Federal Tax News – November

By Team HRH | November 21, 2016

What tax changes might be ahead from the new White House? Beginning Jan. 20, 2017, the Republican Party will control the Presidency and both houses of the U.S. Congress. The day after the election, Congressional leaders said they want to take up tax reform early in the next session of Congress.

Based on proposals made during the campaign, President-elect Trump proposed fewer individual tax brackets and lower top rates: 12%, 25% and 33% — versus the current rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The tax rates on long-term capital gains would be kept at the current 0%, 15% and 20%. The president-elect proposes major changes to the taxes paid by businesses. Trump would cut the corporate tax rate from the current 35% to 15%, but eliminate tax deferral on overseas profits.

Trump also proposed repealing the estate tax, but capital gains on property held until death and valued at over $10 million would be subject to tax, with an exemption for small businesses and family farms. Trump’s proposals didn’t address the future of the gift tax.

“Nanny tax” threshold stays the same for 2017. The nanny tax isn’t just for nannies and babysitters. It also applies to housekeepers, gardeners, cooks, private nurses and other household employees who aren’t independent contractors. Special employment tax withholding, payment and reporting rules apply to employers of these workers. You generally have to withhold and pay FICA taxes if your worker earns cash wages of $2,000 or more during calendar year 2016. If you reach the threshold, all wages (not just the excess) will be subject to FICA. The Social Security Administration announced the threshold will remain $2,000 for 2017.

IRS reminds taxpayers of its offshore compliance initiatives. The IRS highlighted the accomplishments of its Offshore Voluntary Disclosure Program (OVDP) and encouraged taxpayers with undisclosed offshore accounts to come into compliance with their federal tax obligations. The OVDP has helped get more than 100,000 taxpayers into compliance and have brought in over $10 billion in taxes, interest and penalties. Through the program, taxpayers can avoid criminal prosecution and pay reduced penalties.

Under the Foreign Account Tax Compliance Act (FATCA) and the network of inter-governmental agreements between the U.S. and partner jurisdictions, automatic third-party account reporting has entered its second year. More information also comes to the IRS as a result of the U.S, Department of Justice’s Swiss Bank Program. As part of a series on non-prosecution agreements, the participating banks provide information on potential non-compliance by U.S. taxpayers.

Tax fraud scheme traced to India. Have you ever received a call, supposedly from the IRS, saying you owe taxes and need to pay NOW? A federal grand jury just indicted 61 individuals and entities, alleging they conducted such a fraud scheme. The U.S. Justice Dept. stated the criminal organization based in India claimed nearly 50,000 victims in the U.S. and resulted in millions of dollars in losses. Call center operators allegedly impersonated officials from the IRS or Citizenship and Immigration Services. Operators threatened victims with arrest, prison, fines or deportation if they didn’t pay up. Important: If you receive a call from someone who claims to represent the IRS, and demands immediate payment to avoid arrest or a lawsuit, it is a scam, and the best thing to do is to just hang up and report the call to the IRS.

Casualty loss tax deduction allowed for tornado damage. In a new case, the U.S. Tax Court upheld a married couple’s casualty loss write-offs for one of the two tornado-damaged properties they owned. The court found the taxpayers’ estimates of one property’s pre- and post-tornado values to be credible and upheld the deduction for the decline in value. For the second property, the court found that the taxpayers established the decline in value, but it denied the deduction because the taxpayers failed to establish they had any basis in the property. (TC Memo 2016-197)

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