Federal Extension to pay June 16 Estimates

IRS extends estimated tax payment and other deadlines for storm victims in 10 states
IR 2008-78
IRS has announced that victims of recent storms and flooding in Iowa, Indiana, and Wisconsin have more time to make quarterly estimated tax payments normally due on June 16, 2008. Similar relief was extended earlier this year to victims of storms and floods in seven other states. Many other filing, tax payments and certain other time sensitive acts also are postponed for victims of storms and flooding in 2008.

Who gets relief. Only taxpayers considered to be affected taxpayers are eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts. Affected taxpayers are those listed in Reg. § 301.7508A-1(d)(1) and thus include:

    • any individual whose principal residence, and any business entity whose principal place of business, is located in the counties designated as disaster areas;
    • any individual who is a relief worker assisting in a covered disaster area, regardless of whether he is affiliated with recognized government or philanthropic organizations;
    • any individual whose principal residence, and any business entity whose principal place of business, is not located in a covered disaster area, but whose records necessary to meet a filing or payment deadline are maintained in a covered disaster area, or whose tax professional/practitioner is located in a covered disaster area;
    • any estate or trust that has tax records necessary to meet a filing or payment deadline in a covered disaster area; and
    • any spouse of an affected taxpayer, solely with regard to a joint return of the husband and wife.

What may be postponed. Under Code Sec. 7508A, IRS gives affected taxpayers until the extended date (specified by county, below) to file most tax returns (including individual, estate, trust, partnership, C corporation, S corporation income tax returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date falling on or after the onset date of the disaster (specified by county, below), and on or before the extended date.

IRS also gives affected taxpayers until the extended date to perform other time-sensitive actions described in Reg. § 301.7508A-1(c)(1) and Rev Proc 2007-56, 2007-34 IRB 388, that are due to be performed on or after the onset date of the disaster, and on or before the extended date. This relief also includes the filing of Form 5500 series returns, in the way described in Rev Proc 2007-56, Sec. 8. Additionally, the relief described in Rev Proc 2007-56, Sec. 17 relating to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 or 5498 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. IRS, however, will abate penalties for failure to make timely employment and excise deposits, due on or after the onset date of the disaster, and on or before the information return delayed date (specified by county, below), provided the taxpayer made these deposits by the information return delayed date.

IRS will waive the failure to deposit penalties for employment and excise deposits due on or after the onset date of the disaster, and on or before the deposit delayed date, as long as the deposits were made by the deposit delayed date.

Affected counties and dates for storms and floods in May and June of this year are as follows:
Arkansas: The following are presidential disaster areas qualifying for individual assistance: Arkansas, Benton, Cleburne, Conway, Crittenden, Grant, Lonoke, Mississippi, Phillips, Pulaski, Saline and Van Buren counties.

For these Arkansas counties, the onset date of the disaster was May 2, 2008, the extended date is July 21, 2008, the information return delayed date was May 19, 2008, and the deposit delayed date was May 19, 2008.

Colorado: The following counties are presidential disaster areas qualifying for individual assistance: Larimer and Weld counties.

For these Colorado counties, the onset date of the disaster was May 22, 2008, the extended date is July 25, 2008, the information return delayed date was June 6, 2008, and the deposit delayed date was June 6, 2008.

Georgia: The following are presidential disaster areas qualifying for individual assistance: Bibb, Carroll, Douglas, Emanuel, Jefferson, Jenkins, Johnson, Laurens, McIntosh and Twiggs counties.

For these Georgia counties, the onset date of the disaster was May 11, 2008, the extended date is July 22, 2008, the information return delayed date was May 27, 2008, and the deposit delayed date was May 27, 2008.

Iowa: The following are presidential disaster areas qualifying for individual assistance: Adams, Benton, Black Hawk, Bremer, Buchanan, Butler, Cedar, Cerro Gordo, Delaware, Fayette, Floyd, Hardin, Johnson, Jones, Linn, Louisa, Marion, Muscatine, Page, Polk, Story, Tama, Union and Winneshiek counties.

For these Iowa counties, the onset date of the disaster is May 25, 2008, the extended date is July 28, 2008, the information return delayed date is June 9, 2008, and the deposit delayed date was June 9, 2008.

