By Brandy Stykes

The Tennessee state legislature has repealed the Tennessee gift tax, effective as of January 1, 2012.  The repeal of the gift tax will help those individuals that make large gifts take advantage of the $5.12 million federal exemption.

The Tennessee state legislature has also repealed the Tennessee inheritance tax, effective as of January 1, 2016.  The yearly taxable estate exemptions until that date are as follows:

• 2012 – $1,000,000
• 2013 – $1,250,000
• 2014 – $2,000,000
• 2015 – $5,000,000

By Wade Farmer

1.  One of the best ways to avoid a tax scam is to consult with your CPA.  If you’re not sure, then ask.  We will be more than happy to answer any questions you might have.

2.  Don’t trust a return preparer that guarantees you a big refund or charges based on your refund rather than the complexity of your return.  Look for a reputable preparer.

3.  Got a suspicious-looking email from the IRS?  These scams are called phishing, and they are used to steal your identity.  A criminal will send you an email claiming to be from the IRS, and it might even have an IRS logo.  The email will tell you that you are eligible for a larger refund, or that they need more information, and they will request that you send back your bank account numbers or social security number.  The IRS will never initiate contact with you by email.  See more about phishing scams on the IRS website, or, if you have any immediate questions or concerns, please contact us.

4.  A new scam this year is the abuse of the American Opportunity Tax Credit.  Scheme promoters tell their victims they can receive a refund or a stimulus payment based on paying for college even if the victim is not enrolled in college.  Promoters claim that you can receive money for paying for college decades ago.  These scam artists are targeting seniors, but everyone should beware of this since they will charge you high fees to file these false claims you will be responsible for paying back.

5.  Don’t try to hide foreign income or money in a foreign financial account.  The IRS has reopened the Offshore Voluntary Disclosure Program to disclose foreign accounts and assets to ensure you avoid criminal prosecution of international tax evasion.  Have an offshore account?  Read Jake Hutchison’s blog post for more information. 

Have more questions about possible scams?  Call or email us, and we will be glad to answer your questions. 

By Jake Hutchison

The Internal Revenue Service has reopened the Offshore Voluntary Disclosure Program (OVDP) which allows a US person to disclose all foreign accounts and other assets with the IRS to avoid criminal prosecution of international tax evasion.  Please refer to the 2012 Spring Edition of the BCS Client-Tell for more information on the new OVDP. 

Any US person that has a financial interest in or signature authority over a foreign financial account where the aggregate value of the account exceeds $10,000 at anytime during the calendar year is subject to additional annual filing requirements.

The Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1 (FBAR), is due on or before June 30, following the calendar year and this deadline may not be extended.   Corporations, partnerships, trusts, or estates along with individuals are subject to FBAR.  Failure to file this form could result in a failure-to-file penalty of $10,000.  In addition, the taxpayer may be assessed back taxes, late filing interest, late filing penalty and possibly an accuracy related penalty for the underpaid tax on any foreign income omitted on Form 1040. 

A new separate requirement was released from the IRS which is in addition to FBAR.  Form 8938 requires taxpayers to report specified foreign financial assets on their annual Form 1040 by the April 15 due dates which may include an extension.  Currently, Form 8939 is only required by individuals, although the IRS speculates that entities such as corporations or partnerships may be subject to filing requirements in future years. 

Some examples of specified foreign financial assets are securities, bonds, or other foreign financial accounts.  A single taxpayer living in the US is subject to filing Form 8938 if the value of the taxpayer’s specified assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year.  Married taxpayers living in the US are subject to the filing requirement if they have a value of the specified assets which exceeds $100,000 on the last day of the tax year or more than $200,000 at any time during the year. 

Failure to file Form 8938 could result in a failure-to-file penalty of $10,000 plus another $50,000 of failure-to-file penalties if the IRS notifies a taxpayer to file and the taxpayer fails to do so.  In addition, the individual could be assessed back taxes, late filing interest, late filing penalty and an accuracy related penalty for the underpaid tax on any income omitted on Form 1040.

This article covers the basic guidelines on annual requirements for foreign accounts, if you have any questions related to foreign accounts please contact our office.  As always we will try to keep you up to date on changes related to foreign disclosure along with all other tax matters.

By Brenda Petersen 

1.  Complete the organizer.

If you are a tax client of BCS, you should have received your individual organizer.  If you did not, please click here to find an electronic version, or call the office at 282-4511 to request one.

The organizer helps you by making sure you have all your ducks in a row.  You will find questions regarding your personal information; dependents; purchases, sales and debt; itemized deductions; possible tax credits and other miscellaneous information.

To ensure a flawless tax return, check the names, birthdays, and social security numbers of you, your spouse, and your dependents.

Please be sure to provide updated contact information.

2. Send us all W-2s, 1099s, etc.

In addition to W-2s and 1099s, we also need any of the following to minimize tax liability:

-  Medical expenses

-  Property taxes paid

-  Charitable contributions

-  Child care expenses

-  Mortgage interest statements

-  Student loan statements or tuition paid

3. Don’t opt out of e-file.

We recommend all of our eligible clients e-file their return.  Some returns cannot be e-filed due to attachments, etc., but if at all possible, you should have your return e-filed.  E-filing is a safer and faster way than paper mail to get your return to the IRS.  Once your e-filed return or extension is accepted, we get a confirmation from the IRS. 

The IRS has mandated that all individual and trust returns be e-filed.  If you still choose not to e-file your return, you must sign an opt-out form.

4. The earlier your information is in, the better.

Our returns are prepared on a first-in, first-out basis, so get your information to us as soon as you can.  The only way we can guarantee your return will be done before the deadline, is to make certain your complete information is to us by April 1^st.   If you wait until after April 1^st, we might have to extend your return. 

5. Start organizing now for next year.

January is a great place to start organizing for next year.  We recommend filing all your information by month, and keeping a separate file for tax-related statements.  This will ensure a stress-free tax season for you next year! 

By Gina Lemons

Have you noticed that the social security tax withheld from your employees’ pay checks is still less than the amount you have to match as an employer? That is due the Payroll Tax Cut Extension that Congress passed at the end on 2011. Employees pay in 4.2% toward Social Security while employers pay in 6.2% toward that same program. The two-month extension is set to expire February 29, 2012, unless Congress can agree to extend it through the end of 2012.

Employers who use computer software to prepare their payroll shouldn’t worry. Companies like Intuit, which owns QuickBooks, will issue updates via their internet links as soon as the law is passed. However, employers who are not connected to the internet may have to wait on CD updates. This delay may result in added time and cost to manually calculate the 1^st payroll in March. My advice is to update your QuickBooks (or other software) when prompted. If you are not connected to the Internet, get connected. It will save you a lot of frustration and time.