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August 2014 tax compliance calendar

As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of August 2014. August 1 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates July 26-29. August 6 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates July 30-August 1. August 8 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 2-5. August 10 Employees who work for tips. Employees who received $20 or more in tips during July must report them to their employer using Form 4070. August 13 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 6-8. August 15 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 9-12. August 20 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 13-15. August 22 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 16-19. August 27 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 20-22. August 29 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 23-26. September 4 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 27-29. September 5 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates August 30-September 2. If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby...

FAQ: Why use a partnership instead of an S corporation?

Taxpayers that plan to operate a business have a variety of choices. A single individual can operate as a C corporation, an S corporation, a limited liability company (LLC), or a sole proprietorship. Two or more individuals can form a partnership, a corporation (C or S), or an LLC. Nontax considerations State law and nontax considerations are an important consideration in choosing the form of the business and may play a decisive role. A general partner of a partnership has unlimited liability for the debts of the business. This can be modified by using a limited partnership (LP), which must have at least one general partner and at least one limited partner. The general partner still have unlimited liability, but a limited partner’s liability is limited to its contribution to the partnership. A corporation has limited liability; shareholders generally are not responsible for the liabilities of the corporation beyond their contributions to the entity. Federal tax considerations At the same time, it is crucial to consider federal tax requirements and consequences when choosing the form of business entity. A primary federal tax consideration is avoiding a double layer of tax on business income. This can be accomplished by operating as a passthrough entity, such as a partnership or S corporation. Income is not taxed at the entity level. It passes through to partners and shareholders and is taxed at their rates. In contrast, C corporations are taxable entities. Furthermore, when a C corporation pays a dividend to its shareholders, this generally is taxable to the shareholder. It must be noted that income of a passthrough entity is allocable and...

How Do I . . . compute the employer child care expense credit?

Employers may be able to claim a tax credit for a portion of their expenses for providing child care to their employees. Code Sec. 45F allows a employer-provided child care credit, which is a part of the general business credit. Businesses calculate the credit using Form 8882, Credit for Employer-Provided Childcare Facilities and Service, and enter any credit amount on Form 3800, General Business Credit, which must be attached to an employer’s tax return. Amount of the credit The amount of the credit is the sum of 25 percent of an employer’s “qualified childcare facility expenditures,” plus 10 percent of the employer’s “qualified childcare resource and referral expenditures” for the tax year. The total credit amount is limited to $150,000. Qualified childcare facility expenditures Examples of expenses that are qualified child care expenditures include: Expenses paid or incurred to acquire, construct, rehabilitate, or expand a qualified child care facility that (i) is to be used by the taxpayer; (ii) is depreciable property; and (iii) is not the principal residence of the taxpayer or any of the taxpayer’s employees; Expenses for operating costs of a qualified child care facility (i.e. providing childcare training), and Amounts paid or incurred under a contract with a qualified child care facility to provide childcare to the taxpayer’s employees. Fair market value. Employers should consider the fair market value of childcare expenditures. The IRS may question expenses that exceed the fair market value of the care provided. For example, alarm bells may ring if in a given area, expenses to operate a childcare facility are only half of what the employer claims. Qualified childcare facility...

Appeals courts split on tax credits for ACA Marketplaces

On July 22, two federal appeals courts roughly 100 miles apart reached very different conclusions about one of the most widely-used provisions of the Affordable Care Act: the Code Sec. 36B premium assistance tax credit. The U.S. Court of Appeals for the District of Columbia Circuit found that the IRS had overreached when it issued regulations providing that individuals who obtain health coverage through a federally-facilitated Affordable Care Act Marketplace are eligible for the tax credit. In contrast, the Fourth Circuit Court of Appeals, sitting in Richmond, Virginia, upheld the IRS regulations as a valid exercise of the agency’s authority. The contradictory decisions create a split among the Circuits, which could prompt the U.S. Supreme Court to review the IRS regulations. Tax Credit To help offset the cost of health insurance coverage obtained through Marketplaces, the Affordable Care Act created the Code Sec. 36B credit. The credit is linked to an individual’s income in relation to the federal poverty line (FPL). Generally, individuals and families whose household income is between 100 percent and 400 percent of the FPL for their family size may be eligible for the credit. The credit is refundable and may be paid in advance to the insurer. In 2012, the IRS issued regulations about the Code Sec. 36B credit. Opponents of the Affordable Care Act challenged the regulations in a number of cases, including the cases that made their way to the D.C. Circuit (Halbig et al. v. Burwell) and the Fourth Circuit (King et al. v. Burwell). Generally, they argued that the language of the Affordable Care Act only made the Code Sec. 36B...

New look to TINs/EINs to prevent identity theft/refund fraud

The IRS continues to ramp-up its work to fight identity theft/refund fraud and recently announced new rules allowing the use of abbreviated (truncated) personal identification numbers and employer identification numbers. Instead of showing a taxpayer’s full Social Security number (SSN) or other identification number on certain forms, asterisks or Xs replace the first five digits and only the last four digits appear. The final rules, however, do impose some important limits on the use of truncated taxpayer identification numbers (known as “TTINs”). Note. A TTIN typically appears as XXX-XX-1234 or ***-**-1234. Identity theft/refund fraud The IRS has more than 3,000 employees working identity-theft related issues. They are investigating refund fraud and assisting taxpayers – both individuals and businesses – that have been victims of identity theft. The IRS has also upgraded its filters that screen tax returns for indications of refund fraud. Between 2011 and 2014, the IRS reported that it prevented more than $50 billion in fraudulent refunds. Protecting personal information from disclosure is one important tool in the IRS’s toolshed to fight identity theft. IRS data systems contain personal information, such as SSNs, EINs, individual taxpayer identification numbers (ITINs) and adoption taxpayer identification numbers (ATINs) on millions of taxpayers. To thwart potential identity thieves, the agency launched a pilot program in 2009 to allow the use of TTINs. The goal of the pilot program was to reduce the risk of identity theft that could result from the inclusion of a taxpayer’s entire identifying number on a payee statement or other document. Proposed regulations The IRS viewed the pilot program as a success and issued proposed regulations in...