EisnerAmper Blog

Private Business Services Blog - An Accounting & Advisory Resource

FBAR Due Date Revised

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August 12, 2015

Gibson_New(1)By Dan Gibson, CPA
The Foreign Bank and Financials Report (“FBAR”) is used to report signature authority over or a financial interest in a foreign financial account. The report formerly done on a Form TD F 90-22.1 is now done, electronically, via a FinCEN Form 114.

Generally, for years ending through December 31, 2015, those with foreign accounts that aggregate a value that exceeds $10,000 at any time during the calendar year must file a Financial Crimes Enforcement Network (“FinCen”) Form 114. These reports are due to the Treasury Department on or before June 30 of the year following the calendar year being reported on. The filing date cannot be extended. 
Under the recently passed Highway Trust Fund extension law, the due date and ability to extend the due date has been revised for years beginning after December 31, 2015. The Department of the Treasury has directed that the FinCEN Form 114 will be due on April 15 of the year following the calendar year being reported on. Treasury will allow an extension for a period of 6 months that would extend the due date until October 15. In addition, the Department will be providing first-time abatement relief to those required to file for the first time who fail to request or file an extension.

Changes to Business Tax Return Filings

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August 10, 2015

Gibson_New(1)By Dan Gibson, CPA

In case you were wondering, your federal government has been hard at work. Recently, new legislation (Highway Trust Fund extension law) has come up with new filing due dates for business tax returns.

All of these changes apply to returns for tax years beginning after December 31, 2015 with the one exception described above for C corporations with June 30 year-ends.

  • March 15 – Will now be the filing due date for all calendar year-end partnerships and S corporations. This is new for partnerships and continues to be the case for S corporations. Those not filing with calendar year-ends will file their returns on the 15th day of the third month following the year-end of the entity (for example, an S corporation with a March 31 year-end would have a due date of June 15,excluding any extension).
  • April 15 – C Corporations will file by the 15th day of the fourth month following the year-end of the entity. For calendar year-end C corporations, this will mean a filing due date of April 15. The exception to the rule is for those C corporations with years ending on June 30. For these entities, the due date will remain the 15th day of the 3rd month following the year-end of the entity until tax years ending after December 31, 2026. At that time, the filing due date will be the 15th day of the 4th month following the year-end of the entity.

Extension filing periods have been affected as well.    

  • S Corporations – Will continue to be allowed an automatic extension for 6 months.
  • Partnerships – Automatic extensions will increase from 5 months to 6 months.
  • C Corporations – Calendar year-end C corporations will have an automatic extension of 5 months. C corporations with year-ends that end on June 30 will be allowed a 7-month extension. C corporations with other year-ends will be granted extensions of 6 months.

There are items in this legislation that affect other taxpayers, but more on that in future postings.

Update on Health Insurance Plan Reporting

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August 4, 2015

Gibson_New(1)By Dan Gibson, CPA

The IRS released IRS Health Care Tax Tip 2015-42 on July 21, 2015 and updated it on July 28, 2015. This notice was a reminder to all providers of health coverage, including employers that provide self-insured coverage, that they must file annual returns with the IRS reporting information about the coverage and about each covered individual. Insurance companies must also report on coverage under employer plans that are insured.

Employers will be reporting this information on Forms 1094-B and 1095-B or on Forms 1094-C and 1095-C, depending on whether the employer is an applicable large employer for purposes of the employer shared responsibility provisions. An applicable large employer is defined as an employer that employed an average of at least 50 full-time employees – including full-time equivalent employees – in the preceding calendar year.

If the employer providing self-insured coverage is not an applicable large employer, then they must:

  • Report the coverage on Form 1095-B, along with the Form 1094-B transmittal.
  • Furnish a copy of the 1095-B to the applicable employee.   

An Employer providing self-insured coverage and that is an applicable large employer, will generally report information regarding coverage of eligible employees and their covered dependents on Form 1095-C, not a Form 1095-B. 

These reporting requirements initially kick in for coverage provided in 2015. Therefore, the information forms mentioned above will be due to the IRS in early 2016.

