“The exodus continues. It’s like the party’s over and the last one to leave gets stuck with the check!”
- Agent Zed, “Men in Black” (a film about aliens)
Immigration laws and tax laws frequently go hand in hand – unsurprising given how complex both can be.
For resident and nonresident aliens who wish to leave the United States, the concept of the “sailing permit” can be one of the most important items of business that must be resolved before departing. But what exactly is a “sailing permit?” (Spoiler: It has nothing to do with maritime law, marina fees, or the United States Coast Guard.)
Internal Revenue Code Section 6851(d)(1) specifies that “[n]o alien shall depart from the United States unless he first procures from the Secretary a certificate that he has complied with all the obligations imposed on him by the income tax laws,” subject to certain exceptions by regulatory authorities. This certificate, simply put, is result of the IRS’s review and concurrence that an alien is up to date with all income tax obligations and is therefore cleared to leave.
The IRS refers to this certificate in informational materials as a “tax clearance document,” but it’s also known as a “departure permit” or, more commonly, as a “sailing permit.”
As mentioned earlier, all departing resident and nonresident aliens must obtain this document, with the following exceptions: foreign diplomats, employees of international organizations, exchange students and industrial trainees, aliens who earn no U.S. income, and commuting employees who reside in Canada or Mexico whose wages have U.S. taxes withheld.
Applying for a Sailing Permit from the IRS
If you don’t meet an exception, the application for a sailing permit is done using one of two forms: Form 2063 or Form 1040-C.
Form 2063 is the simpler and easier of the two forms to prepare, but has certain conditions that must be met. Resident aliens who have taxable income but are not, in the IRS’s evaluation, leaving to avoid paying income taxes, may file this form. Additionally, resident and nonresident aliens who have no taxable income for the current and preceding year may file this form. Form 2063 is short, but more importantly doesn’t require you to calculate and pay tax. If you don’t qualify for Form 2063, your only avenue is to file Form 1040-C, which is more onerous and requires a calculation of tax before you can receive a sailing permit.
Regardless of the form you need to file, the window of time you have is limited and you’ll need quite a bit of information to make the process go as smoothly as possible. If you are a resident or nonresident alien and you think you may need to apply for the sailing permit, we stand ready to assist you in the process.
Tax Planning and Advice for Resident and Nonresident Aliens
We at Freed Maxick pride ourselves on our experience and expertise with sailing permits and other international tax matters. If you are a resident or nonresident alien, and would like to discuss your tax and compliance responsibilities, please connect with us here , or call us at 716.847.2651 to schedule a brief conversation.View full article
Caring for a loved one with a disability or extra needs is wrought with many challenges. One of these challenges can be how to leave assets to this beloved after your death in such a way that does not disqualify them from the governmental benefits to which they are entitled. A “special needs trust” can be one solution to this problem.
Funding Special Needs Trusts
Sometimes called a supplemental needs trust, a special needs trust is established for the benefit of a person with special needs to help him or her financially after your death. Usually established by parents for their disabled children or by children for their elderly parents, it is a vehicle by which to leave money or property behind without giving direct control over the assets. In this manner, the value of the assets in trust can be excluded from being considered in federal or state means-tested benefits of the beneficiary, thus allowing them to still receive such items as Supplemental Security Income (SSI) or Medicaid.
Several kinds of assets such as cash, real estate, business interests, stocks or intangible assets can be held in a special needs trust. Property belonging to the beneficiary can be used to fund the trust or assets from another party can be used instead, but both sources of assets should not fund the same trust, meaning there can be more than one special needs trust established for someone.
Improving Quality of Life
Collectively, these assets are used by the trustee(s) (who cannot be the beneficiary) to fund expenses that improve the quality of life for the beneficiary and that are not already covered by existing government benefits. Some examples of such expenses include:
- Additional caregiving or personal therapy, including visits to or expenses of a companion
- Reasonable expenses for experiences such as travel and visits to relatives or entertainment
- Costs for special transportation
- Personal items
The trust would pay for such expenses directly rather than the beneficiary receiving cash to pay for these expenses him or herself, which might jeopardize benefits.
