Key Tax Tips on the Tax Effects of Divorce or Separation

Issue Number:    IRS Summertime Tax Tip 2015-23

Inside This Issue

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Key Tax Tips on the Tax Effects of Divorce or Separation

Income tax may be the last thing on your mind after a divorce or separation. However, these events can have a big impact on your taxes. Alimony and a name change are just a few items you may need to consider. Here are some key tax tips to keep in mind if you get divorced or separated.

• Child Support.  If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.
• Alimony Paid.  If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony. This applies only if the payments qualify as alimony for federal tax purposes. If the decree or agreement does not require the payments, they do not qualify as alimony.
• Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
• Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse's traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
• Name Changes.  If you change your name after your divorce, notify the Social Security Administration of the change. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can delay your refund. 

Health Care Law Considerations

• Special Marketplace Enrollment Period.  If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
• Changes in Circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace you may get advance payments of the premium tax credit in 2015. If you do, you should report changes in circumstances to your Marketplace throughout the year. Changes to report include a change in marital status, a name change and a change in your income or family size. By reporting changes, you will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.
• Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.

For more on this topic, see Publication 504, Divorced or Separated Individuals. You can get it on IRS.gov/forms at any time.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Additional IRS Resources:

• Publications 590-A, Contributions to Individual Retirement Arrangements (IRAs)
• Publication 555, Community Property
• Publication 974, Premium Tax Credit
• Publication 5152: Report changes to the Marketplace as they happen  English | Spanish

IRS YouTube Videos:

• Changed Your Name After Marriage or Divorce? – English | Spanish | ASL
• Premium Tax Credit – English | Spanish | ASL
• Premium Tax Credit: Changes in Circumstances – English | Spanish | ASL

IRS Podcasts:

• Changed Your Name After Marriage or Divorce? – English | Spanish
• Premium Tax Credit – English | Spanish

Premium Tax Credit: Changes in Circumstances – English | Spanish

New Corporation and Partnership Filing Deadlines

On July 31^st, H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, was signed into law.  This has caused major changes to important tax filing deadlines.  These changes will affect broad categories of taxpayers for tax years beginning after December 31, 2015.

Here is one of the major changes that you need to be aware of:

New Corporation and Partnership Filing Deadlines
This bill changes the due dates for partnership tax returns.  This includes tax returns filed by LLCs that are taxed as partnerships.  The new due date for these filers is the 15^th day of the third month following the close of the entity’s tax year. [i]  This accelerates the due date for these returns by one month, to March 15^th for calendar year taxpayers.  The extension available to partnerships has also been extended to six months, [ii] which will keep the extended due date the same, September 15^th for calendar year filers.
This bill also changes the due dates for C corporation tax returns.  This also includes tax returns filed by LLCs that are taxed as corporations.  The new due date for these filers is the 15^th day of the fourth month following the close of the entity’s tax year. [iii] This will delay the filing of these returns for one month, to April 15^th for calendar year taxpayers.  The extension available to these filers has also been shortened to five months, [iv] keeping the extended due date the same, September 15^th for calendar year filers.
If you have a corporation with a fiscal year ending on June 30^th, the changes outlined in this bill will not affect your entity until after December 31, 2025[v].
There is no change to the filing deadlines for S corporations.

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[i] Id., Sec. 2006(a)(1)

[ii] Id., Sec. 2006(a)(2)(b)(1)

[iii] Id., Sec. 2006(a)(2)

[iv] Id., Sec. 2006(a)(2)(c)(1)(B)

[v] Id.

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 Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Pub. L. No. 114-41,https://www.congress.gov/bill/114th-congress/house-bill/3236/text​

New FBAR Filing Deadline

On July 31^st, H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, was signed into law.  This has caused major changes to important tax filing deadlines.  These changes will affect broad categories of taxpayers for tax years beginning after December 31, 2015.

Here is one of the the major changes that you need to be aware of:

New FBAR Filing Deadline

This bill also changes the due date for Foreign Bank Account Reports (FBARs), syncing them up with the due dates for individual return filings.  Beginning in 2016, the due date for FBAR forms (FinCen Form 114) will be April 15^th. [i]  The bill also provides for an extension of up to six months to file the FBAR, until October 15^th, [ii] to match the final due date for individual returns.

