February 2015 Tax Snacks

Tax snacks

Tax Snacks: Bite-size tax news and information on the fly

Date to Remember

 

March 15:
  • Corporate tax returns are due (for calendar-year taxpayers)

IRS Phone and e-Mail Scams are Escalating

With tax filing season upon us, some recurring scams have returned as well. A common IRS-related scam involves telephone callers posing as IRS agents. Their messages can warn of a potential lawsuit if action is not taken, or that a large refund awaits, or that personal information has been compromised. In every case, the imposter is trolling for personal information – and wants it immediately. In some cases, the scammers will already have some personal information, which makes them seem legitimate. Another IRS-related scam involves use of an e-mail designed to appear as if it originated with the IRS, possibly with a link to a website that purports to belong to the IRS.

Remember that the IRS will never initially contact you by e-mail, and very rarely does so by phone. Their preferred means is by conventional mail. Also, if the IRS is about to do something drastic, they will not do so with their initial communication. They instead will point out a discrepancy, propose a correction, and invite you to clear up any confusion. Taxpayers often interact with the IRS by phone, but consider doing so only when you initiate the call, using a number obtained from a source other than a voicemail or e-mail.

Will the Federal Section 179 Deduction be Made Permanent?

In our December 2014 Tax Advisory, we pointed out that the enhanced Section 179 deduction, which had expired at the end of 2013, had been extended for another year through the end of 2014. A glaring problem is that while this mid-December law change was helpfully retroactive to the beginning of 2014, it was unhelpfully prospective only through the end of 2014 – a whopping two weeks. Sen. Wyden, D-OR, quantified the last-minute change well by saying that the “tax bill doesn’t have the shelf life of a carton of eggs.” From a practitioner’s perspective, such retroactive changes are incredibly frustrating, because the ability to plan for our clients’ taxes is clouded with guesswork. The good news is that there is some movement afoot to make the increased Section 179 benefit permanent. HR 636, sponsored by Rep. Pat Tiberi, R-Ohio, would do just that. His bill has the support of Rep. Paul Ryan, R-WI, and others on both sides of the aisle, but some house democrats prefer to address Section 179 only in the context of larger, overall tax reform. It seems unlikely the increased Section 179 benefit would be allowed to remain expired as it is now, but it will not be surprising at all to see it exhumed as the year is nearly over again, as has happened too often in the past.

New England States’ Treatment of Enhanced Section 179 and Bonus Depreciation

When the elevated Section 179 and bonus depreciation benefits were extended in December (as described above), it was unclear what action, if any, states would take to conform to it. Most states follow federal treatment (or deviate from it) by passing laws that state their rules are in conformity with the Internal Revenue Code as of a certain date. But when the federal law changes from what existed on that date, the “link” is broken, requiring a state update. New England states’ current conformity statuses are as follows:

Just this month, Maine updated its laws in a manner that makes them consistent with Maine’s 2013 depreciation rules for purposes of 2014 tax returns. Massachusetts, Rhode Island and Connecticut contain “rolling” conformity language that automatically updates when the federal rules change, and their 2014 rules therefore will be similar to 2013’s as well. “Live Free or Die” New Hampshire bows to no other jurisdiction’s peer pressure, and has changed nothing; their rules remain in conformity with federal rules that existed as of the year 2000. We are still awaiting word from Vermont. Perhaps they are too snowed under to deal with this at the time.

U.S. Tax Reporting Requirements Lead to Americans Renouncing Citizenship

A particularly burdensome new US tax and information-reporting policy (the FATCA requirements described briefly in our Tax Snacks here) has caused some people to turn in their citizenship rather than deal with the paperwork required to stay. Also, some banks are denying accounts to all Americans for the same reasons. These rules are not just scaring off scofflaws and disreputable banks; they appear to be driving away good people and legitimate commerce, which suggests that looser calibration may be in order. A pair of good articles from CNN’s Money section address this here and here.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.