Monthly Archives: November 2016

Be Aware – Several Tax Filing Deadlines Have Changed

By Nick Leacoma, CPA, Senior Manager, Tax

nelsmallerBe aware that tax filing deadlines have changed for various entities including C corporations and partnerships. The changes result from the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.  Many of the changes apply to tax years starting after December 31, 2015.

C corporations
C corporations with calendar year-ends face a deadline shift from March 15 to April 15. Similarly, the tax return due dates for corporations with tax years that end on dates other than June 30 (and other than December 31) will now be the 15th day of the fourth month after the end of their tax years. Corporations with a June 30 year-end will continue to file taxes by September 15, until December 31, 2025. After this date, their filing deadline shifts to October 15.

C corporations with calendar year-ends will be allowed five-month extensions (Sept 15) until 2026, while companies with June 30 year-ends will be allowed seven-month extensions
(April 15), also until 2026. Corporations with other year-ends can receive six-month extensions. Starting with the 2026 returns, all extensions can be six months.

Partnerships
Partnerships with calendar year-ends must now file Form 1065 by March 15. This is a change from the previous due date of April 15. The new date should allow partners to use the information contained in these forms to file their personal returns, which typically are due a month later.

Partnerships with year-ends other than December 31 must file these forms by the 15th day of the third month after the close of their fiscal year-ends. Partnerships can ask for extensions of up to six months.

S corporations
The S corporation deadline remains the same. For those with calendar year-ends, Form 1120S, is due March 15. Similarly, the due dates for S corporations with other than calendar year-ends remain the 15th day of the third month after fiscal year-end. And S corporations are still able to request six-month extensions.

Trusts and Estates
The deadline for filing Estate and Trust returns remains unchanged. Form 1041 is due April 15.
The extended due date for Estates and Trusts has changed. The new extended due date for filing the Estate and Trust return has changed from Sept 15 to Sept 30.

Exempt Organizations
The Exempt Organization deadline also remains the same. For those with calendar year-ends, Form 990 is due May 15. Similarly, the due dates for exempt organizations with other than a calendar year-end remains the 15th day of the fifth month after fiscal year-end. There will now be a single automatic six month extension for exempt organizations, eliminating the current first 90-day extension.

FBAR
FinCEN Form 114, “Report of Foreign Bank and Financial Accounts” (also known as “FBAR”), will be due April 15, rather than June 30, starting with the 2016 tax year. This way, it aligns with the deadlines for individual income tax returns. FBAR filers will be able to request extensions of up to six months. For taxpayers filing FBARs for the first time, any penalty for failing to request or file for an extension in a timely manner may be waived.

Help with the changes
If you have questions about the new tax return deadlines, contact me, Nick Leacoma, CPA, Senior Manager in the Ciuni & Panichi, Inc. tax department, at 216-831-7171 or nleacoma@cp-advisors.com. I’ll be happy to help you make these important deadlines.

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A quick look at the President-elect’s tax plan for businesses

20171The election of Donald Trump as President of the United States could result in major tax law changes in 2017. Proposed changes spelled out in Trump’s tax reform plan released earlier this year that would affect businesses include:

  • Reducing the top corporate income tax rate from 35% to 15%,
  • Abolishing the corporate alternative minimum tax,
  • Allowing owners of flow-through entities to pay tax on business income at the proposed 15% corporate rate rather than their own individual income tax rate, although there seems to be ambiguity on the specifics of how this provision would work,
  • Eliminating the Section 199 deduction, also commonly referred to as the manufacturers’ deduction or the domestic production activities deduction, as well as most other business breaks — but, notably, not the research credit,
  • Allowing U.S. companies engaged in manufacturing to choose the full expensing of capital investment or the deductibility of interest paid, and
  • Enacting a deemed repatriation of currently deferred foreign profits at a 10% tax rate.
    President-elect Trump’s tax plan is somewhat different from the House Republicans’ plan. With Republicans retaining control of both chambers of Congress, some sort of overhaul of the U.S. tax code is likely. That said, Republicans didn’t reach the 60 Senate members necessary to become filibuster-proof, which means they may need to compromise on some issues in order to get their legislation through the Senate.

So there’s still uncertainty as to which specific tax changes will ultimately make it into legislation and be signed into law.

It may make sense to accelerate deductible expenses into 2016 that might not be deductible in 2017 and to defer income to 2017, when it might be subject to a lower tax rate. But there is some risk to these strategies, given the uncertainty as to exactly what tax law changes will be enacted. Plus no single strategy is right for every business.

Please contact Ciuni & Panichi, Inc. –  Jim Komos at 216.831.7171 or jkomos@cp-advisors.com to develop the best year-end strategy for your business.

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© 2016

Donating Appreciated Stock Offers Tax Advantages

Not-for-Profit Donations and Tax Savings

By Mike Klein, CPA, Ciuni & Panichi, Inc. Partner-In-Charge of the Not-for-Profit Group

mbkThe best scenario for not-for-profit organizations is when they have the revenue they need to achieve their mission, their benefactors’ pain is eased, and their donors enjoy the rewards of contributing as well as a nice tax deduction. It’s important for donors to know that donating appreciated stock can help fulfill all three needs. And best of all for donors, a gift from his or her portfolio is not only possible, it can boost the tax benefits of the charitable gift.

