EFT Payment Requirement Threshold Reduced to $5,000

The District of Columbia requires business taxpayers to make tax payments over a certain threshold by electronic funds transfer (“EFT”).  The most recent guidance issued by the D.C. Office of Tax and Revenue regarding EFT payments says that business taxpayers must pay EFT for all tax payments exceeding $10,000.  However, over the last couple of months the Office of Tax and Revenue have been issuing notices to business taxpayers informing them that the EFT requirement has been decreased to payments exceeding $5,000.  Although the Office of Tax and Revenue is authorized by statute to require EFT payments at this threshold, it has yet to issue a general notification to taxpayers or practitioners informing them of this new requirement. 

According to conversations we have had with the Office of Tax and Revenue, their system will generate the 10% non-compliance penalty when a payment is submitted by check over $5,000.  Although there is a reasonable cause waiver to the penalty that we think would obviously apply in these circumstances (i.e., no notice to taxpayers), the waiver requires a written request that could take some time in getting approved. 

Taxpayers that suspect that they will have upcoming payments over $5,000 should register for making EFT payments on the Office of Tax and Revenue’s Electronic Taxpayer Service Center (eTSC) well advance of the payment due date.  It can take 7-10 business days to receive the ID and password for the website, which are sent separately to taxpayers via regular mail.  Taxpayers can call the Office of Tax and Revenue to receive their ID earlier, but the ID still may not be available for up to 7 business days after the registration is submitted. 

Therefore, we would recommend completing the eTSC registration early if there is any chance that it will have an upcoming payment over $5,000.  Please contact Aronson’s tax department if you have any questions.

Be Aware: FBAR Filing Date Moved Up!

The Form TD F 90-22.1 is commonly referred to as the foreign bank account report or “FBAR.” The FBAR is usually due on June 30th following the calendar year end. This year June 30th is on a Saturday so the FBAR for the calendar year 2011 is required to be received by the U.S. Treasury Department on or before June 29, 2012. The mailbox rule does not apply to the filing of the FBAR and an extension of the due date is not allowed. The mailbox rule means that U.S. federal income tax returns are considered to be filed based on the date Continue reading »

Need cash? Don’t borrow from the IRS!

Many businesses and individuals are experiencing cash flow difficulties in today’s economy. To ease the cash crunch, it may be tempting to delay payment of taxes in the hope that finances will improve soon. Unlike other creditors, the IRS moves relatively slowly, lulling the taxpayer into complacency. During this time, interest and penalties accrue which, in some situations, can even exceed the original tax due. When the IRS decides to act, they often file liens, levies, and other garnishments that can cause significant and sometimes permanent economic damage. In addition to these civil penalties and collection actions, the IRS can pursue criminal charges. The failure to truthfully account for or turn over taxes is a felony, with the potential of up to five years of jail time. This applies to all taxes under the Internal Revenue Code – income tax, payroll tax, gift tax, and excise tax, to name a few. Continue reading »

IRS Hunting for Omitted Gift Taxes

Smart Money is alerting readers that the IRS has a “sweeping effort under way” to search out unreported gifts of real estate. The agency is using land-transfer records for evidence of omitted filings. Any gift of over $13,000 within one year’s time should be reported to the IRS, with lifetime caps currently at $5 million. This includes non-cash gifts between family members. If you haven’t yet disclosed giving such a generous gift, Smart Money cautions “voluntary disclosure typically works out better than having the gap discovered in an IRS audit.”

Compensation Packages for Ministerial Staff

I believe it is the desire of churches to fairly compensate their ministerial staff.  However, this goal is a bit challenging due to unique Internal Revenue Service and Social Security Agency rules that apply to ministerial staff.  For example, most ministers are considered both employees and self-employed.  Also, the church needs to be aware that excessive compensation can result in penalties or jeopardize the tax-exempt status of the church.   For more details read Sherre Stephens of GuideStone Financial Resources recent article on the topic.

DC Launches Tax Amnesty; Program Waives All Penalties and Fees on Back Taxes Paid by September 30

The DC Office of Tax and Revenue, on Monday August 2^nd 2010, announced the start of the long anticipated Tax Amnesty program. Under this program, delinquent taxpayers will: (a) get a rare opportunity to pay outstanding taxes and interest to the District; (b) have their penalties and fees waived; and, (c) avoid criminal prosecution.  The Amnesty program will run from August 2, 2010, through September 30, 2010. A public awareness program is underway to reach the residents of the District, adjacent suburbs and across the country and the District has set a special website: http://www.dctaxamnesty.com/, to assist affected taxpayers.

Aronson and Company’s team of state and local tax experts is ready to assist effected taxpayers with issues such as: (a) eligibility requirements; (b) required documents including application forms; and, (c) expedite payments and liability resolution. Affected taxpayers should contact either Jack Koniszewski at 301-231-6205 or Henry Chiwaya at 301-222-8217.

IRS Reporting for Foreign-Sourced Accounts

All US taxpayers are required to report any interest in a foreign-sourced bank or investment account on an annual basis, due on June 30^th (Form TD F 90-.22.1).  The penalty for failure to report is substantial.

 The IRS has given taxpayers until September 23, 2009 to catch up on this obligation by filing the required forms for the previous 6 years (2003-2008).  Organizations should take care of these filings immediately if this applies to them.