Friday, October 23, 2015

What Taxpayers Need to Know About the FBAR Deadline Change

What Taxpayers Need to Know About the FBAR Deadline Change

FBARAs part of the new highway appropriations bill, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, the deadline for filing Reports of Foreign Bank and Financial Accounts, or FBAR, has been changed to April 15. The new deadline was moved up from June 30 to align with the filing date for individual tax returns, and carries stiff penalties for taxpayers.

Thursday, October 22, 2015

The Social Security Administration Has Announced The Wage Base for Computing the Social Security Tax

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in will remain at $118,500.

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

For 2016, the FICA tax rate for employers is 7.65%—6.2% for OASDI and 1.45% for HI. For 2016, an employee will pay:

  • (a)  6.2% Social Security tax on the first $118,500 of wages (maximum tax is $7,347.00 [6.2% of $118,500]), plus
  • (b)  1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
  • (c)  2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return

For 2016, the self-employment tax imposed on self-employed people is:

  • 12.4% OASDI on the first $118,500 of self-employment income, for a maximum tax of $14,694.00 (12.40% of $118,500); plus
  • 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a separate return),plus
  • 3.8% (2.90% regular Medicare tax + 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return).

There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.

Sunday, October 18, 2015


Unfortunately today Identity theft is a common occurrence.

In order to combat identity theft of a person’ s tax refunds, the IRS began issuing IP PINs to eligible taxpayers in Fiscal Year 2011. An IP PIN is a 6-digit number assigned to eligible taxpayers that allows their tax returns/refunds to be processed without delay and helps prevent the misuse of their SSNs on fraudulent Federal income tax returns. For Processing Year 2014, IRS issued over 1.2 million IP PIN notices to taxpayers for use in filing their tax returns.

To get an IP PIN the personal information the taxpayer entered must match the information provided us on the most recent tax return. The IRS uses the following information to verify your identity:

·        Name

·        Social Security Number or Individual Tax ID Number (ITIN)

·        Date of Birth

·        Filing Status

·        Mailing Address

·        Third Party Verification Questions - you must provide answers to questions about personal information such as prior address, mortgage information, etc., that only you should know.

You must also provide the IRS with a valid email address, which we will be confirmed and use to notify the taxpayer if his registration information changes.

Once a taxpayer gets an IP PIN, he must use the IP PIN to confirm his identity on his current federal tax return and any delinquent returns filed during the calendar year. IRS sends a new IP PIN each December by postal mail.

On its website, IRS has discussed various IP PIN issues, including:

Fpor example...Who can get an IP PIN?

A taxpayer can receive an IP PIN if he meets one of the following criteria:

  • He received an  IP PIN last year;
  • He received a CP01A (which provides an IP PIN) or CP01F (which invites the taxpayer to obtain an IP PIN) notice; or
  • He filed his last tax return as a resident of FL, GA, or DC. (FAQ 3)

What happens when a taxpayer receives an IP PIN but doesn't use it on his return?

The answer depends on whether the taxpayer files electronically or on a paper return.

For an electronic return: if IRS sent an IP PIN through Get an IP PIN, but the taxpayer did not use it or he entered it incorrectly, his return will be rejected and he won't be able to e-File his return.

For a paper return: failure to input the IP PIN for the primary taxpayer (when required) on a paper return will mean his return will take longer to process while IRS validates the information.

Must a taxpayer include his dependent's IP PIN on his tax return?

Not at the current time. He will not need to enter an IP PIN for a dependent in order to file his return. However, if the dependent's SSN has been used to file another tax return, the dependent should report the incident to IRS, an identity theft indicator will be placed on the dependent's account, and the dependent may receive an IP PIN prior to the tax season. While this IP PIN doesn't have to be entered to claim the person as a dependent, the IP PIN will prevent anyone else from filing a tax return using the dependent's information as the primary or secondary taxpayer.

Starting Jan. 1, 2016, there will be new rules for the dependent IP PIN. IRS will require the use of IP PINs for all SSNs with an IP PIN requirement, regardless of whether the SSN is entered for a primary, spouse, or dependent/qualifying individual. This requirement applies to the Form 1040 series of returns, Form 2441 (Child and Dependent Care Expenses) and Schedule EIC (Earned Income Credit). Failure to include the IP PIN in any of the required fields will result in the return being rejected. (IP PIN Program Update: Numbers Must be Entered for All IP PIN Holders)