PENNSYLVANIA TAX PROBLEMS – Pennsylvania Tax Amnesty Program – 2017

PENNSYLVANIA TAX AMNESTY PROGRAM – 2017

 

Act 84 of 2016 established the “Pennsylvania Tax Amnesty Program” (the “Amnesty Program”). The Amnesty Program period begins April 21, 2017, and ends on June 19, 2017 (the “Amnesty Period”). All taxes owed to the Commonwealth administered by the Department of Revenue (Department) are eligible for the Amnesty Program. Taxes, interest and penalties collected under the International Fuel Tax Agreement owed to other states or provinces are not eligible for the Amnesty Program. Eligible periods are those where a known or unknown delinquency exists as of December 31, 2015.

 

The Department may use the services of a third party vendor to assist with implementation of the Amnesty Program and provide services to its participants.

 

To participate, taxpayers must file an online Amnesty Return, file all delinquent tax returns and make the required payment within the Amnesty Period. All penalties, collection and lien fees and one-half of the interest due will be waived.

 

Unpaid taxes, penalties and interest that result from periods subsequent to December 31, 2015, are not eligible for the Amnesty Program. However, if a taxpayer has unpaid taxes or unfiled returns for periods not eligible for Amnesty (due after December 31, 2015), those periods must be filed for the taxpayer’s participation in the 2017 Amnesty Program to be approved.

IRS TAX PROBLEMS – TAX ON SALE OF PERSONAL RESIDENCE

IRS TAX PROBLEMS – Sale of Residence – Real Estate Tax

You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.

Ownership and Use Tests

To claim the exclusion, you must meet the Ownership and Use tests. This means that during the Five (5) -Year period ending on the date of the sale, you must have:

  • Owned the home for at least Two (2) Years (the “Ownership Test”)
  • Lived in the home as your main home for at least Two (2) years (the “Use Test”)

Gain

If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

  • If you can exclude all of the gain, you do not need to report the sale on your tax return
  • If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040)

Loss

You cannot deduct a loss from the sale of your main home.

Worksheets

Worksheets are included in IRS Publication 523, “Selling Your Home”, to help you figure the:

  • Adjusted basis of the home you sold
  • Gain (or loss) on the sale
  • Gain that you can exclude

Reporting the Sale

Do not report the sale of your main home on your tax return unless:

  • You have a gain and do not qualify to exclude all of it,
  • You have a gain and choose not to exclude it, or
  • You have a loss and received a Form 1099-S.

More Than One Home

If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Example One:

You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.

Example Two:

You own a house, but you live in another house that you rent. The rented house is your main home.

Business Use or Rental of Home

You may be able to exclude your gain from the sale of a home that you have used for business or to produce rental income. But you must meet the Ownership and Use tests.

Example:

On May 30, 1997, Amy bought a house. She moved in on that date and lived in it until May 31, 1999, when she moved out of the house and put it up for rent. The house was rented from June 1, 1999, to March 31, 2001. Amy moved back into the house on April 1, 2001, and lived there until she sold it on January 31, 2003. During the 5-year period ending on the date of the sale (February 1, 1998 – January 31, 2003), Amy owned and lived in the house for more than 2 years as shown in the table below.

Five Year Period Used as Home Used as Rental
2/1/98-5/31/99 16 months  
6/1/99-3/31/01   22 months
4/1/01-1/31/03 22 months                
  38 months 22 months

Amy can exclude gain up to $250,000. However, she cannot exclude the part of the gain equal to the depreciation she claimed for renting the house.

 

 

IRS TAX PROBLEMS – Is Your Gift Taxable?

IRS TAX PROBLEMS – Is Your Gift Taxable?

If you gave money or property to someone as a gift, you may wonder about the federal gift tax. Many gifts are not subject to the gift tax. Here are Seven (7) basic rules for gifts and the gift tax.

  1. Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are nontaxable gifts:
    • Gifts that do not exceed the “Annual Exclusion” for the calendar year,
    • Tuition or medical expenses you paid directly to a medical or educational institution for someone,
    • Gifts to your spouse
    • Gifts to a political organization for its use, and
    • Gifts to charities.
  1. Annual Exclusion. For 2016 and 2017, the “Annual Exclusion” is $14,000. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the Annual Exclusion for the year.
  2. No Tax on Recipient. Generally, the person who receives your gift will not have to pay taxes on it.
  3. Gifts Not Deductible. Making a gift does not ordinarily affect your taxes. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
  4. Forgiven Debt and Certain Loans. The gift tax may also apply when you forgive a debt or give a loan that is interest-free or below the market interest rate.
  5. Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.
  6. Filing Requirement. You must file IRS Form 709 – “United States Gift (and Generation-Skipping Transfer) Tax Return”, if any of the following apply:
    • You gave gifts to at least one person (other than your spouse) that amount to more than the Annual Exclusion for the year.
    • You and your spouse are splitting a gift. This is true even if half of the split gift is less than the Annual Exclusion.
    • You gave someone (other than your spouse) a gift of a “future interest” that they can’t actually possess, enjoy, or from which they’ll receive income later.
    • You gave your spouse an interest in property that will terminate due to a future event.

IRS TAX PROBLEMS – How the IRS “Taxpayer Bill of Rights” Works

IRS TAX PROBLEMS – How the IRS Taxpayer Bill of Rights Works

Taxpayers have fundamental rights under the law. The “Taxpayer Bill of Rights” presents these rights in TEN (10) categories. This helps taxpayers when they interact with the IRS.

In IRS Publication No. 1, your Rights as a Taxpayer, highlights a list of taxpayer rights and the IRS’s obligations to protect you. Here is a short summary of the Taxpayer Bill of Rights:

  1. The Right to Be Informed.
    Taxpayers have the right to know what is required to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to know about IRS decisions affecting their accounts and clear explanations of the outcomes.
  2. The Right to Quality Service.
    Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.
  3. The Right to Pay No More than the Correct Amount of Tax.
    Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties. They should also expect the IRS to apply all tax payments properly.
  4. The Right to Challenge the IRS’s Position and Be Heard.
    Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. They should expect that the IRS will consider their timely objections and documentation promptly and fairly. If the IRS does not agree with their position, they should expect a response.
  5. The Right to Appeal an IRS Decision in an Independent Forum.
    Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. Taxpayers have the right to receive a written response regarding a decision from the Office of Appeals. Taxpayers generally have the right to take their cases to court.
  6. The Right to Finality.
    Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS concludes an audit.
  7. The Right to Privacy.
    Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. They should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.
  8. The Right to Confidentiality.
    Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayer or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose their return information.
  9. The Right to Retain Representation.
    Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
  10. The Right to a Fair and Just Tax System.
    Taxpayers have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect their underlying liabilities, ability to pay or ability to provide information timely. Taxpayers have the right to receive assistance from the “Taxpayer Advocate Service” if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.