In a bit of good news, the bill also codifies a first time penalty abatement for taxpayers that fail to file the FBAR or to timely request an extension. [iii]  This clarifies the IRS’s discretion to waive the FBAR filing penalties.

 

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[i] Id., Sec. 2006(a)(2)(b)(11)

[ii] Id.

[iii] Id.

Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Pub. L. No. 114-41, https://www.congress.gov/bill/114th-congress/house-bill/3236/text.​

Basis Overstatement Statute of Limitation Increase

On July 31^st, H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, was signed into law.  This has caused major changes to important tax filing deadlines.  These changes will affect broad categories of taxpayers for tax years beginning after December 31, 2015.

Here is one of the the major changes that you need to be aware of:

Basis Overstatement Statute of Limitation Increase

One of the most potentially painful effects of this bill is to increase the statute of limitations provisions with respect to basis overstatements.

Typically, the IRS must assess tax three years after a return is filed or due unless an exception to the statute of limitations applies.  An extended six year statute of limitations applies in situations where a taxpayer omitted more than 25% of income reported.  In the past, overstating basis in a property sold has not qualified as a omission of income for the purposes of this extended statute of limitations, even if it had an economic effect reducing income reported by more than 25%.  This bill specifically amends Internal Revenue Code §6501(e)(1) to provide than an omission from gross income includes an overstatement of basis. [i] 

With this extended statute of limitations, taking steps to verify the basis of any property sold is an even more important audit protection.

 

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[i] Id., Sec. 2005

 

Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Pub. L. No. 114-41, https://www.congress.gov/bill/114th-congress/house-bill/3236/text.​.

Mortgage Reporting Requirements

On July 31^st, H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, was signed into law.  This has caused major changes to important tax filing deadlines.  These changes will affect broad categories of taxpayers for tax years beginning after December 31, 2015.

Here is one of the major changes that you need to be aware of:

Mortgage Reporting Requirements
Under this bill, lenders will be required to report additional information on Form 1098, which reports the mortgage interest that you have paid to borrowers.  In addition to the existing requirements, lenders will also report the amount of outstanding principal on the mortgage at the beginning of the calendar year, the date the mortgage originated, and the address of the property securing the mortgage. [i]  These requirements go into place in 2016, so you can expect to see a new form 1098 in 2017.

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[i] Id., Sec. 2003(a)

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Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Pub. L. No. 114-41, https://www.congress.gov/bill/114th-congress/house-bill/3236/text.​

Miscellaneous Return Due Date Changes

On July 31^st, H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, was signed into law.  This has caused major changes to important tax filing deadlines.  These changes will affect broad categories of taxpayers for tax years beginning after December 31, 2015.

Here is one of the major changes that you need to be aware of:

Miscellaneous Return Due Date Changes

In addition to the changes discussed above, the bill also changes the maximum filing extensions for a number of other tax and information returns. [i]  Some of the more pertinent changes are:

• Form 5500  Benefit plans that file form 5500 will have an automatic three and a half month extension, ending on November 15^th for calendar year plans (increased from two and a half months)
• Form 1041 Trusts that file form 1041 will have a five and a half month extension, ending on September 30^th for calendar year taxpayers (increased from  five months)
• Form 990  Tax-exempt organizations filing Form 990 series will have an automatic six month extension, ending on November 15^th for calendar year filers (increased from three months)
• Form 4720 Tax-exempt organizations filing Form 4720 for excise tax returns will have an automatic six month extension (increased from three months)

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[i] Id., Sec. 2006(a)(2)(b)

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 Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Pub. L. No. 114-41, https://www.congress.gov/bill/114th-congress/house-bill/3236/text​.

Create a Disaster Plan in 10 Steps

Article Written by Eric Bank

 

Natural disasters can destroy your business. Earthquakes, hurricanes, terrorist attacks, viral contagions and other calamities can knock out power or disrupt key vendors, events that can damage your small business. Research indicates that one in four businesses that undergo a significant disaster close for good. That ratio increases to between 40 and 60 percent for small businesses. Moreover, 90 percent of businesses close within a year if they don't resume operations within a week. The best defense against financial ruin is a carefully drawn disaster plan that you update regularly. The plan should facilitate resumption of operation rapidly so that you can once again provide your offerings to your customers.

