The IRS has stated that large estates of those who passed away in 2010 will have an extension to file their returns and pay estate taxes. The extension is expanded until January, 2012. The IRS is also granting no penalties for some beneficiaries on these estates for their 2010 tax returns.

This relief was granted so that estates worth more than $5 million will have time to adhere to the major tax law changes that were put in place last year. The modified estate tax forms can be downloaded from irs.gov and the carry-over form will be available this fall.

The IRS will give the following relief:

Large estate whose beneficiaries opt out of the estate tax will have until January 17^th, 2012 to file the 8939 Form. This carry-over form was originally due on November 15^th of this year. The change is specific to the date and not a true extension, there will be no other forms required when filing your return.

For 2010, estates that requested an extension on the 4768 Form will be be given until March of 2011 to file their returns and pay any taxes that are due. A six month extension is usually granted for those who file this form, but if there is a good cause to extend payments, the extension is granted. Most estates for the 2010 tax year that file the 4768 Form will have until March 19^th, 2012 to file a 706 or 706-A Form. If someone passed away in late 2010, generally after December 16^th, 2010, but before January 1^st, 2011, the due date to file is 15 months after the owner of the estate has passed away. There will be no late filing or late payment penalties, but there will still be interest on estate taxes that are paid after they are due.

There is a penalty relief for many beneficiaries of large estates and trusts who have already filed their 2010 tax returns or requested an extension and will file before October 17^th, 2011. Late payment and penalty relief will apply to beneficiaries of estate owners who passed away in 2010 and who sold the property in 2010. If they reported incorrect gains or losses due to not knowing that the estate was eligible for the carry-over. Information about this extension and relief can be found in Notice 2011-76 on irs.gov.

Daniel Stoica Accounting Professional

Have you earned some income in the last few years but didn’t file your tax return because you didn’t earn enough to warrant filing? If so, you may have money waiting for you from the IRS. The IRS has millions of dollars waiting to be claimed.

If you feel you may be entitled to your share of this unclaimed money, the IRS offers help on how to claim it:

Unclaimed Refunds

There are some taxpayers who earned income in past years but didn’t make enough money to have to file a tax return. These people may be able to claim a refund from the tax that was withheld from their pay. Other taxpayers didn’t have any taxes taken out of their checks, but they may still be eligible for the Earned Income Tax Credit. These people will have to file a tax return in order to claim it.

-In order to claim this money, a tax return must be filed within three years of the tax return’s due date.

-The unclaimed money will become the property of the United States Treasury if there is no claim for the money within the three year time limit.

-The IRS will not assess a penalty if you file a late return where you are claiming your refund.

-For forms and publications that will instruct you on how to claim your potential refund, log on to www.irs.gov and click on Forms and Publications, or call 800-829-3676.

-To find information about the Earned Income Tax Credit, log on to www.irs.gov.

Undeliverable Refunds

Perhaps you were expecting a refund, but didn’t receive it?

-All refunds are sent to your last known address on file with the IRS. The checks will be returned to the IRS if you don’t provide them, or the post office, with your new address.

-You can updated your address on the IRS website by clicking on the “Where’s My Refund?” tab. You will have the opportunity to give your new address, and your refund check will be mailed to you at your new address.

-You can download and submit the 8822 Form, Change of Address, and mail it to the IRS. Or, you can call 800-829-3676 to request the form.

-If you feel you have money coming to you and you don’t have access to the Internet, check your tax return or talk to your tax preparer. If everything looks correct, you can call the IRS assistance line at 800-829-1040 and check the status of your refund.

Daniel Stoica Accounting Professional

The Internal Revenue Service has announced that a voluntary disclosure initiative has been implemented that is designed to bring money that is held offshore back to the U.S., which will assist people with income in hidden offshore accounts to become current with their taxes. The disclosure initiative is voluntary and will be available through Aug. 31st of this year.  Individuals with hidden off-shore accounts would be wise to consult with a tax professional in order to get the best information and comply with the regulations. 

IRS Commissioner Doug Shulman says, “As we continue to gather more information and follow more people internationally, the risk to individuals hiding assets offshore increases.” He goes on to say, “This new effort gives people who are hiding money in foreign accounts a tough, fair way to resolve their tax problems. It also gives them a chance to come in before we find them.”

The IRS has decided to open another initiative which follows taxpayers with foreign accounts. The first disclosure program closed with 15,000 individuals sending voluntary disclosures on Oct. 15, 2009. Since then, over 3,000 taxpayers have come forward with bank account information from around the world. They are now eligible to take advantage of the provisions of this new initiative.

The goal here is to get this money back in the U.S.  For the IRS, fighting international tax evasion is a top priority. According to the IRS, there are many more banks under review. The situation is said to get worse for taxpayers who are hiding their assets and income in offshore banks. This new disclosure initiative is their best chance for them to get back into the system.

The new initiative, called the 2011 Offshore Voluntary Disclosure Initiative,  includes many revisions from the 2009 Initiative. The penalty is higher now, which means that people who did not come forward in 2009 won’t be rewarded for coming forward now. The 2011 initiative does have new features, though.

There is a new structure which requires taxpayers to pay a penalty of 25% of the amount in those foreign bank accounts. A few of those taxpayers may be eligible for 5% or 12.5% penalty. Those who comply with the voluntary initiative must also pay back-taxes, and interest, for eight years. They will also be required to pay accuracy-related and/or delinquency penalties.

Taxpayers who participate in this voluntary initiative will have to file all original and amended tax returns. They will also have to include their payments for taxes owed and other penalties by the Aug. 31 deadline.

The IRS also states that they will be making additional modifications to the 2011 disclosure initiative.

Participants will be faced with a 25% penalty, but taxpayers who qualify for limited situations will receive a 5% penalty.

The IRS appointed a new penalty class of 12.5% for smaller offshore accounts. Those with offshore accounts or assets below $75,000 qualify for this lower rate.

The 2011 initiative gives benefits taxpayers which should encourage them to come in now instead of waiting for the IRS to find them. Taxpayers who currently have offshore assets who don’t come forward will face much bigger penalties and the possibility of criminal charges.

Doug Shulman stated that this initiative is fair. It allows people with offshore accounts to come forward so they can “get right” with the IRS. The initiative gives them the opportunity to receive accurate information about how their case will be handled by the IRS. Those taxpayers who do come in on their own accord will also avoid criminal prosecution.

The IRS is taking care of these voluntary disclosures in central areas of the United States to be more efficient in the processing of the applications.

The IRS recently launched a section on irs.gov that includes the terms and conditions of the 2011 Offshore Voluntary Disclosure Initiative. It also includes a set of questions and answers to assist taxpayers and tax professionals alike. The IRS web site also has a detailed section where people can make their voluntary disclosure.

In the 2009 voluntary disclosure program, taxpayers were looking at a 20%  penalty that covered a six-year period. Approximately 15,000 taxpayers presented the IRS with voluntary disclosures in an effort to avoid the high penalties. These disclosures covered banks in over 60 countries.

Shulman said this international effort will increasingly continue as the year goes on.

Secrecy in taxes continues to fall apart. The IRS is not giving up on these international issues. For those taxpayers who are hiding cash or assets offshore, the IRS advises that they come forward now because their risk of being caught is becoming greater.

Daniel Stoica Accounting Professional