Providers will be reporting the following information to the IRS:

  • The name, address, and employer identification number of the provider.
  • The statement recipient’s name, address, and taxpayer identification number, or date of birth if a TIN is not available. 
  • The name and TIN, or date of birth if a TIN is not available, of each individual covered under the policy or program and the months for which the individual was enrolled in coverage and entitled to receive benefits.
    I urge you to review my earlier posting  on this topic. If you are an employer or work for an employer as a financial executive, controller or CFO and your business provides any sort of health care insurance coverage for its employees (self-insured or not), you’ll want to address these new reporting issues as soon as possible.
  • First, determine what your reporting requirements are.   
  • Second, determine who will generate these information forms.    
  • Last, determine how much it will cost for you to get the reporting done.     

This is definitely one of those instances where you’ll want to be proactive and not wait until year-end to sort this all out!

New ACA Penalty as of July 1

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July 16, 2015

Gibson_NewBy Dan Gibson, CPA

For those small employers (less than 50 employees) who are thinking they can provide their employees with medical insurance coverage but avoid the medical insurance hassle in covering their employees with a company plan, please consider the following. Many employers have come up with a plan of just giving their employees the money to go out to purchase their own health coverage; thereby avoiding the headaches of shopping for and then maintaining medical insurance plan for their worker pools. This may have worked years ago, prior to the Affordable Care Act (“ACA”), but not anymore. Doing this could result in fines of $100 per day, per employee or $36,500 per year, per employee. The ACA is truly an employer-driven system and this rule has been set up to keep it that way.

Employers were provided some transitional relief from this penalty, but that expired on June 30, 2015.

Federal tax law prohibits any form of "employer payment plan" with respect to non-sponsored or integrated "individual" health policies (other than certain "excepted benefits" such as limited-scope dental or vision policies). Specifically, employers are prohibited from making or offering any form of payment for individual policy premiums, whether through pretax reimbursements, premium reimbursement arrangements (i.e., HRAs), after-tax reimbursements, or cash compensation. This limitation exists, regardless of employer size.

As a small business, what are your options?

  1. Get health insurance on your state’s SHOP Exchange.
  2. Hire an insurance broker/agent and ask them to obtain an ACA-compliant plan.
  3. Don’t offer any employee health insurance.

None of these are particularly creative, but the penalties being assessed by ignoring them can be onerous.


Borrower Beware

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June 26, 2015
Gibson_New(1)By Dan Gibson, CPA

There are occasions when individuals are advised to borrow money against property (non-residence) or securities they own in order to fund the purchase of, say, a home or a vehicle. Then, they are often incorrectly told that the interest is deductible as either mortgage interest or investment interest.    

Interest on a loan not secured by the first or second home, as is the case above, must be traced. Traced interest means categorized based on the use of the loan proceeds. These categories include trade/business, passive activity, investment, portfolio and personal. 

For example, Joe takes out an equity loan against his rental property, so that he can purchase a new car for personal use. Mortgage company issues a Form 1098, reporting the interest paid. However, since he used the proceeds for personal use, the interest expense is not deductible against the rental income. In fact, the interest is not deductible at all because it is considered personal interest. Alternatively, if Joe had taken out an equity loan against his principal residence and purchased a car, the interest would have been deductible as mortgage interest. (This is assuming the balance of his equity loan against his residence is less than $100,000 and he is not subject to the alternative minimum tax.)

In an actual tax court case, Ellington, T.C Memo 2011-193, the taxpayers purchased a personal residence and secured the loan, used to make the purchase, partially against the residence and partially against securities owned. The taxpayers deducted the interest on the portion of the loan secured by the securities as investment interest expense. The Court disallowed that deduction, stating that the interest on the loan not secured by the residence must be categorized based on the use of the loan proceeds, not the assets securing the loan. Since that portion of the loan was not secured by the residence, the interest on that portion was considered personal and not deductible.

Installment Agreement Options

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June 9, 2015

Gibson_NewBy Dan Gibson, CPA

Over the last few posts, we’ve discussed offers-in-compromise (Fresh Start and Cash Flow , Fresh Start and Net Equity, and Doesn’t Everyone Deserve a Fresh Start?).  Here’s one more fact about offers-in-compromise: about 50% of them are approved. So, for those left wondering what to do when an offer won’t work, here are some installment agreement options that you can use with the IRS.

