regarding the deductibility of donations. 1. Tax-exempt status – Contributions must be made to qualified charitable organizations in order to be deductible.  Be sure to ask the charity about its tax-exempt status, or check IRS.gov for the Exempt Organizations Select Check (a/k/a Publication 78), an online search tool More…

Aug 172012
 
Swiss Banks Begins Turning Over Their Own Employees To The IRS

A frequent topic of conversation on this blog is the issue of foreign tax havens and the trouble they can cause with the IRS.  Usually, these articles discuss the consequences to taxpayers who have maintained foreign accounts in banks which are now working with the IRS in an effort to save themselves from further prosecution. However, this time it appears that a number of Swiss banks are throwing their own employees under the bus. At least five Swiss banks, including HSBC Holdings Plc’s Swiss unit, Credit Suisse Group AG (CSGN) and Julius Baer Group Ltd. (BAER), have supplied e-mails and More…

Aug 142012
 
Life Insurance Planning Will Be Very Important If Estate Tax Exemption Rolls Back

While many people are aware that life insurance policies are generally exempt from income tax, they may not be aware that the value of these policies may be included in their estate for the purpose of calculating estate taxes.  Under IRC § 2042, the value of a decedent’s gross estate includes the value of any life insurance policy that is either (1) receivable by the executor of the decedent’s estate (i.e. where the estate is a beneficiary); or (2) receivable by any other beneficiary when the decedent had any “incidents of ownership” over the policy at the time of death.  More…