Indiana: The following are presidential disaster areas qualifying for individual assistance: Adams, Bartholomew, Brown, Clay, Daviess, Dearborn, Greene, Hamilton, Hancock, Henry, Jackson, Jennings, Johnson, Knox, Marion, Monroe, Morgan, Owen, Parke, Putnam, Randolph, Rush, Shelby, Sullivan, Vermillion a
nd Vigo counties.

For these Indiana counties, the onset date of the disaster is May 30, 2008, the extended date is Aug. 7, 2008, the information return delayed date is June 16, 2008, and the deposit delayed date is June 16, 2008.

Missouri: The following are presidential disaster areas qualifying for individual assistance: Barry, Jasper and Newton counties.

For these Missouri counties, the onset date of the disaster was May 10, 2008, the extended date is July 22, 2008, the information return delayed date was May 27, 2008, and the deposit delayed date was May 27, 2008.

Oklahoma: The following are presidential disaster areas qualifying for individual assistance: Craig, Latimer, Ottawa and Pittsburg counties.

For these Oklahoma counties, the onset date of the disaster was May 10, 2008, the extended date is July 14, 2008, the information return delayed date was May 27, 2008, and the deposit delayed date was May 27, 2008.

Wisconsin: The following are presidential disaster areas qualifying for individual assistance: Crawford, Columbia, Sauk, Milwaukee and Vernon counties.

For these Wisconsin counties, the onset date of the disaster was June 5, 2008, the extended date is Aug. 13, 2008, the information return delayed date is June 20, 2008, and the deposit delayed date is June 20, 2008.

Claiming disaster loss on previous year’s return. A taxpayer that sustains a loss attributable to a disaster occurring in a Presidential disaster area may elect to deduct that loss on his return for the tax year immediately preceding the tax year in which the disaster occurred. (Code Sec. 165(i)) Generally, a taxpayer must make this election by filing a return, an amended return, or a refund claim on or before the later of (i) the due date of his income tax return (determined without regard to any filing extension) for the tax year in which the disaster actually occurred, or (ii) the due date of his tax return (determined with regard to any filing extension) for the immediately preceding tax year. The election is irrevocable 90 days after it is made. (Reg. § 1.165-11(e)) Because of the new disaster area designation, taxpayers in affected counties designated as disaster areas in 2008 can elect to claim a 2008 disaster loss on their 2007 returns, instead of on their 2008 returns.

    RIA observation: Claiming the disaster loss for the year before the loss occurred saves taxes immediately, without having to wait until the end of the year in which the loss was sustained. In some cases, the deduction may result in a net operating loss, which could result in a refund from an earlier year to which it is carried. On the other hand, deducting the loss in the year the loss actually occurred may result in bigger tax savings if the taxpayer is in a higher bracket in that year.

RIA Research References: For postponement of tax deadlines due to disasters, see FTC 2d/FIN ¶ S-8500; United States Tax Reporter ¶ 75,08A4; TaxDesk ¶ 570,306.

Source: Federal Taxes Weekly Alert (preview) 06/19/2008, Volume 54, No. 25

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Relief for Today’s Tax Due Date!

From the Wisconsin Department of Revenue website, an extension for filing and paying taxes due between June 5th and August 13th – this includes any of our clients because our firm is located in Columbia County, one of the affected counties.

Wisconsin Tax Relief for Flood Victims

The federal government has declared several counties in the State of Wisconsin as a presidential disaster area. The affected counties are Crawford, Columbia, Sauk, Milwaukee, Vernon, Racine and Richland, counties. As a result, affected taxpayers in these counties will qualify for federal tax relief. If the Federal Emergency Management Agency declares additional counties eligible for assistance, the relief provisions described below will also apply to affected taxpayers in those counties.

“Affected taxpayers” includes:

  • taxpayers who live, and businesses whose principal place of business is located, in the covered disaster area,
  • taxpayers whose books or tax records or whose tax professionals’ offices are located in the covered disaster area, and
  • relief workers affiliated with a recognized government or philanthropic organization assisting with the relief activities in the covered disaster area.

Income Tax Returns for Taxpayers Other Than Corporations

Affected taxpayers allowed additional time to file their return for the tax year 2007 by the Internal Revenue Service due to the flooding in Wisconsin are allowed an extension of time to file until August 13, 2008, for both federal and Wisconsin purposes. When filing the Wisconsin income tax return with the extension to August 13, 2008, taxpayers should enter the number “03” in the Special Conditions box on the front of the return and write “ Wisconsin flooding” on the line provided.