First of all, the IRS normally wants to figure out how they can get the taxpayer to full pay as soon as possible. However, with a little persistence and, most likely, handing over your financial information by way of a Form 433, the IRS will eventually give in and accept payment in installments. Here is a summary of installment plans that are available:

  1. Guaranteed: Basically, the IRS is required to accept an installment arrangement from a taxpayer with tax debt (excluding penalties and interest) of $10,000 or less, who can pay the debt in 3 years, who has not entered into a recent installment agreement, has filed prior year returns and agrees to stay current going forward. No Form 433 is needed.    
  2. Streamlined: 
    • $25K or less – Available to taxpayers with a balance due (taxes, penalties and interest) of $25,000 or less who can pay the balance within the earlier of the expiration of collection statute expiration date or 72 months. No 433 is required.
    • $25K to $50K – Similar to the $25K or less arrangement, except that some financial information may be needed and the taxpayer must agree to paying installment with a direct debit to a bank account.
  3. Partial Payment: If the taxpayer can demonstrate, through a Form 433, that they can pay make some installment payments but not enough to cover the debt owed by the collection statute expiration date, the IRS does have the authority to enter into a partial payment installment agreement. This is sometimes known as the poor man’s offer-in-compromise as it can be done at a relatively low cost. However, the downside is the IRS will be checking in every 2 years and will want you to refresh the Form 433 to determine if your financial status has changed.
  4. Negotiated:  If none of the above works, you’re left with doing it the old-fashioned way. The taxpayer will be required to provide a Form 433 and will need to haggle with the IRS about the terms of the installment agreement.

Again, the agent dealing with your case will normally start up the discussion wanting to know when they can expect to received full payment for the amounts due to the IRS. If an installment plan is needed, the taxpayer or practitioner will have to persist and the agent should back down. If not, never shy away from this question: “Who’s your boss, and can I speak with him or her, please?”

Fresh Start and Cash Flow

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June 8, 2015

Gibson_NewBy Dan Gibson, CPA

As stated in my posting on May 14, 2015, determining an offer-in-compromise amount to extinguish debt owed to the IRS is made up of 2 components – net equity and cash flow. These are used by the IRS to determine reasonable collection potential or RCP. RCP represents net equity plus monthly cash flow multiplied by 12 (if offering to make payment in 5 installments or less) or 24 (if offering to make payment in 6 to 24 installments). If the RCP exceeds the amount owed, chances are your offer will be rejected. If it falls below the amount owed, you might have a shot as getting an offer accepted.

In my last posting, I discussed the net equity calculation. In this posting, we’ll take a look at the cash flow calculation.

In most cases, you would think this is pretty easy: “Count the cash I bring in every month and subtract what I have to pay out every month; whatever is left over is discretionary and available for use against, say, amounts due to the IRS.” Unfortunately, the IRS doesn’t quite see it that way.

The IRS appears to start out right by asking you to provide income information supported by pay stubs or a business income statement. Then things take a turn for the worse: The portion that you subtract from this income is not necessarily the amount that you actually pay. Surprised? The IRS has created what are called collection financial standards, which might restrict the amounts you can subtract from your income. The living expenses that are allowable are considered by the IRS to be reasonable amounts that you would otherwise need to spend. Thus, that discretionary amount ends up being higher than you thought. From my past experience, the IRS is pretty rigid when it comes to the standards, but will allow some leeway when the taxpayer has excessive commuting costs, court-ordered payments, medical expenses or education needs for a special needs child. But by no means are they a lay-up. You need to put forth your case for allowing these excessive costs with solid substantiation. By the way, there are some costs which the IRS will normally not allow at all; namely, credit card payments, payments on unsecured debt, private school tuition and charitable contributions.

The key to understanding the logic of the IRS when it comes to determining cash flow is to know about the collection financial standards. Your cash flow bottom line calculation, based on the standards, can make or break your chances of getting to “yes” when it comes to an offer.

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