Tax Planning

Starting a new business is fun and exciting. There's also a lot of work that goes into coming up with the idea for a business venture and putting together a business plan. Alyssa Gregory shares her 10-step guide to starting a new business.

Jean Murray also has a collection of articles covering Startup Basics.

Americans who have bank accounts in foreign countries may need to file a special report with the U.S. Treasury Department.

The Report of Foreign Bank and Financial Accounts (FBAR) is required of individuals and businesses if they have a financial interest in a bank account or other type of financial account that's located at a bank or financial institution outside the United States and if the aggregate balance of all their accounts was at least $10,000 at any time during the year. The report is due on or before June 30, 2013, to disclose account holdings for the year 2012.

Be aware, that this is the last year the Treasury Department will accept FBARs filed on paper. Starting July 1, 2013, the Treasury Department will require all FBARs to be filed electronically.

June 30th Falls on a Sunday

This year, the June 30th deadline to file the FBAR falls on a Sunday. According to the instructions, "The FBAR must be received by the Department of the Treasury on or before June 30th." Accordingly, people cannot rely on a timely postmark date and should mail in their FBARs with plenty of time to make sure that the document is received at the Detroit FBAR processing center on or before Sunday, June 30th. For reports mailed from inside the United States, I recommend sending them via certified mail with return receipt requested, as this will provide you with proof that your FBAR was received by the Treasury Department. For reports mailed from outside the United States, be sure to use a delivery method that will guarantee delivery by Friday, June 28.

When you finish your FBAR, mail it to the addresses provided below. If you use the United States Postal Service:

United States Department of the Treasury

P.O. Box 32621

Detroit, MI 48232-0621

If you use a private delivery service such as FedEx, DHL, UPS, and so forth, use the following street address:

IRS Enterprise Computing Center

ATTN: CTR Operations Mailroom, 4th Floor

985 Michigan Avenue

Detroit, MI 48226

Delivery messenger service contact telephone number: (313) 234-1062.

 

FBAR E-Filing

The foreign bank account report can be electronically filed at the following Web address: bsaefiling.fincen.treas.gov/Enroll_Individual.html.

Only the filing individual can electronically file the FBAR. Accountants, attorneys and other practitioners are not permitted to electronically file FBARs on behalf of their clients.

In honor of Small Business Week, the Internal Revenue Service will be providing two Web-based seminars covering tax issues relevant to small businesses.

• "Small Business Owners: Get All the Tax Benefits You Deserve," June 18th, 2013, at 2 pm Eastern.
• "Avoiding the Top Tax Mistakes that Small Businesses Make," June 20th, 2013, at 2 pm Eastern.

To learn more about these seminars and to sign up, visit the IRS Web page, Webinars for Small Businesses.

The IRS also has videos from previous training seminars archived at www.irsvideos.gov/SmallBusinessTaxpayer.

The second installment of estimated tax payments for the year 2013 are due on Monday, June 17, 2013. The deadline for sending in estimated tax payments normally falls on June 15th. Because June 15th is a Saturday this year, the deadline is moved to the following Monday.

Estimated tax payments can be remitted online using the Electronic Federal Tax Payment System. Payments can also be mailed in using Form 1040-ES with a check. Checks should be made payable to the United States Treasury, and in the memo field indicate the Tax Year and Tax Form; for example, "Year 2013 Form 1040-ES." After this write your Social Security Number.

Additional Resources:

• Where to Mail Form 1040-ES
• Publication 505, Tax Withholding and Estimated Tax

Americans who live outside the United States have a special filing deadline of June 17, 2013, to file and to pay their 2012 U.S. taxes. The IRS explains this automatic extension as follows:

"Automatic 2-month extension. You are allowed an automatic 2-month extension to file your return and pay federal income tax if you are a U.S. citizen or resident alien, and on the regular due date of your return:

• "You are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or

• "You are in military or naval service on duty outside the United States and Puerto Rico."

Further, the IRS notes, "Even if you are allowed an extension, you will have to pay interest on any tax not paid by the regular due date of your return" (from Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, section on "When to File and Pay").

The two-month automatic extension normally is good until June 15th (two months after April 15th). This year, however, June 15th falls on a Saturday. Since the filing deadline falls on a weekend, the deadline is pushed back to the following Monday, June 17th.

If additional time is needed, Americans living abroad can request additional time to file their return by submitting Form 4868, to request an extension until October 15, 2013. Read More...

The following email is an example of a fake or spoofed email. The email pretends to come from the Internal Revenue Service. In reality, this email has a virus attached.