Finally, a special needs trust has a finite life. It will terminate either when the funds in the trust are depleted, the beneficiary no longer needs the trust, or the beneficiary passes away.
Note that there are other avenues by which to give assets or the use of assets to your disabled loved one, one of them being a 529-ABLE plan administered by each state. However, with those plans there are limitations on the annual contribution to the plan and the total value the plan can achieve.
If you are considering one of these vehicles to improve the quality of life of someone in your life with special needs, please contact us so we can help you get started.View full article
Your CPA Can Help You Avoid Paying Taxes—But Only if They Know What's Going On!
For many people, the process of putting together tax information for their accountant is a burdensome chore. The chore can be that much worse when you have a small business or rental properties, etc. You finally get it done and submitted, and you sit and await your fate: refund or balance due. Whew. With that behind you, you file your records away, and are happy you don’t have to deal with that for another year. You go about your life, dealing with your real life issues… should I sell this property? Buy this one? What do we do with mom’s home, now that she is entering assisted living?
More than the messenger of whether you owe additional taxes
Your CPA is your strategic partner in minimizing taxes due. We are your advocate. But we can’t help you after the fact, when you turn in your records at tax time. We need you to contact us during the process of making these decisions, in case there are things you need to know.
Here is a real world example from the 2016 filing season.
A client of mine sent his records in and included information on the sale of one rental property and the purchase of another rental property. He assumed that because he rolled the profit from the sale into a new property, he wouldn’t be taxed on that gain. Unfortunately, that was an incorrect assumption.
When exchanging like properties, there is a way to avoid paying taxes in the near-term. Known as a Section 1031 exchange, there are several requirements that must be met. Had my client contacted me when he was contemplating the sale, I could have helped him do it in a way to avoid taxes on the transaction in 2015. But because he didn’t call me, he ended up paying a few thousand dollars in tax. This was not good news for me to deliver, and it was not good news for him to receive.
Here’s another example… My own mother.
A retiree, my mother decided to withdraw from her IRA to finance a small addition to her home. She had taxes withheld from the distribution, and assumed she would be OK. She never even thought to call and ask me. What she failed to consider was that her distribution was substantial enough to make her Social Security income taxable. She ended up paying several thousand dollars in tax, much more so than interest she would have paid on a bank loan.
The moral of the story is that we are here to help you, if you just stay in touch with us during the year. Sometimes a quick ten-minute phone call may be all that is necessary. It never hurts to ask, and there are no stupid questions. Other times, we may need a bit more information from you to sort it out. But the time necessary to evaluate it saves us time during busy season, and could potentially save you a lot of tax dollars.
So please, don’t be a stranger. We want to hear from you! For starters, contact us today.View full article
With the new release of income tax credits, three New York State business tax credits have been extended or created to help reduce New York State income tax liability. These credits include potential claims for refundable credits even if you do not owe any income tax and may benefit employers.
For a full explaination of these credits please see our client alert here.
By: Howard B. Epstein, CPA
The Bank Records and Foreign Transactions Act- commonly referred to as the Bank Secrecy Act, became law in 1970 out of a growing complexity of the national and international economy, and technological revolution. Activities increased not just at home but abroad. This allowed the IRS to require citizens or residents of the U.S., or a person in, or doing business in the U.S. to file reports on any financial accounts with aggregate totals valuing $10,000 or more. But did you know……
As a result of new legislation on foreign tax reporting and disclosure of financial assets, some taxpayers may be required to file the new foreign financial assets disclosure statement (Form 8938) with the income tax return, and the Report of Foreign Bank and Financial Accounts (FBAR) seperately. Filings and returns are due April 15th or June 15th, if living in the U.S. For those living outside the U.S., extensions for October 15th filings can go through December 15th. These reporting requirements will potentially add to both taxpayer roadblocks and the complexity of tax law changes.