Installment Payments of Estimated Tax for Taxpayers Other Than Corporations

Affected taxpayers that have an estimated tax payment originally due on or after June 5, 2008, and before August 13, 2008, are allowed an extension of time to make such payment until August 13, 2008.

Corporation Franchise or Income Tax Returns

For federal purposes, affected corporations that have an extended return due date or original return due date that falls on or after June 5, 2008, and before August 13, 2008, are granted an extension of time to file until August 13, 2008. These corporations are allowed an additional 30 days beyond August 13, 2008, to file their corresponding Wisconsin returns.

Corporation Installment Payments of Estimated Tax

Affected corporations that have an estimated tax payment originally due on or after June 5, 2008, and before August 13, 2008, are allowed an extension of time to make such payment until August 13, 2008.

Sales and Use, Withholding, and Excise Tax Returns, Reports, and Payments

For reporting periods with a due date that falls on or after June 5, 2008, and before August 13, 2008, an “affected taxpayer” may request a 30-day extension of time to file sales and use, withholding, or excise tax returns or reports. Requests for an extension should be sent to:

Registration Unit
Wisconsin Department of Revenue
PO Box 8949
Madison, WI 53708-8949

For more information or if you have questions, please contact the Department of Revenue at (608) 266-2772.

Last updated June 16, 2008

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Not For Profits Due Date May 15

All Not For Profit organizations with a December 31, 2007 financial year end MUST file something with the IRS, beginning TOMORROW, MAY 15, 2008. If you normally file a Form 990, then you will continue to do so.

If you have never had to file Form 990 because your total income was less than $25,000, NOW YOU HAVE TO FILE AN “E-POSTCARD”. That E-Postcard is due tomorrow, May 15 for calendar year reporting not for profit organizations. You may access the outsourced provider of that service at: http://epostcard.form990.org/

As the site says, there is no penalty for not filing by May 15th, but you must file. I would expect it will be difficult to do so tomorrow with the rush of requests. But don’t forget to get it done!

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Fringes for S Corps, Ptnrshps & LLC’s

Which tax-free and tax-favored fringe benefits are passthrough owners entitled to?
RIA Practice Alert
Partnerships, LLCs treated as partnerships, and S corporations have distinct tax and nontax advantages. However, entrepreneurs considering these forms of business should be aware that fewer tax-free and tax-favored fringe benefits are available to owner-entrepreneurs of passthroughs than to shareholder-employees of C corporations. This Practice Alert reviews which fringe benefits can be made available on a tax-preferred basis to partners, members of LLCs taxed as partnerships, and more-than-2% S shareholder-employees. It helps practitioners advise clients who are thinking of operating a business as a passthrough, or are operating as a passthrough and are looking for ways to maximize their tax-free compensation.

Note that the statutory rules allowing or denying fringe benefits to passthrough owners are stated explicitly only in the context of partners and partnerships. However, under the default classification rules of Reg. § 301.7701-3(b)(1)(i), a domestic eligible entity with two or more members automatically is treated as a partnership unless it elects to be taxed as an association (i.e., as a corporation). And under Code Sec. 1372 , for fringe-benefit purposes, more-than-2% S corporation shareholder-employees are subject to the rules that apply to partners, and S corporations are treated as partnerships. As a result, unless otherwise noted, the tax consequences of fringes for members of LLCs taxed as partnerships and for more-than-2% S shareholder-employees are the same as they are for partners.

Working condition fringe benefits. Property or services supplied by an employer to an employee are tax-free working condition fringe benefits (WCFBs) if the employee would be entitled to a business expense deduction under Code Sec. 162 or Code Sec. 167 for the item had he paid for it himself. (Reg. § 1.132-5(a)(1)(i)) For WCFB purposes, the term “employee” includes partners who perform services for the partnership. (Reg. § 1.132-1(b)(2)(ii)) Thus, partners may receive the following WCFBs tax-free:

    • Business-related use of a company auto, if properly substantiated. (Reg. § 1.132-5(a)(1)) The personal-use value of the auto must, however, be treated as compensation income. (Reg. § 1.61-21(a)(1))
    • The business-use portion of company paid country club dues, even though the dues are completely nondeductible. (Reg. § 1.132-5(s))
    • Job-related education expenses paid by the firm. (Reg. § 1.132-1(f))
    • Job placement assistance. (Rev Rul 92-69, 1992-2 CB 51)

