Anthony Sykes & Company

The Internal Revenue Service has issued final regulations shortening the automatic extension time period for partnership, trust, and estate tax returns from six to five months, meaning the returns are due Sept. 15. The final regulations in TD 9531 put in place a temporary change that was originally created in July 2008. Those temporary and proposed regulations reduced the automatic six month extension of time to file to five months for certain pass-through entities, including most partnerships, estates, and certain trust. As these pass-through entities were previously allowed to obtain an automatic six-month extension of time to file certain returns under 2005 regulations, the Treasury Department and the IRS requested comments on whether, and how, a five-month extension of time to file for these pass-through entities might increase or reduce overall taxpayer burden. Approximately 10 comments were received in response to the notice of proposed rule making. A public hearing was held ...

The Court of Appeals for the Fifth Circuit has denied an employer's refund claim, even through the employer had overpayments in certain quarters that were not applied to its withholding tax liability [Nicholas Acoustics & Specialty Company, Inc. v., CAS, 107 AFTR 2d ||2011-950,6/15/11]. Between 1999 and 2003, Nicholas Acostics & Specialty Company, Inc. (Nicholas) remitted payroll taxes to the IRS, but failed to file any tax returns.  The funds remitted were not for the exact amount owed, but were instead an estimate of the amount due.  The company occasionally paid taxes in excess of its liability.  Nicholas erroneously assumed that the IRS could apply all of its overpayments to other quarters in which it had underpaid its tax liability. In 2003, the IRS audited Nicholas due to its failure to file its tax returns.  After the audit, Nicholas filed returns for the missing quarters, which allowed the IRS to refund overpayments or credit the overpayments to c...

IRS has released a draft of form 5884, Work Opportunity credit taxpayer to claim this tax credit, which is scheduled to expire for employees who begin work after 2011.  For many taxpayers, information previously reported on the form would now be reported directy on Form 3800 General Business Credit. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation At of 2010 extended Code Sec. 51 work opportunity tax credit four months to include individuals who began work before Jan 1, 2012. Under pre-Act law, wages for purposes of the credit didn't include any amount paid or incurred for an individual who began work after Aug. 31, 2011. The credit allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of the first-year wages up to $6,000 per employee($12,000 for qualified veterans; and $3,000 for qualified summer youth employees).  Where the employee is a long-term family assistance (LTFA) recipient the...

Form 8903 Domestic Produciton Activities Deduction (DPAD) is for those businessess that make a product in the United States and Puerto Rico.  It is available to individuals, corporations, cooperatives, estates, and trusts.  For those businesses that are pass through entities such as partnerships and S corporations the partners or shareholders take the deduction on their personal tax returns. The DPAD is not just for oil and gas companies any individual or entity can qualify as long as it has Qualified Produciton Activities Income (QPAI). Domestic Produciton Gross Recipts (DPGR) is Construction of real property you build in the united States in your construction trade or business. Engineering or Architectural services trade or business for the construction of real property in the United States. Any lease, rental, license, sale, exchange, or other disposition of the following. a. Qualifying produciton property you manufacture, produce, grow or extract in whole or in ...

If you received a form 1099-C (Cancellation of Debt) for a loan modification, foreclosure, or short sale of your primary residence, you maybe able to reduce the amount of income to be included in your income tax return from form 1099-C.  Form 982 is used to show reduction of the amount of debt included as income from several sources but I am only going to discuss the part that pertains to a primary residence.  In order to use form 982 for your primary residence you must have Qualified Principal Residence Indebtedness.  This is a mortage that you took out ot buy, build, or substantially improve your main home.  Also the debt is secured by your main home.  If the amount of the orginal mortgage is more than the cost of your main home plus improvements, only the debt that is not more the cost of your main home plus improvements is qualified principal residence indebtedness.  The amount of exclusion applies only to debt discharged after 2006 and before ...

If you have had a mortgage loan modification and you receive a form 1099-C (cancellation of debt) there may be some tax relief. Publication 4681 Canceled Debts, Foreclosures, Repossessions and Abandonments goes into detail about cancelled debt and defines exclusions and deductions. I am only going to discuss how this affects your primary residence. A mortgage loan modification occurs when you and the bank agree to a reduction of the principle balance. You may receive a form 1099-C showing cancelled debt; this amount is to be included in income. However if it qualified debt (the mortgage was used to buy, build, or to substantially improve your main home) then the amount on the 1099-C line 2 or a portion of it may be entered on form 982 to be excluded from income. If you have refinanced your primary home and received money then your qualified debt may be limited to your original mortgage depending on what the money was spent on. Also the amount of debt that was not used to improve the ...

In February of this year IRS made major changes to its practice of filing tax liens. These changes include: Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens. Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill. Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement. Creating easier access to Installment Agreements for more struggling small businesses. Expanding a streamlined Offer in Compromise to cover more taxpayers. When IRS files a tax lien it notifies the public that the taxpayer's property can be used to satisfy a tax debt. This adversely affects a person's credit making it harder to get a loan to pay off the debt. To help taxpayers IRS has raised the lien threshold to 25,000. Also, IRS will allow Installment Agreements on amounts owed under 25,000 without submitting a financial statement but a lien may be filed. In order to not have ...

The 1099K Merchant Card and Third Party Network Payments form is now available.  This form was created to account for monies that merchants who accept credit and debit cards received.  Some businesses have a separate bank account for their merchant services or may be using a foreign merchant service company and may not report all the income  received when preparing  their taxes.  On the form 1099K each month is shown separately so that the total on line 1 equals the total of the all the months. This form should be mailed by January 31 just as all other 1099s. It will be mailed from the merchant service company to all its customers.  If the total number of transactions are less than 200 or the total amount of transaction dollars is less than $20,000 for the year a 1099K may not need to be issued.

The Franchise Tax Board (FTB) has issued an update on the estimated application and reservation requests received for the New Home Credit.  As of May 24, 2011 the FTB has received 21,390 ( up from 21,250 as of May 17) resevation requests and 31,280 (up from 31,110) applications.  This is different from the federal because there was no seperate application.  The FTB will stop accepting applications when it has received sufficient applications to allocate the full $100 million.  This is different from the federal because there was no limit.  New homes closing escrow in 2011 are only eligible for the New Home Credit if the is purchased pursuant to an enforceable contract executed on or before December 31, 2010.  This is different from the federal which ended April of 2010.  Claimants should continue using the 2010 forms for homes purchased pursuant to an enforceable contract in 2010, but closing in 2011.  Taxpayers who applied or the New Home Credit ...

IRS is asking for public comment on Tax Preparer Exams.  This means that you can make suggestions on what topics tax preparers should be tested on or if you feel they should have to take a test at all.  In developing the exam IRS would like to know if you think the examination should concentrate in a certain area of tax law or cover all areas in general.  Do you feel the exam should be multiple choice, true or false, writtern problems or short answers or a combination of all.  Also how often should the exam be given once a year or several times a year and when can a person apply and how often they can apply if they need to retake the test.  To make suggestions and comments about the Tax Preparer Exams email IRS at Notice.Comments@irs.counsel.treas.gov  before July 7, 2011.