On March 18, 2010, the President signed the HIRE Act, containing the Foreign Account Tax Compliance Act, into law. Addressing taxpayer concerns, the law requires individual taxpayers with foreign financial assets with an aggregate balance exceeding stipulated dollar amounts during a taxable year to file a disclosure statement with his or her income tax return for that taxable year. The stipulated dollar amounts can be found in IRS Form 8938. Beginning with 2011 individual tax return filings; the new law requires compliance with filing the disclosure statement (Form 8938) describing the maximum value of the assets during the taxable year. The disclosure statement should also provide the following information in the case of a:
Financial account – the name and address of the foreign financial institution in which such accounts are maintained and the number of such account.
Stock or security – the name and address of the foreign issuer and such information as is necessary to identify the class or issue of which such stock or security is part of.
Contract, interest, or other instrument – such information as is necessary to identify such contract, interest, or other instrument and the name(s) and addresses of all foreign issuers and counterparties with respect to such contact, interest, or other instrument.
What should you do next?
It is important to note that while there are similarities between the FBAR and FATCA filings, there are also a number of differences when filing each of the Forms. Freed Maxick International tax practice professionals are here to assist you with your FBAR filings. We can assess FBAR filing requirements and prepare current and past due FBARs. We can navigate the IRS guidelines and minimize potential penalties through the various IRS Voluntary Disclosure Programs available. Contact us to connect with our experts.
Various Tax Credits Available to Industries
Author: Jeff Zawada, CPA
Most of the energy used in the United States comes from Fossil Fuels; petroleum, coal, and natural gas, with crude oil products currently used as the dominant source of energy.
According to the EIA (the United States Energy Information Administration) and OPEC, market fundamentals and expectations strengthened in January 2013; forecasting growth from 110,000 bpd to 1.05 million bpd over the course of the next 22 years. While only a 12% growth rate, compared to the 26% growth from 2004-2012, EIA projections are conservative and likely to increase.
What credits are available?
The IRS has specified tax credits for the oil and gas industry; at the state level legislation varies. “Fracking” — more formally known as high volume hydraulic fracturing — involves injecting large amounts of sand, water and chemicals deep underground at high pressures to extract natural gas from rock formations. The drilling is concentrated in the Marcellus Shale formation, a deep repository that runs through West Virginia, Ohio, Pennsylvania and New York. Natural gas drilling, while maintaining certain growth expectations, is still hitting barriers in New York State.
Permit applications for conventional vertical gas well, which are still allowed in NYS, have dropped from roughly 600 in 2008 to below 200 in 2012.
Site specific special assessment reviews have to be done on an individual basis.
Currently Governor Cuomo is expected to announce a formal decision after the Geisinger Health System study, launched in Pennsylvania by Degenstein Foundation, is finished.
State by State Analysis: Quick snapshot
Pennsylvania has created over 140,000 jobs in the last few years in the drilling industry. With the launch of the Geisinger Health study, PA will provide deeper insight into drilling impact and incentives across the board.
Ohio’s Knox and Stark Counties saw the most drilling activity since 2010, at 43 wells drilled. In total Ohio currently has 11 counties reporting drilling. The state of Ohio also maintains a cost recovery assessment, as per law 1509.50. All money collected, pursuant to section C of this law, shall be deposited in Ohio state treasury to the credit of the oil and gas well fund.
In New York State, the NYS Energy Research and Development Authority (NYSERDA) has recently provided incentives for alternative fuel trucks. Credits such as: vouchers of up to $40,000 for the purchase of compressed natural gas, hybrid electric and all-electric Class 3 through 8 trucks operating in New York City, and vouchers that cover up to 80% of the cost of purchasing and installing emission reduction equipment for medium- and heavy-duty diesel vehicles operating primarily in New York City; requests for pre-qualification are now being accepted- currently there is a wait list. E85, compressed natural gas, and hydrogen fuel that is used exclusively to operate a motor vehicle engine is exempt from state sales and use taxes. Additionally, NY cities and counties may reduce the sales and use tax imposed on 20% biodiesel blends (B20) to 80% of the diesel fuel tax rate. The exemption and rate reduction are in effect until September 1, 2014 (Reference from: New York Tax Law 1111 and 1115).