"Subject: Complaint Case #460575036224
"From:    IRS.gov <fraud.dep@irs.gov>

"You have received a complaint in regards to your business services.  The complaint was filled by Mr./Mrs. Anibal DOLATRE on 05/29/2013/                                                

"Case Number: 460575036224

"Instructions on how to resolve this complaint as well as a copy of the original complaint are attached to this email.

"Disputes involving consumer products and/or services may be arbitrated. Unless they directly relate to the contract that is the basis of this dispute, the following claims will be considered for arbitration only if all parties agree in writing that the arbitrator may consider them: Claims based on product liability; Claims for personal injuries; Claims that have been resolved by a previous court action, arbitration, or written agreement between the parties

"The decision as to whether your dispute or any part of it can be arbitrated rests solely with the IRS.

"The IRS offers a binding arbitration service for disputes involving marketplace transactions. Arbitration is a convenient, civilized way to settle disputes quickly and fairly, without the costs associated with other legal options.                          

"2013 Council of IRS, Inc. All Rights Reserved."                              

Attachment: Complaint_460575036224.zip
ZIP file contains: Complaint_05292013.exe

The email above claims to be sent from the Internal Revenue Service. However, the IRS has stated that the agency "does not initiate contact with taxpayers by email." Furthermore, the file that is attached to the email may contain a virus or other malware. My virus scanner says this file attachment contains the W32.Rogue.Gen virus.

Fake emails, such as the one above, can be reported to the IRS. The IRS will then investigate the emails. To report the fake email to the IRS, forward the email with all the headers showing to phishing@irs.gov.

The IRS advises taxpayers not to reply to the email or to open any attachments.

Additional Resources:

• Report Phishing (IRS.gov)
• Protecting Yourself from Scam Emails Pretending to be from the IRS (About.com)
• IRS Complaint Fraud (Snopes.com)

Taxpayers who are victims of the tornado storms in Oklahoma may qualify for the tax relief from the Internal Revenue Service and the Oklahoma Tax Commission.

The IRS has announced that taxpayers in Cleveland, Lincoln, McClain, Oklahoma and Pottawatomie counties are eligible for the federal tax relief. The IRS is providing taxpayers in these counties with additional time to file tax returns and remit tax payments. The IRS has set a September 30, 2013, deadline to file any tax returns and pay any taxes that were otherwise due starting from May 18, 2013. Specifically,

• the June 17 and September 16 due date for estimated tax payments is postponed to September 30, 2013;
• the July 31 due date for the second quarter payroll returns and excise tax returns is postponed to September 30, 2013; and
• the September 3 deadline for truckers filing highway use tax returns is postponed to September 30, 2013.

Secondly, the IRS is setting a June 3, 2013, deadline to remit payroll tax deposits and excise tax deposits that were otherwise due between May 18 and before June 3, 2013.

Thirdly, taxpayers can choose to deduct any "uninsured or unreimbursed disaster-related losses ... on either last year's [2012] or this year's [2013] return."

Additional information on disaster-related casualty losses can be found in Publication 547 and in the IRS's information release, IRS Gives Tax Relief To Oklahoma Tornado Victims; Return Filing and Tax Payment Deadlines Extended to Sept. 30 (IR-2013-53).

The Oklahoma Tax Commission has announced the following tax relief:

• Interest may be waived for tax returns that are filed late or tax payments that are remitted late.
• Interest and penalties up to $10,000 will be waived "so long as the taxpayer has voluntarily filed the report(s), paid the taxes due thereunder and submitted a written statement of the taxpayers' circumstances."
• The Commission will provide assistance to taxpayers needing help to deconstruct damaged records.

Additional information about the tax relief in Oklahoma can be found in the informational notice, OTC Extends Tax Relief to Tornado Victims, and Commission Order 2013-05-23-01 (PDF).

The Internal Revenue Service will be closed on Friday, May 24th, 2013. This day is the first in a series of five furlough days that were planned in response to the automatic budget cuts known as the sequester.

"This means that all IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency's nearly 400 taxpayer assistance centers nationwide, will be closed," says the IRS in a news release. The IRS will also be closed the following Monday, May 27th, in observance of Memorial Day.

Some Web-based services will be shut down, while other Web services will remain functional, the agency said.

