2013 Revised Tax Rates

Posted by Sanket Shah | International Tax | Tuesday 15 January 2013 12:49 pm

On January 11, 2013, Internal Revenue Service announced annual inflation adjustments for tax year 2013, including the tax rate schedules, and other tax changes from the recently passed American Taxpayer Relief Act of 2012.

The revised tax rates are as follows:

The other changes that are of great interest to most taxpayers include the following:

1. The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.

2. The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).

3. The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly). It phases out completely at $372,500 ($422,500 for married couples filing jointly.)

4. The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).

5. The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012.

6. Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.

7. For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

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IRS Plans Jan. 30 Tax Season Opening For 1040 Filers

Posted by Sanket Shah | International Tax | Friday 11 January 2013 11:40 am

Following the January tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), the Internal Revenue Service announced today it plans to open the 2013 filing season and begin processing individual income tax returns on Jan. 30.

The IRS will begin accepting tax returns on that date after updating forms and completing programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted Jan. 2. The announcement means that the vast majority of tax filers — more than 120 million households — should be able to start filing tax returns starting Jan 30.

The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.

“We have worked hard to open tax season as soon as possible,” IRS Acting Commissioner Steven T. Miller said. “This date ensures we have the time we need to update and test our processing systems.”

The IRS will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit.

“The best option for taxpayers is to file electronically,” Miller said.

The opening of the filing season follows passage by Congress of an extensive set of tax changes in ATRA on Jan. 1, 2013, with many affecting tax returns for 2012. ‬While the IRS worked to anticipate the late tax law changes as much as possible, the final law required that the IRS update forms and instructions as well as make critical processing system adjustments before it can begin accepting tax returns.
The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.

Who Can File Starting Jan. 30?

The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Who Can’t File Until Later?

There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.
The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances.

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Fiscal cliff deal raises 2013 tax rates

Posted by Sanket Shah | Newsletters | Saturday 5 January 2013 3:54 pm
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IRS issues memo on “Tie breaker” rule under a tax treaty

Posted by Sanket Shah | General | Tuesday 27 November 2012 7:45 pm

A recent IRS memo addresses the U.S. tax status of a U.S. citizen deemed to be a resident of a foreign country under a tax treaty “tie breaker” rule.

The memo was issued with respect to Israel, but the general rule stated at the conclusion of the memo would seem to apply to other treaty countries with such a tie breaker rule as well.

This is what was stated at conclusion:

“A U.S. citizen who is treated as a resident of another country under an income tax treaty would still be required to file a Form 1040 (assuming his income meets the filing thresholds) and would still be subject to U.S. tax on his worldwide income (except to the extent one of the exceptions to the saving clause applies).”

You can read the entire memo here . . . . http://1.usa.gov/Wtl65m

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A new streamlined filing compliance procedures for non-resident U.S. taxpayers went into effect on September 1, 2012

Posted by Sanket Shah | General | Tuesday 4 September 2012 4:33 pm

Description of the New Streamlined Procedure

This streamlined procedure is designed for taxpayers that present a low compliance risk. All submissions will be reviewed by the IRS, but, the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program (OVDP).

Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past six years. Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns.

Eligibility

The eligibility requirement is on the questionnaire that a taxpayer must submit (see attached questionnaire by clicking on http://slidesha.re/OjdYpH)

The taxpayer qualifies only if each of the following questions answered No.

1. Have you resided in the U.S. for any period of time since January 1, 2009?
2. Have you filed a U.S. tax return for tax year 2009 or later?
3. Do you owe more than $1,500 in U.S. tax on any of the tax returns you are submitting through this program?
4. If you are submitting an amended return (Form 1040X) solely for the purpose of requesting a retroactive deferral of income on Form 8891, are there any adjustments reported on the amended return to income, deductions, credits or tax?

You can read further about the program and its instructions at http://1.usa.gov/PFp8VJ

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Tax implications in India and US on sale of property held by US person in India

Posted by Sanket Shah | Newsletters | Tuesday 7 August 2012 10:52 am

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or anticipate to receive an
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What are the tax implications in
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held by US person in India.

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Taxability of [Indian] PPF Interest in USA

Posted by Sanket Shah | Newsletters | Thursday 26 July 2012 5:52 pm
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Who is required to file an US individual tax return

Posted by Sanket Shah | Newsletters | Thursday 26 July 2012 5:36 pm
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Form 8938

Posted by Sanket Shah | General | Wednesday 1 February 2012 12:01 pm

 

For tax years beginning after March 18, 2010, certain individuals must file new Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds the reporting threshold amount.

Who Must File: Unless an exception applies, you must file Form 8938 if you are a specified person that has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold.

Exception: If you do not have to file an income tax return for the tax year, you do not have to file Form 8938, even if the value of your specified foreign financial assets is more than the appropriate reporting threshold.

Specified individual: You are a specified individual if you are one of the following:

1. A U.S. citizen

2. A resident alien of the United States for any part of the tax year

3. A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return

Specified foreign financial assets: Generally include the following assets:

1. Any financial account maintained by a foreign financial institution.

2. To the extent held for investment and not held in a financial account, any stock or securities issued by someone that is not a U.S. person, any interest in a foreign entity, and any financial instrument or contract with an issuer or counterparty that is not a U.S. person.

Reporting threshold: If the total value of your specified financial assets is more than the following:

Taxpayer living in United States

Taxpayer living abroad

On the last day of the tax year

Anytime during the tax year

On the last day of the tax year

Anytime during the tax year

Unmarried $50,000 $75,000 $200,000 $300,000
Married filing jointly $100,000 $150,000 $400,000 $600,000
Married filing separately $50,000 $75,000 $200,000 $300,000

Form 8938 does not relieve you of the requirement to file FBAR form TD F 90-22.1

 

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USA Tax Amnesty Program OVPD Reopens

Posted by Sanket Shah | General | Tuesday 10 January 2012 3:03 pm

The Internal Revenue Service on January 9th, 2012 reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes.

The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply.  However, the terms of the program could change at any time going forward.  For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.

Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures.  Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program.

The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

The IRS is currently developing procedures by which dual citizens and others who may be delinquent in filing, but owe no U.S. tax may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.

More details will be posted on our blog, as it becomes available.

Official announcement can be read here http://www.irs.gov/newsroom/article/0,,id=252162,00.html?portlet=108

 

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