What credits are available to your business? Have you maximized your IDC planning? Learn more HERE.
Freed Maxick understands the growing complexity and nature of the oil and gas industry. We can navigate industry tax filing requirements, locate tax credits, and help with financial statement audits, reviews and compilations. Still have questions? Contact us to connect with our experts, or call us at 716-847-2651.
Are you a Canadian “snowbird” spending winters in the United States? You may not realize it, but you could be considered a U.S. tax resident. If this is the case, the basis on which tax residency is determined is through the IRS “Substantial Presence Test.”
For this purpose, you will be considered a U.S. tax resident if you meet the following requirements:
Physically present in the United States at least 31 days in the current year, and
183 days during the 3 year period that includes the current year and the 2 years immediately before that.
If you fall into this category, don’t panic! There is potential relief available to Canadian citizens that are caught by this Substantial Presence Test:
You are present in the U.S. for fewer than 183 days in the current year.
You maintain a “tax home” in a foreign country during the year.
You have a “closer connection” to the foreign country where your “tax home” is than to the U.S.
Are there exceptions to the rule?
There are exceptions to the substantial presence test. The following are a few examples:
Days you are in the United States for less than 24 hours- when you are in transit between two places outside the United States.
Days you are in the United States as a crew member of a foreign vessel.
Days you can classify “exempt individual.”
The term “exempt individual” does not refer to someone exempt from U.S. taxes, but to anyone that claims exemption from counting days of presence in the United States. For example- a teacher or trainee temporarily in the United States under a “J” or “Q” visa, who substantially complies with the requirements of the visa. For a full list of exemptions and exceptions, please refer to the IRS substantial presence test.
What should you do next?
If you exclude days of presence in the United States because you fall under a special category, you must file Form 8840 (Closer Connection Statement) or Form 8843 (Statement of exempt individuals and individuals with a medical condition).
Freed Maxick International tax practice professionals can help you determine if you qualify as a U.S. tax resident, and assist you with Substantial Presence Test filings. We can navigate the IRS guidelines and minimize potential penalties. Contact us to connect with our experts.
It’s always a benefit to business and real estate owners to uncover ways to save money. Did you know that the tax depreciation records of golf course owners likely contain a tax deduction that can be claimed for the 2012 tax year?
The tax deduction is claimed by adopting specific sections of the temporary repair regulations that were issued in December 2011. The IRS is allowing taxpayers to adopt specific sections of these regulations for their 2012 tax year and to defer other sections that may result in income until the 2014 tax year. Specific sections of these regulations allow taxpayers to claim a deduction for assets that are now reclassified as repairs, routine maintenance, or were disposed of before 2012.
It’s a lot of information to wade through, but CSP 360 and their affiliate Freed Maxick CPAs can help country clubs and golf course owners navigate through the complex regulations.
Get the Tangible Property Q&A now to learn more!
Check out a few examples of how we can help:
1) Tax Deductions: Golf course owners that capitalized improvements to buildings and the course since 1987, likely removed or abandoned assets as a result. The remaining tax basis in these assets and perhaps, the costs of removal, can be claimed as a tax deduction for 2012 tax year.
For another example, let’s assume during 2008 that $1 Million of structural improvements were made to a club house facility and $1 Million of land improvements were made to the golf course bringing the total investment to $8 Million. A cost segregation specialist identifies $1 Million of tax basis remaining in the real and personal property disposed of in conjunction with the improvements.
Result? The golf club owner is entitled to claim a $1 Million tax deduction for the 2012 tax year.
