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Tax Amnesty, Charity Rules, Fraud Risk

Berdon Alerts 05.07.2015 | eVisor

Reminder: Brief Massachusetts Tax Amnesty Ends May 15

The Massachusetts Department of Revenue limited 60-day tax amnesty program began on March 16, 2015 and runs through May 15, 2015.  Under the program, eligible taxpayers will be able to resolve their existing assessed liabilities by paying only the tax and interest owed.  The Department will waive all associated penalties.

Taxpayers with unpaid tax liabilities stated on a Notice of Assessment issued by the Commissioner on or before January 1, 2015 are invited to participate.  Eligible tax types include corporate income (excise) tax, as well as financial institutions tax; insurance tax; public utilities tax; estate tax; fiduciary income tax; and individual use tax on motor vehicles. 

Taxpayers must have received a bill for one or more of the covered tax types in order to participate. Taxpayers currently under audit who have not been assessed on or before January 1, 2015 are not eligible to participate.  Corporate taxpayers must also be in compliance with the Secretary of State's annual report filing requirement in order to participate.

Qualifying taxpayers will receive a Tax Amnesty Notice from the Department indicating the applicable tax period(s).  Taxpayers must pay the amnesty balance due in full with respect to each tax period listed on the notice by May 15, 2015.  If the tax and interest due are paid in full, the unpaid penalties, along with any interest associated with such penalties, will be waived.  The amount of unpaid penalty to be waived will be reflected on the notice.

If you believe you are eligible, but have not received a Tax Amnesty Notice or have questions, contact your Berdon advisor, Wayne Berkowitz at 212.331.7465 |wberkowitz@berdonllp.com,or Les Rosenbaum at 212.699.6703 |lrosenbaum@berdonllp.com. 

Charity


IRS Rules for Charitable Contributions

For the charity-minded, here are rules for donations which have been updated and revised in recent years.

Donating Household Items: These items include furniture, furnishings, electronics, appliances, and linens. To be tax deductible, clothing and household items must be in good, used condition or better. If you claim a deduction of over $500 for a particular article of clothing or household item, you do not have to meet this standard if you include a qualified appraisal of the item with the return. For all gifts worth $250 or more, you must get a written acknowledgement from the charity that includes a description of the items contributed.

Donating Cars, Boats, or Airplanes: The deduction is usually limited to the gross proceeds from the sale, if the claimed value exceeds $500.

Donating Money: This can be done in cash, by check, or via electronic funds transfer, credit card, or payroll deduction. Regardless of the amount donated, you must have a bank record or a written statement from the charity in order to take the deduction.  The record must include the name of the charity and the date and amount of the contribution.

Contributions are deductible in the year they are made. Only donations to eligible organizations are tax deductible.  Select Check, an online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions.

Questions? Contact your Berdon advisor or Saul Brenner at 212.331.7630 | sbrenner@berdonllp.com

 
Business Operations

Inadequate Controls Raise Concerns over Employment Tax Fraud Risks

A Treasury Inspector General for Tax Administration (TIGTA) report has found that employers using third-party payers for their federal employment tax withholding and tax payments are at risk of being defrauded.  The four most common third-party payer (TPP) arrangements are: payroll service provider (PSP), reporting agent, Section 3504 agent, and professional employer organization (PEO).

The report evaluated whether controls were adequate to protect the employer's and government's interests when TPPs are not fulfilling requirements. There were instances where TPPs received funds from employers for payroll taxes, but did not remit those taxes to the IRS. This left the employers with an unpaid tax bill.  The report found that: 

  • Processes have not been established by the IRS to link employers with all TPPs;
  • The IRS does not always accurately process authorization forms; and
  • The IRS has not established an effective process to ensure that indicators are accurately assigned to Section 3504 agent and employer tax accounts.

TIGTA recommended that the IRS work with the Bureau of the Fiscal Service to establish a plan to use the Electronic Federal Tax Payment System to link a PSP with an employer. The Service should also establish a program where employers can inform the IRS of the PEOs they authorize to file and pay employment taxes. While reforms will eventually take place, employers should be aware that they remain responsible for ensuring tax compliance, including timely filing of returns and payment of taxes when using a TPP.
Questions? Contact your Berdon advisor or Saul Brenner at 212.331.7630 | sbrenner@berdonllp.com

Security

Beware of Bogus IRS Phone Calls

Email "phishing" scams get considerable media attention, but another common scam designed to separate you from your money is the fake IRS phone call.  It is important to remember that the IRS does not:

  • Initiate contact with you by phone to request personal or financial information;
  • Call and demand immediate payments. The Service will not call about taxes owed without first mailing you a bill; and
  • Require that you pay taxes in a specific way, say via a prepaid debit card.

If you receive a phone call from someone claiming to be from the IRS who makes any of these demands, consider reporting them to:

  • Treasury Inspector General for Tax Administration. Use TIGTA's web page "IRS Impersonation Scam Reporting" to report the incident.
  • Federal Trade Commission. Use the "FTC Complaint Assistant" on FTC.gov. Place "IRS Telephone Scam" in the comments of your report.

Questions? Contact your Berdon advisor or Saul Brenner at 212.331.7630 | sbrenner@berdonllp.com