IRS Services that will be closed:

• Telephone hotlines
• Walk-in taxpayer assistance centers
• Taxpayer Advocate Service
• Where's My Refund? application
• Online Payment Agreement application
• Online EIN application
• e-Services for practitioners

IRS Services that will be open:

• Electronic Federal Tax Payment System
• Withholding Calculator
• Order a Transcript
• EITC Assistant
• Interactive Tax Assistant
• PTIN system for tax professionals
• TeleTax (800) 829-4477
• First Time Homebuyer Credit Account Look-up

For additional details, see IRS To Be Closed May 24, Four Other Days Due to Budget and Sequester; Filing and Payment Deadlines Unchanged (IR-2013-51).

Tax returns and documents related items on the tax return are important to keep. From a tax perspective, such documents may be needed in the event that the IRS's wants to review information relating to the tax return. Tax returns come in handy for other purposes, such as to verify income when applying for a loan from a bank.

Generally speaking, tax returns and their related documents should be retained for at least as long as the IRS or a state tax department is permitted to audit the return. This period of time is referred to as the statute of limitations for audits. For federal audits, that statute of limitations is three years from the date the tax return was actually filed, or three years from the April 15th deadline if the return was filed before the deadline. At the state level, each state has different statute of limitations on audits. Many states follow the federal time period of three years, while some states have longer time periods. Montana, for example, has a five year time period for audits.

Along with a copy of your tax return, keep any documents that are related to the income or deductions or credits claimed on the return. This would include copies of Form W-2, Form 1099, acknowledgement letters for charitable donations, and receipts for tax-deductible expenses. Self-employed persons should also keep copies of any accounting records (such as profit and loss statements, or a backup of their data from accounting software) as well as copies of bank statements.

Besides tax returns, taxpayers will also want to keep keep any documents about real estate, business assets, stocks and bonds, and other assets you own for as long as you own the asset, and then for another 3 years (or longer, depending on your state) after the asset is sold. These records will be needed for calculating cost basis and gain or loss when the asset is sold.

Tax returns and their related documents can be maintained in a number of different ways, including:

• Paper files organized by year, with tax returns and related documents in the same folder.
• Scan your documents, and store on a hard drive, flash drive or CD-ROM.
• Use an accordion file or box for each year.
• Keep separate files for your long-term assets.
• Make CD-ROMs or flash drives of your most valuable documents, and put these in a safe deposit box.

Before you discarding old tax documents, make these final checks:

Check your Social Security statement and compare your earnings to the information on your W2s and tax returns. If you haven't received your Social Security statement, you can request from for the Social Security Administration. Every so often, income from your W2 or self-employment income from your tax return doesn't show up on your Social Security Statement. The SSA has procedures in place to help you correct an error in your record of earnings. Do this before discarding any documents relating to your earned income, such as Form W-2 or Schedule C.

Check the date you filed your tax return. Make sure it has been at least three years after the tax return has been filed before discarding a tax return.

Call the IRS and ask for a "Record of Account" for a particular tax year. Your accountant can do this for you, and help you read this IRS printout. Sometimes, adjustments have been made to a tax return, and either you didn't know about it, or you forgot about it. This is an opportunity to make sure any IRS problems for a tax year have been settled before you throw away your important documentation.

Scan your tax documents and save them to a CD-ROM. Having scanned copies of your tax documents takes less space than paper files.

Shred your old tax and financial documents. This will prevent anyone from gaining access to your identifying information.

Additional information from the IRS: Publication 552, Recordkeeping for Individuals.

President Obama and Vice President Biden released copies of their 2012 tax returns to the public on April 12, 2013. The tax returns can be downloaded from the White House blog.

President Barack Obama and First Lady Michelle Obama filed a joint return showing total income of $662,076, of which $394,840 was from the president's salary and another $258,772 in income related to the president's publishing. The President itemized his deductions, for state income tax, real estate taxes, mortgage interest and charity. The first family donated $150,034 to charity. Obama's return shows a total federal tax of $112,214, which includes $21,221 in alternative minimum tax. Obama's Form 6521 shows that his alternative minimum tax was triggered by his deductions for state and local taxes. (Link to PDF of Obama's 2012 tax return.)

Vice President Joseph Biden and his wife Jill Biden filed a joint tax return showing total income of $385,072 for the year 2012. The Bidens itemized their deductions for state income taxes, property taxes, mortgage interest, and charity. The Bidens donated $7,190 to various charities. The Bidens' return shows total federal tax of $86,871, including $5,987 in alternative minimum tax. Biden's Form 6521 shows that their alternative minimum tax was triggered by their deduction for state and local taxes. (Link to PDF of Biden's 2012 tax return.)