2) Regulation Changes: All golf course owners should prepare for other changes under these regulations which may affect current accounting policies and procedures. For example, a golf course owner that has historically expensed assets for tax purposes based on their book capitalization policy may need to act before 2014 to be able to continue to deduct assets under this policy beginning in 2014. In addition, all golf course owners will be required to review their treatment of materials and supplies and repairs in order to comply with the new repair regulations.
3) Uncovering Cash Flow: For example, let’s assume a club house was constructed and placed in service during 2004 with an original cost of $2 Million and the golf course was constructed with an original cost of $4 Million for a total capitalized cost of $6 Million. A cost segregation study reclassified $2.4 Million of the capitalized cost as land improvements and tangible personal property.
Result? This reclassification results in a $1.5 Million tax deduction for 2012 providing additional cash flow from the federal and state income tax savings.
CSP 360 is affiliated with Freed Maxick CPAs and is one of the nation's leading providers of cost segregation and consulting services to real estate owners. CSP 360 is the national leader in providing cost segregation services to the golf and hospitality industries. Our experienced team of Construction Engineers and CPAs work in the cost segregation service niche with no outsourcing.
Allow us to show you how our Cost Segregation and CapX services could result in a substantial income tax savings for the 2012 tax year. Contact Us today to learn more about how we can assist.
With the ever-changing and complex regulatory environment, compliance with accounting for income taxes
(ASC 740), formerly known as FAS 109, has become more difficult for companies to manage efficiently. Companies must work hard to ensure that they minimize compliance related errors with the current tax laws and financial accounting and reporting standards.
In this two-hour LIVE webcast on May 17th, a panel of distinguished professionals assembled by The Knowledge Group will discuss the significant topics related to tax accounting rules and implementation of ASC 740. The faculty will discuss:
- Brief Overview of ASC 740 and Refresher in Current and Deferred Tax Computation
- Pertinent Accounting Principles and Tax Accounting Provisions
- Application of ASC 740 to State and International Income Taxes
- Hot Topics in Internal Controls
- Issues Relating to Compensation and Benefits Developments
- Best Practices and Practical Guidance for Tax Preparation, Compliance and Effectiveness
- Up-to-the-Minute Regulatory Updates
This is a must attend event for Finance Executives, CPAs, Attorneys, Enrolled Agents, Tax Practitioners, and other Interested Professionals. Attending this course will give you the tools you need to understand the latest developments in ASC-740.
Course Level: Intermediate
Method Of Presentation: Group-Based-Internet
Developer: The Knowledge Group, LLC
Recommended CLE/CPE Hours: 1.75 - 2.0
Advance Preparation: Print and review course materials
Course Code: 134416
$199 - $249 (Early Bird Discounted Rate - on or before 05/07/2013)
$299 - $349 (Regular Rate - registration after 05/07/2013)
$149 (Government / Nonprofit Rate)
(Please click here for details)
Featured Speakers for ASC 740: Income Tax Accounting for 2013 LIVE Webcast :
Douglas I Schwartz, LLC
Douglas I. Schwartz, CPA/CFF, Cr.FA
speaker bio »»
Freed Maxick CPAs, PC
Mark A. Stebbins, CPA
Director - Tax Practice Leader
speaker bio »»
Freed Maxick CPAs, PC
Samuel C. DiSalvo, CPA J.D.
speaker bio »»
Who Should Attend?
- Finance Executives
- Tax Attorneys
- Enrolled Agents
- Tax Practitioners
- Tax Directors
- Tax Managers/Executive
- Internal Audits
- Financial Planners and Executives
- Tax Consultants
- And Other Interested Professionals
This is a must attend event for anyone interested in understanding the related issues and changes to Income Tax Accounting (ASC 740). In this live virtual course, you will hear:
- Detailed guidance explained by the most qualified key leaders & experts
- Hear directly from experienced practitioners & thought leaders
- Interact directly with panel during Q&A
Advanced registration is recommended as space is limited. Please click the “Register” button below to enroll in this course today. Significant discounts apply for early registrants.