De minimis fringe benefits. For purposes of the tax-free de minimis fringe benefit rules, “employees” include any recipient of a fringe benefit. (Reg. § 1.132-1(b)(4)) So partners are entitled to get tax-free supper or supper money or local transportation fare if provided on an occasional basis in connection with overtime work. (Reg. § 1.132-6(d)(2)(i)) Other de minimis fringes include:

    • traditional birthday or holiday gifts of property (not cash) with a low fair market value (an undefined term in the regs), occasional theater or sporting event tickets, and fruit, books, or similar property provided under special circumstances (e.g., on account of illness, outstanding performance, or family crisis) (Reg. § 1.132-6(e)); and
    • traditional awards (such as a gold watch) upon retirement after lengthy service. (H Rept No. 99-426 (PL 99-514) p. 105)

Dependent care assistance. Partners are eligible for the Code Sec. 129 dependent care assistance exclusion. (Code Sec. 129(e)(3)) The exclusion is for amounts provided under a written plan of the employer and is limited annually to $5,000 ($2,500 for a married person filing separately). However, for a plan to qualify as a dependent care assistance program, no more than 25% of the amounts paid or incurred by the employer for dependent care assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5% of the stock or of the capital or profit interest in the employer. (Code Sec. 129(d)(4))

Educational assistance programs. Under Code Sec. 127, employers can set up educational assistance programs under which employees can receive up to $5,250 per year of graduate- or undergraduate-level educational assistance tax-free, whether or not job-related. Employees for this purpose include partners who have earned income from their partnerships, which, in turn, are treated as employers of these partners. (Code Sec. 127(c)(2); Code Sec. 127(c)(3); Code Sec. 401(c)(1)) However, no more than 5% of the cost of annual benefits may be provided for the class of individuals (and their spouses and dependents) each of whom (on any day of the year) own more than 5% of the stock or of the capital or profits interest in the employer. (Code Sec. 127(b)(1))

Athletic facilities. The Code Sec. 132(j)(4) exclusion for on-premises athletic facilities (e.g., swimming pool, gym) is available to partners (and their spouses and/or children). (Reg. § 1.132-1(b)(3))

No-additional-cost services and qualified employee discounts. For purposes of these tax-free fringes, partners who perform services for a partnership are treated as employed by the partnership. (Reg. § 1.132-1(b)(1))

Transportation fringes. A partner cannot exclude qualified transportation fringes under Code Sec. 132(f) (currently, the value of qualified parking up to $200 a month, and up to $115 a month of the combined value of transit passes and transportation in a commuter highway vehicle). (Code Sec. 132(f)(5)(E); (Reg. § 1.132-9(b), Q&A 24(a)) However, under the de minimis benefit rules, tokens or fare cards provided by a partnership to a partner that enable the recipient to commute on a public transit system (not including privately-operated van pools) are excludable from income if the value of the tokens or farecards in any month doesn’t exceed $21. If the full value of a pass provided in a month exceeds $21, the full value of the benefit is includible. (Reg. § 1.132-9(b), Q&A 24(b)) In addition, if a partner would be able to deduct the cost of parking as a business expense (e.g., parking cost incurred in connection with traveling from the regular office to another business office), the value of the free or reduced-cost parking is excludable as a working condition fringe benefit.

Source: Federal Taxes Weekly Alert (preview) 05/08/2008, Volume 54, No. 19

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What do we do all year?

Our busiest month is May. Yes, you read correctly, May. It is not April.

As a full service CPA firm with a niche practice in Skilled Nursing Facilities, Residential Care Apartment Complexes, and Community Based Residential Facilities, May is the month in which the regulatory reports need to be filed for Medicaid and Medicare. May is also the month in which our not for profit clients need to file their regulatory reports with the IRS.

June begins our government funding audits for the CBRF’s and RCAC’s and the not for profits. These continue throughout August. From July through November, we have all of the same year end tax season work for our business clients who have May/June fiscal year ends.

At the end of November, we take a break for Thanksgiving, and then go back to school to learn more about tax law and accounting standard changes to be ready for the next year.

So for all of you who ask about a vacation after April 15th….there isn’t any. I do run off to Omaha, to listen to Warren and Charlie at the Berkshire Hathaway annual Shareholders meeting, which I did on Saturday. As soon as I summarize my notes, I’ll post those for your reference. It was another great day of financial and business education.

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