Walther CPA

Certified Public Accountants

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Casualty (Hurricane) Losses

Legislation enacted on Sept. 29, 2017, provided benefits for victims of hurricanes Harvey, Irma, and Maria. For qualified disaster-related personal casualty losses from those hurricanes, the act removes the requirement that personal casualty losses must exceed 10% of the taxpayer’s AGI to be deductible and allows nonitemizers to increase their standard deduction by the amount of their net disaster loss. Additionally, victims of the hurricanes can use their 2016 income to calculate the 2017 earned income tax credit and refundable portion of the child tax credit. The legislation waives the 10% penalty on pre-age-59½ retirement account payouts of “qualified hurricane distributions” of up to $100,000 in a tax year, and the income tax due on those distributions can be spread over a three-year period. Any amounts recontributed to the account during the three-year period will be treated as rollovers, and any tax previously paid on those amounts can be recovered by filing an amended Form 1040, U.S. Individual Income Tax Return. Victims with Sec. 401(k) accounts can borrow up to the lesser of $100,000 or 100% of the account balance, and loan repayments can be deferred.

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Highlights

Due April 17, 2018.

Individual, Trust, C Corporation Returns and Foreign Bank Account Reporting

The possible’s slow fuse is lit by the imagination.

Emily Dickinson
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Offshore Voluntary Disclosure Program To End In September

The IRS announced that it is closing the 2014 Offshore Voluntary Disclosure Program (OVDP) on Sept. 28, 2018. It also said it was announcing OVDP’s closure now so taxpayers with undisclosed foreign accounts who want to participate will be aware that they have to act to take advantage of it.

“All along, we have been clear that we would close the program at the appropriate time, and we have reached that point,” said Acting IRS Commissioner David Kautter in a prepared statement. “Those who still wish to come forward have time to do so.”

The IRS Criminal Investigation division has indicted 1,545 taxpayers for criminal violations related to international activities and it continues to fight offshore tax avoidance. The Criminal Investigation Voluntary Disclosure Program continues to exist, as do procedures for submitting delinquent FinCEN Forms 114, Report of Foreign Bank and Financial Accounts, and delinquent international information returns.

Taxpayers who were unaware of their filing obligations can continue to use the Streamlined Filing Compliance Procedures, although the IRS said it may end this program as well sometime in the future.

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The IRS Is Auditing A Lot Fewer Americans

The IRS audited 1 in about 160 individual tax returns in 2017, the lowest since 2002 and the sixth consecutive year that audits have declined, as budget cuts have reduced the number of staff at the federal agency.

The Internal Revenue Service—which has lost nearly a third of its enforcement employees since a 2010 peak, when it audited 1 in 90 individual returns—audited 0.62% of individual returns in the fiscal year that ended Sept. 30, according to IRS data.

The spending bill that Congress recently passed contains just over $11 billion for the IRS.

The bill appropriates $2.5 billion to the IRS for taxpayer services (compared with $2.2 billion last year), $4.9 billion for IRS enforcement activities (similar to last year).

The IRS also gets $3.6 billion for its operations (similar to last year).

For business systems modernization, the IRS gets $110 million (a cut from last year’s $290 million). The bill directs the IRS to make improvements to its 1-800 help line a priority and to allocate resources to improve its response time when communicating with taxpayers, “particularly with regard to victims of tax-related crimes.”

The bill also makes $320 million available to the IRS for carrying out changes made by last year’s tax overhaul legislation, but the IRS must submit to the House and Senate appropriations committees a spending plan for those funds before it can spend them.

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