Monday, February 21, 2011

Do you have a foreign financial account?

If you own or have authority over a foreign financial account including bank, securities, or other types of financial accounts, in a foreign country, and if the aggregate value of these accounts exceeds $10,000 at any time during the year, then you are required to report that information to the Department of Treasury, by filing Form TD F 90-22.1.

This form is due on or before June 30 each year (following the year you are reporting on) and is NOT to be filed with your Federal income tax return. There is NO extension of time to file this report.

Failure to file this informational return can result in fines of up to $500,000 and up to 5 years imprisonment. Individuals and organizations that meet the requirements are required to file.

The form is pretty easy though given the potential fines and jail time for not filing, is not one you want to miss.

Tuesday, February 15, 2011

Tax Cheats

Cheating on taxes is illegal. Tax avoidance is okay, tax evasion isn't.

Tax evasion is incredibly stupid as there are so many ways to get caught. As a CPA with former tax auditing experience, trust me when I tell you there are many, many, many ways to be caught.

And one thing to remember about an IRS audit is this: Unlike a court of law where you are innocent until proven guilty, when the IRS comes knocking, with them you are guilty until you can prove yourself innocent.

Another thing to keep in mind is that there is no statute of limitations on tax evasion. Failure to report wages or hiding income could come back to bite someone years and years later.

When caught, tax cheats face substantial penalties, interest on the unpaid tax, embarrassment, criminal charges, and potential jail time.

I was recently speaking with two people when one admitted to being paid under the table to tutor children, and the other admitted to hiring household help (landscapers, babysitters, and house cleaners) without checking their authority to legally work in the United States or properly dealing with employer reporting and taxation issues.

Every tax cheat I have ever known has their self-serving reasons for cheating. Both these women tried to justify their actions though their excuses amounted to little more than "I don't want to pay more taxes."
"The subject of every State ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the State." ~ Adam Smith (1776)
I don't know anyone who wants to pay more tax although this is the way we fund our government and the many services it provides us. Though as Adam Smith pointed out, we all ought to pay our share according to our incomes and people who cheat to avoid this public responsibility, hurt the rest of us who do our civic duty.

Wednesday, February 2, 2011

Small Business Health Insurance Credit

If you saw President Obama give last week's State of the Union speech, you would have heard him mention how Jim Houser, Co-owner of Hawthorne Auto Clinic, would be getting a $5,000 tax credit to help his small business provide health insurance to his employees under the new Patient Protection and Affordable Care Act.

Jim and the Hawthorne Auto Clinic are customers of ours and we computed the tax savings for him that the President used in his speech. Jim was in the balcony for the speech and I'm both proud of him for his activism and leadership that got him there, and I'm proud of TriLibrium for being just one step removed from the White House.

The tax credit is available to certain small business with tax years beginning in 2010, for those that provide health insurance coverage to their employees. It is also available to certain non-profits and even household employers.

The rules are too complex to go into here but the IRS has a frequently asked questions page that should answer many of your questions. I suggest you start their and then speak with your CPA to find out how you can benefit from this legislation.