No pain from gains
Inform your potential and current donors that charitable organizations are more than happy to receive appreciated stock as a gift. Depending on the not-for-profit’s policy, it may maintain a stock portfolio or sell donated stock.

Contributing appreciated stock entitles donors to a tax deduction equal to the securities’ fair market value — just as if the stock was sold and the cash was contributed. The difference is neither the donor nor the charity receiving the stock will owe capital gains tax on the appreciation. Avoiding capital gains tax and also taking a tax deduction is a double benefit for donors.

The key word here is “appreciated.” The strategy doesn’t work with stock that’s declined in value. In this case it’s better to sell securities that have taken a loss and donate the proceeds. This way also allows for a double deduction for donors: one for the capital loss and one for the charitable donation.

Inevitable restrictions
Inevitably, there are restrictions on deductions for donating appreciated stock. Annually donors may deduct appreciated stock contributions to public charities only up to 30 percent of their adjusted gross income (AGI). For donations to nonoperating private foundations, the limit is 20 percent of AGI. Any excess can be carried forward up to five years.

So, for example, if you contribute $50,000 of appreciated stock to a public charity and have an AGI of $100,000, you can deduct just $30,000 this year. You can carry forward the unused $20,000 to next year. Whatever amount (if any) you can’t use next year can be carried forward until used up or you hit the five-year mark, whichever occurs first.

Moreover, donors must own the security for at least one year to deduct the fair market value. Otherwise, the deduction is limited to the tax basis (generally what was paid for the stock). Also, the charity must be a 501(c)(3) organization.

Last, these rules apply only to appreciated stock. If you donate a different form of appreciated property, such as artwork or jewelry, different requirements apply.

Intriguing option
A donation of appreciated stock is one of many strategies to encourage your donors to support your mission.

Need help? Contact Mike Klein, CPA, Ciuni & Panichi, Inc. Partner-in-Charge of the Not-for-Profit Group at 216-831-7171 or  mklein@cp-advisors.com. In addition to audit and accounting services, the Not-for-Profit Consulting Group offers a complete menu of advisory services including:  Resource Development, 990 Preparation, Strategic Management, Executive Coaching and Marketing.

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© 2016

 

Alternate Minimum Tax Awareness: Be ready for anything

The dreaded surprise tax: What you need to know about Alternative Minimum Tax

By Tony Constantine, CPA, Ciuni & Panichi, Inc. Partner, Tax

TJCAMT… those three little letters cause almost as much fear and trepidation as the other three letters… IRS!  Alternative Minimum Tax (AMT) just sounds scary, and for those facing it for the first time it can be.  You find the benefit that you count on from your itemized deductions wiped away and an increased (and often unexpected) tax liability.  It is important to understand what AMT is and if you are subject to it now, before you file your 2016 return. If you are, there are steps you can consider taking before year end to minimize potential liability.

Bigger bite
The AMT was established to ensure that high-income individuals pay at least a minimum tax, even if they have many large deductions that significantly reduce their “regular” income tax. If your AMT liability is greater than your regular income tax liability, you must pay the difference as AMT, in addition to the regular tax.

AMT rates begin at 26 percent and rise to 28 percent at higher income levels. The maximum rate is lower than the maximum income tax rate of 39.6 percent, but far fewer deductions are allowed, so the AMT could end up taking a bigger tax bite. For instance, you can’t deduct state and local income or sales taxes, property taxes, miscellaneous itemized deductions subject to the two percent floor, or home equity loan interest on debt not used for home improvements. You also can’t take personal exemptions for yourself or your dependents, or the standard deduction if you don’t itemize your deductions.

Steps to consider
Fortunately, you may be able to take steps to minimize your AMT liability, including:

Timing capital gains – The AMT exemption (an amount you can deduct in calculating AMT liability) phases out based on income, so realizing capital gains could cause you to lose part or all of the exemption. If it looks like you could be subject to the AMT this year, you might want to delay sales of highly appreciated assets until next year (if you don’t expect to be subject to the AMT then) or use an installment sale to spread the gains (and potential AMT liability) over multiple years.

Timing deductible expenses – Try to time the payment of expenses that are deductible for regular tax purposes but not AMT purposes for years in which you don’t anticipate AMT liability. Otherwise, you’ll gain no tax benefit from those deductions. If you’re on the threshold of AMT liability this year, you might want to consider delaying state tax payments, as long as the late-payment penalty won’t exceed the tax savings from staying under the AMT threshold.

Investing in the “right” bonds – Interest on tax-exempt bonds issued for public activities (for example, schools and roads) is exempt from the AMT. You may want to convert bonds issued for private activities (for example, sports stadiums), which generally don’t enjoy the AMT interest exemption.

Appropriate strategies
Failing to plan for the AMT can lead to unexpected — and undesirable — tax consequences. Please contact Ciuni & Panichi’s Tony Constantine, CPA, Partner, Tax, at 216-831-7171 or tconstantine@cp-advisors.com for help assessing your risk now, and to plan and implement the appropriate strategies for your situation.

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© 2016