June 11

Employees who work for tips – If you received $20 or more in tips during May, report them to your employer. You can use Form 4070.

June 15

Individuals – If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 and pay any tax, interest, and penalties due. U.S. citizens living in the U.S. should have paid their taxes on April 17. If you want additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then file Form 1040 by October 15. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline.

Individuals – Make a payment of your 2018 estimated tax if you are not paying your income tax for the year through withholding (or will not pay enough tax that way). Use Form 1040-ES. This is the second installment date for estimated tax in 2018.

Corporations – Deposit the second installment of estimated income tax for 2018. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in May.

Employers – Social Security, Medicare, and withheld income tax.If the monthly deposit rule applies, deposit the tax for payments in May.

• By Leon Clinton
• June 2, 2018

An IRS audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct. IRS audits are conducted either by mail (e.g., you receive a letter in the mail that you must respond to) or through an in-person interview.

Taxpayers who have been audited or otherwise interacted with the IRS should know that they have the right to know when the IRS has finished the audit. Known as the right to finality, it is one of ten basic taxpayer rights–known collectively as the Taxpayer Bill of Rights. All taxpayers dealing with the IRS are entitled to these rights. If you’ve been audited, here are seven things you should know about the right to finality.

1. Taxpayers have the right to know:

• The maximum amount of time they have to challenge the IRS’s position.
• The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt.
• When the IRS has finished an audit.

2. The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.

3. There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has an unlimited amount of time to assess tax for that tax year.

4. The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements or the IRS obtains court judgments.

5. There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer’s bankruptcy, or there’s an ongoing collection due process proceeding involving the taxpayer.

6. A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.

7. Generally, a taxpayer will only be subject to one audit per tax year. However, the IRS may reopen an audit for a previous tax year, if the IRS finds it necessary. This could happen, for example, if a taxpayer files a fraudulent return.

If you have any questions about this topic, help is just a phone call away.

• By Leon Clinton
• May 28, 2018

Under the Tax Cuts and Jobs Act (TCJA) enacted in December 2017, members of the U.S. Army, U.S. Navy, U.S. Marines, U.S. Air Force, and U.S. Coast Guard who performed services in the Sinai Peninsula in Egypt can now claim combat zone tax benefits. As such, eligible service members may be able to exclude part or all of their combat pay from their income for federal income tax purposes. Excluding combat pay from a taxpayer’s income can result in a lower tax bill. These combat zone tax benefits are retroactive to June 2015.

How Armed Services members can claim a refund

Service members who previously paid tax on this income may be owed a refund. They may file an amended tax return, Form 1040X, Amended U.S. Individual Income Tax Returnif they already filed a tax return for tax years 2015, 2016 and 2017.

Combat pay received on or after January 1, 2018, will be correctly reported on any W-2 forms issued to any service member who serves in the Sinai Peninsula. Service members who served in the Sinai Peninsula in 2015, 2016, or 2017 can provide documentation of their service to their finance officer and ask for a Form W-2c, Corrected Wage and Tax Statement.

However, an eligible service member who is unable to secure a corrected Form W-2c may still claim the combat pay exclusion by attaching to their Form 1040X copies of official documents showing they served or worked in the Sinai Peninsula. These documents should indicate the area, theater or military operation and the approximate entry date.

Acceptable documents include military orders, letters of authorization (civilians), hospital discharge papers, discharge from active duty, official letterhead memorandum from a military department or civilian employer, or a request and authorization for temporary duty travel of Department of Defense personnel (civilians and military).

Electronic filing is not available and amended returns can only be filed on paper. Amended returns may take up to 16 weeks to process; however, within approximately three weeks after mailing an amended return, taxpayers can track the status online using the IRS “Where’s My Amended Return?” feature.

Please contact the office if you would like more information about requesting a refund based on combat service in Egypt’s Sinai Peninsula.

• By Leon Clinton
• May 25, 2018