The Big Picture

Your disaster plan must cover a range of contingencies stemming from man-made or natural disaster. The basic steps should include:

1.      Identify who will be on your recovery team: Specify who will take charge of managing the crisis and how you will maintain communications with your employees and other parties.

2.      List the disasters that are the most likely: Figure the likelihood of each disaster's occurrence so that you can prepare for the most probable.

3.      Identify alternate operating locations: Identify and make contingent arrangements for backup and recovery sites, and become familiar with your local disaster recovery assistance providers. Also, assign space to an emergency command location.

4.      Create communications plans: Create internal and external communication plans, including emergency phone numbers and non-phone methods such as email.

5.      Create technology recovery plan: Take inventory of all your technology and data backup facilities, and don't forget cloud-based files. Create procedures to recover your technology after disruptions, and specify the employees or vendors who are charged with restoring critical technology. Make sure that you have suitable off-site backup and access to alternate computer facilities.

6.      Develop plan to restore operations: Employee responsibilities should be specified. Create a plan to resume important operations first and to delegate emergency tasks to the appropriate employees. You need a method to track disaster costs and a person or vendor who is in charge of this tracking. Look over your business insurance to verify it will assist you in getting back into operation.

7.      Work out contingency financing: You should set up commercial loan facilities to help pay the bills stemming from disasters. Rapid access to money can improve your business' chances of survival.

8.      Make plans for your supply chain: You must be able to communicate with vendors and suppliers, both local and remote, so that you can continue to obtain important services and materials. List all supply-chain members and secure the list in a safe place. Discus your plans with vendors and form secondary arrangement with alternate suppliers.

9.      Ensure safety: Assemble disaster recovery kits that include survival gear, flashlights, medical supplies, battery-powered radios and other emergency items. Ensure you create an evacuation plan, practice drills and emergency shelter arrangements.

10.   Test: Run a simulation recovery annually. Record the results of drills and assess the results in order to improve the plan. Ensure that you discuss any changes to the plan with employees.

Eight Things to Know about the Taxpayer Advocate Service

Issue Number:    IRS Summertime Tax Tip 2015-16

Inside This Issue

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Eight Things to Know about the Taxpayer Advocate Service

1. TAS is Your Voice at IRS.  The Taxpayer Advocate Service, or TAS, is your voice at the IRS. We are an independent organization within the IRS.
2. TAS Helps Resolve Problems.  TAS helps individuals, businesses and exempt organizations who are not able to resolve their tax problems with the IRS. Our service is always free. TAS can help if:

• Your problem is causing financial difficulty for you, your family, or your business.
• You, your business or your organization is facing an immediate threat of adverse action.
• You have tried repeatedly to contact the IRS but no one has responded. We will also help if the IRS has not responded by the date promised.

3. Taxpayer Bill of Rights.  The IRS has adopted a Taxpayer Bill of Rights that includes 10 basic rights that every taxpayer has when interacting with the IRS:

• The right to be informed.
• The right to quality service.
• The right to pay no more than the correct amount of tax.
• The right to challenge the IRS's position and be heard.
• The right to appeal an IRS decision in an independent forum.
• The right to finality.
• The right to privacy.
• The right to confidentiality.
• The right to retain representation.
• The right to a fair and just tax system.

4. TAS Protects Your Rights.  TAS protects taxpayers' rights by ensuring that the IRS treats all taxpayers fairly and that you know and understand your rights. Our taxpayer rights web page can help you understand what these rights mean to you and how they apply.
5. TAS on the Web Toolkit Can Help.  The TAS Tax Toolkit at TaxpayerAdvocate.irs.gov explains common tax issues. It also offers self-help videos and documents. You can use the site's information to solve your tax problem or help you understand it when you work with the IRS and your tax preparer.
6. Report a Problem that Affects Many Taxpayers.  TAS also handles large-scale or "big picture" problems that affect many taxpayers. You can report these issues at www.irs.gov/sams.
7. TAS in Every State.  We have offices in every state, the District of Columbia and Puerto Rico. Your local advocate’s number is in your local directory and at taxpayeradvocate.irs.gov. You can also call us at 877-777-4778.
8. TAS on Social Media.  Keep up with us via social media:

• facebook.com/YourVoiceAtIRS
• twitter.com/YourVoiceatIRS
• youtube.com/TASNTA

IRS YouTube Videos:

• Taxpayer Bill of Rights – English | Spanish | ASL

IRS Podcasts:

