Vernoia, Enterline + Brewer, CPA LLC

Archive for the ‘Tax Law’ Category

Employee or Independent Contractor – Know the Rules

The IRS encourages all businesses and business owners to know the rules when it comes to classifying a worker as an employee or an independent contractor. (more…)

Need to Sell Real Property? Try an Installment Sale

If your company owns real property, or you do so individually, you may not always be able to dispose of it as quickly as you’d like. One avenue for perhaps finding a buyer a little sooner is an installment sale. (more…)

NJ – Division’s claim for repayment of refund upheld

The Appellate Division of the New Jersey Superior Court upheld the Tax Court’s grant of summary judgment to the Division of Taxation (Division) in its claim for a refund of gross income (personal income) taxes erroneously made to beneficiaries of a New Jersey resident trust because a taxpayer, who was acting on behalf of the beneficiaries, failed to establish that the Division’s determination concerning the repayment of refund was incorrect. (more…)

Taxpayer protections: IRS oversight bills advance in Congress

identity theftResponding to growing concerns over the scope of tax-related identity theft, the House has approved legislation to give victims more information about the crime. The House also took up a bill expanding disclosure of taxpayer information in cases involving missing children and the Ways and Means Committee approved a bill impacting disclosures by exempt organizations. (more…)

2016 enhancements to certain tax incentives

Passage of the “Tax Extenders” undeniably provided one of the major headlines – and tax benefits – to come out of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), signed into law on December 18, 2015. Although these tax extenders (over 50 of them in all) were largely made retroactive to January 1, 2015, valuable enhancements to some of these tax benefits were not made retroactive. Rather, these enhancements were made effective only starting January 1, 2016. (more…)

How do I set up a like-kind exchange

Property SwapUnder Code Sec. 1031, a taxpayer can make a tax-free exchange of property held for productive use in a trade or business or for investment. The exchange must be made for other property that the taxpayer will continue to use in a trade or business or for investment. Ordinarily, the exchange is made directly with another taxpayer who holds like-kind property. For example, an investor in real estate may exchange a building with another person who also owns real estate for use in a trade or business or for investment. (more…)

President signs bill increasing failure-to-file penalty

Showing penalty card

Penalty for Failure-to-File a Tax Return

President Obama signed in February the Trade Facilitation and Trade Enforcement Act of 2015 (H.R. 644). The comprehensive trade and customs bill includes an increase in the penalty for failure to file a return.

Penalty

The failure to file penalty is five percent of the unpaid tax shown on the return for one month, with an additional five percent for each month or part of a month that the failure continues, up to 25 percent. For taxpayers who fail to file their returns more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. The Achieving a Better Life Experience Act of 2014 (ABLE Act) provided for inflation adjustments for certain penalties, including the fail to file penalty, applicable to returns required to be filed after December 31, 2014.

The IRS may abate the penalty for reasonable cause. Generally, this means that if a taxpayer exercised ordinary business care and prudence and was nevertheless unable to file a return, the resulting delay may have been due to reasonable cause. However, every taxpayer’s situation is unique. Some examples of reasonable cause include, but are not limited to, the death or serious illness of the taxpayer or a member of the taxpayer’s immediate family; failure to file resulting from a fire, casualty, natural disaster, or other disturbance; or reliance on erroneous advice from the IRS.

Trade Act

The Trade Act provides that if a return is filed more than 60 days after its due date, then the failure to file penalty may not be less than the lesser of $205 or 100 percent of the amount required to be shown as tax on the return. The increase under the Trade Act is effective for returns required to be filed in calendar years after 2015.