While most of us are trying to thaw out from a very cold winter season, presented here is a reminder to file your 1120S business tax return by March 17th and a recap of some of the common scams being encountered by the IRS. There is also a description of a new mobile app from the IRS and a general interest article outlining a new currency phenomena in the news called bitcoin.
As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.
IRS Announces Annual Scams
Each year the IRS announces “Dirty Dozen Tax Scams” they encounter most frequently regarding frivolous tax arguments and fraud. Here are five of the scams that impact most taxpayers.
|Offshore accounts. The IRS has made inroads to those hiding assets in off-shore accounts. This includes breaking the long-standing secrecy wall of Swiss bank accounts. If you have money in foreign accounts, you must understand the reporting requirements or you could be subject to substantial fines.|
|Donating to invalid charitable organizations. Prior to donating funds, make sure the charity is both legitimate and deemed a qualified charity by the IRS. After major disasters, many charitable givers are scammed into making donations to fake charities. In addition, new IRS charitable organization reporting requirements are not being followed by many organizations which makes donations to them non-deductible.|
The IRS sees scams in many more forms than noted here. Should you wish more information please visit IRS.gov. Your best defense is to stay alert and ask for help prior to providing sensitive information to anyone who requests it.
New IRS2GO Mobile App Announced
“Where’s my Refund?” This popular feature on the IRS web site (www.irs.gov) allows taxpayers to see the status of their refund after filing their income tax return.
Now with a recent announcement, the IRS is making their Refund Status service available on the 2014 version of their Mobile App called IRS2GO.
What can you do on the new IRS2GO?
A note of caution
Remember, the IRS is also experiencing record levels of identity theft. If you plan on using theIRS2GO Mobile App, take the same security precautions you would if you were logging into your bank account. This includes, but is not limited to, using your personal internet network and not a public network.
To download the IRS2GO app with an iPhone or iTouch go to your iTunes app store. Android users can visit Google Play to download their version of the app.
Are You Doing Your Bit?
Recently a number of news services have been discussing problems at a web site called Mt.Gox. The service provided at Mt. Gox is as a Bitcoin exchange. So what is this and why should you care?
Traditionally currencies like the dollar, the euro and British Pounds are backed by the faith in the underlying government and their central banks that issue the currency. The faith in these currencies allows each of us to use them as a means of exchanging goods and services. Separately there are foreign exchange markets where buyers and sellers trade in these currencies, often to hedge against the rise and fall of one currency against another. Bitcoins is a cybercurrency that does the same thing without the underlying support of a government or central bank. To create value, the bitcoin supply is limited with the creation of new bitcoins (called mining) only given to those that are managing the transactions. The digital currency can also be bought using traditional currency or by accepting them for merchandise just like any other currency.
Why bitcoins? Who uses it?
Why bitcoin? When you consider the issues with overspending by many governments, there is potential risk in the devaluing of currencies they supply. By limiting supply, the bitcoin concept can theoretically provide a more predictable means of establishing value to purchase goods and services across all boarders.
Another major benefit of bitcoins is that it solves some of the problems of foreign exchange. By having a currency that is not tied to a country, you do not have to worry about converting your currency into the currency of the foreign market where you wish to purchase your goods or service.
Bitcoin transactions are also much cheaper for merchants than credit card transactions and these transactions provide more identity protection than credit card transactions.
Is anyone using it? Much of the value of bitcoins is established in exchange centers that buy and sell the currency. However, a growing number of traditional merchants are beginning to accept bitcoins as legal digital tender. Bitcoins can be used at overstock.com and it is being considered by large internet retailers like e-bay and others.
What is happening now?
Recently one of the largest exchanges that allow trading of bitcoins has had a security breach. As much as 730,000 bitcoins appear to have been stolen. At an estimated value of $450 to $550 per coin this amounts to a very large cyber theft. Because of this, many users of the digital coin are beginning to pull back on enabling their use. This includes a recent announcement by Apple to shut off their bitcoin App. Many countries like Russia and China, who centrally control their currency, have outlawed the use of digital currencies like bitcoins.
Even worse, just like any other currency, when faith in the product falters so does its value. Those who own bitcoins in their digital wallets are seeing their value falling dramatically.
Does bitcoin have a future? What you need to know.
|Bitcoin survival. The current bitcoin problem is occurring at one of the largest bitcoin exchanges. In theory, this will impact bitcoin value in the short-term, but owners of bitcoins that have their digital tender in their personal cyber wallets should still have their bitcoins. The currency’s survival will depend on whether users of the tender still believe it has value beyond using it as an exchange trading mechanism to make profits.|
|Regulation? Governments are watching this digital currency phenomena. We can expect more regulations to follow as this concept becomes a more accepted way to buy and sell.|
|Other cybercurrencies? As long as Federal Goverments overspend and then increase their money supply, there will always be a potential for an independent means of enabling the exchange of goods and services. So while bitcoin may not be the eventual winner, rest assured the concept of digital currency will continue to survive.|
|Your digital wallet. Prior to using transactional products like bitcoin, you should understand who accepts them, how their value is determined over time, and how you can secure them. Just like cash buried in your back yard, should a robber take your digital currency you are out of luck.|
Missing the Flow-through Deadline
|Please remember March 17th is the due date for filing Sub S Corporation tax returns that have a year-end of December 31st. While the Form 1120S does not require making a tax payment, missing the due date could cost you plenty. This is despite the fact that late filing of the sub S tax return does not impact the receipt of the taxes due on April 15th.Those that are getting this “gotcha” penalty are often sole proprietors and couples who have formed a Sub S Corporation to handle their small businesses. The penalty is calculated based on each partial month the return is late times each shareholder. So a return filed 17 days late with no tax due could cost a married couple with a small S-Corporation $350 to $400 in penalties!|
Action to take
|If you have a Sub S Corporation, or other flow through entity, either file an extension or submit your tax return on time. Remember, an extension gives you six months to file and you do not owe the tax until your 1040 tax return due date (typically April 15th).|
|Challenge the penalty. While you may not be successful, remember the US Treasury is still receiving the taxes owed to them on a timely basis|
|Do not file your individual 1040 tax return until you have received all your K-1 tax forms from the flow-through entities you own (like tax returns from Sub S and Limited Liability Corporations).|
As always, should you have any questions or concerns regarding your situation please feel free to call.