• Taxpayer Bill of Rights – English | Spanish

Card Skimming at ATMs Jumps - Your Bank Balance Is at Risk

Card Skimming at ATMs Jumps - Your

Bank Balance Is at Risk

TheStreet.com

Aug 5th 2015 11:18AM

Getty Images

By Robert McGarvey

NEW YORK -- The numbers are chilling: ATMs on bank property are under heavy and escalating attack by organized criminals who are ever smarter and slicker. What that means is that every time you stick a debit card into an ATM slot you just may be giving your information to a crook who has inserted a "skimmer" that gathers your card data. The crook then prints out a fake card with your data. Usually PINs are also collected via tiny pinhole cameras.

Credit reporting group FICO has reported that attacks on ATMs on bank property jumped 174 percent year on year in the first part of 2015. Attacks on non bank machines jumped 315 percent in the same period.

Matters are so grave that leading ATM-maker NCR on July 23 issued an alert to its customers that said, "NCR is tracking an increasing frequency of card skimming attacks in both the U.S. and in Mexico."

An NCR spokesperson said that direct losses globally due to ATM skimming is $3 billion.

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It gets worse. Until recently many skimmers were crude and attached directly on top of the ATM card slot. For them, the usual self defense prescription has been to shake the slot. If something comes off in your hand it's probably a skimmer. No more. Owen Wild, an NCR expert, said that NCR is seeing more skimmers that are inserted down into the card slot and thus are invisible on the exterior. There also is a rising incidence of cases where a criminal drills a hole into an ATM, inserts a copying device, then covers the hole with a decal. Wild said many of these devices are slick enough that they defeat some anti-skimming technologies in use on ATMs.

By now you want to know what your liability is.

The news is mixed. On paper you have little to no liability. The Federal Trade Commission says losses are capped at $50 if the loss is reported within two days of learning of it. The cap is $500 if reported within 60 days. More than 60 and the losses are unlimited.

But it gets worse. Several victims of ATM fraud have told TheStreet that their bank refused to restore any monies, insisting the victim must have given the crook his card and PIN. Remember: the crook has a card with the right data and the PIN, so it looks like the accountholder is withdrawing cash. Who knows the real facts in these cases -- just don't assume all will be well with ATM theft because it isn't always.

In just about all cases, too, there are delays -- often short, occasionally long -- in restoring money taken from an account. With a bogus credit card charge, it's put in suspense the instant it is challenged. With a debit card, real money has to be restored to the account and while that is happening, rent checks may bounce, car payments may be late and more mayhem may befall the victim. It isn't pretty.

The best defense: don't become a victim.

So, why is ATM skimming sharply jumping? "The ability to buy pre-assembled or programmed skimmers have turned what was once a complicated scam, into something that the average Joe could do if he's willing to pay for it," said Luis A. Chapetti, software engineer and data scientist at Barracuda. Chapetti also provided a URL where many skimmers are for sale, generally at prices of $1,000 and up.

Snag just two or four cards and the skimmer paid for itself. The rest is gravy.

This availability of off-the-shelf skimmers is key to the epidemic. Before a crook needed some fabrication skills and tools. No more. Ready cash buys the gear, so any klutz can become an ATM crook. It won't stop soon, either. Experts anticipate a sustained attack on ATMs, because they are where the money is.

How can consumers protect themselves?

"Shield the [ATM] pad from prying cameras as you enter your PIN, and regularly check your account for evidence of fraud," said Steven Weisman, a lawyer in Amherst, Massachusetts, who frequently writes about scams. The first part is crucial: cover your actions with your other hand as you enter the PIN. That probably will thwart the crook's attempt to grab the PIN and, by doing that, you have dramatically reduced -- maybe eliminated -- this card's usefulness.

As for checking your account -- and setting up account activity alerts -- that's key to minimizing your actual losses. The sooner you notify the bank, the lower your losses generally will be.

Do just those two things and, probably, you'll be fine -- even if the ATM crooks keep redoubling their efforts which is what some experts gloomily expect.

http://www.dailyfinance.com/2015/08/05/atm-card-skimming-increased-identity-theft-risk/?icid=maing-fluid%257Cbon1-t-finance%257Cdl1%257Csec1_lnk2%2526pLid%253D-1480646342&intcmp=hplnws