Extension available to file FBAR
The Internal Revenue Service has issued Notice 2009-62, which extends until June 30, 2010 the filing date for filing the Report of Foreign Bank and Financial Accounts (FBAR) for 2008 and earlier calendar years with respect to their foreign financial accounts for:
(i) persons with signature authority over, but no financial interest in, a foreign financial account, and
(ii) persons with a financial interest in, or signature authority over, a foreign commingled fund.
When do you file a Report of Foreign Bank and Financial Accounts(FBAR)
Generally if you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund, unit trust, or other types of financial accounts, then you may be required to report the account yearly to the Internal Revenue Service. Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (FBAR), if
1. The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and
2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts
Hence, holding a foreign account requires some reporting though no income is earned on such account. Checking the appropriate block on Form 1040 Schedule B, and filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, satisfies the account holder’s reporting obligation.
The Form TD F 90-22.1 must be mailed on or before June 30 of the following year to:
U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621.
The FBAR is not to be filed with the filer’s Federal income tax return.
The granting, by IRS, of an extension to file Federal income tax returns does not extend the due date for filing an FBAR. There is no extension available for filing the FBAR.
Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.
Thursday, August 13, 2009
Seven Tax Facts About Selling Your Home
During summer months, some people sell their home. Many of those individuals will make a profit on the sale and still will not have to pay a single dime of additional income tax to the IRS.
Here are seven tax facts about selling your home.
1. Ownership and Use Tests In general, you are eligible to exclude from your income all or part of any gain from the sale of your main home if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its sale. Refer to Publication 523, Selling Your Home, for the complete eligibility requirements as well as exceptions to the two year rule.
2. Main Home Your main home is the one in which you live most of the time.
3. Capital Gain Exclusion If you have a gain from the sale of your main home and you meet the ownership and use tests, you may be able to exclude up to $250,000 of the gain from your income or $500,000 on a joint return in most cases. The exclusion may be claimed each time that you sell your main home, but generally no more often than once every two years.
4. Reduced Exclusion If you do not meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced maximum exclusion. But you must have sold the home for other specific reasons such as serious health issues, a change in your place of employment, or certain unforeseen circumstances such as a divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.
5. Reporting the Gain Do not report the gain of your main home on your tax return unless you have a gain and at least part of it is taxable. Report any taxable gain on Form 1040, Schedule D, Capital Gains and Losses.
6. 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.
7. Loss You cannot deduct a loss from the sale of your main home. If you have a loss on the sale of your main home for which you received a Form 1099-S, Proceeds From Real Estate Transactions you must report the loss on Form 1040 Schedule D, even though the loss is not deductible.
Source: http://www.irs.gov/
Here are seven tax facts about selling your home.
1. Ownership and Use Tests In general, you are eligible to exclude from your income all or part of any gain from the sale of your main home if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its sale. Refer to Publication 523, Selling Your Home, for the complete eligibility requirements as well as exceptions to the two year rule.
2. Main Home Your main home is the one in which you live most of the time.
3. Capital Gain Exclusion If you have a gain from the sale of your main home and you meet the ownership and use tests, you may be able to exclude up to $250,000 of the gain from your income or $500,000 on a joint return in most cases. The exclusion may be claimed each time that you sell your main home, but generally no more often than once every two years.
4. Reduced Exclusion If you do not meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced maximum exclusion. But you must have sold the home for other specific reasons such as serious health issues, a change in your place of employment, or certain unforeseen circumstances such as a divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.
5. Reporting the Gain Do not report the gain of your main home on your tax return unless you have a gain and at least part of it is taxable. Report any taxable gain on Form 1040, Schedule D, Capital Gains and Losses.
6. 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.
7. Loss You cannot deduct a loss from the sale of your main home. If you have a loss on the sale of your main home for which you received a Form 1099-S, Proceeds From Real Estate Transactions you must report the loss on Form 1040 Schedule D, even though the loss is not deductible.
Source: http://www.irs.gov/
Thursday, August 6, 2009
Residential Energy Credits - Saves taxes and energy bills
In 2009- you can save on utility bills and taxes by making energy efficient improvements to your house. So it is the right time to start planning to take advantage of these credits...
Nonbusiness energy property credit.
This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2009. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel.
Limitation.
The total amount of credit you can claim in 2009 and 2010 is limited to $1,500.
Residential energy efficient property credit.
Beginning in 2009, there is no limitation on the credit amount for qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, and qualified geothermal heat pump property costs. The limitation on the credit amount for qualified fuel cell property costs remains the same.
Nonbusiness energy property credit.
This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2009. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel.
Limitation.
The total amount of credit you can claim in 2009 and 2010 is limited to $1,500.
Residential energy efficient property credit.
Beginning in 2009, there is no limitation on the credit amount for qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, and qualified geothermal heat pump property costs. The limitation on the credit amount for qualified fuel cell property costs remains the same.
Tax Relief for Ponzi-Scheme Victims
Generally investment losses are capital losses. Capital losses can only be deducted to the extent of capital gains for the year, plus another $3,000 ($1,500 if you use married filing separate status). Any balance capital losses get carried forward to the following year, and is subject to similar limitation in future years.
Hence, it can take years to fully deduct huge capital losses.
In contrast, ordinary losses can be written off against any other type of income. Also, If you have a big ordinary loss that exceeds the income for the year, the excess will result in net operating loss which can be carried back to previous years and/or carried forward to offset income in future years.
IRS now allows Ordinary Loss Treatment for Ponzi-Scheme Victims
According to IRS Revenue Ruling 2009-9 and IRS Revenue Procedure 2009-20, the ordinary loss from a Ponzi investment scheme can be written off as an itemized deduction (on Schedule A of Form 1040) as Casualty and Theft Losses.
Note that-
· It can be deducted in full without regard to the limitations that apply to personal theft losses.
· It can be deducted in full without regard to other rules that reduce write-offs for other types of itemized deductions.
· It can be deducted in full under the alternative minimum tax (AMT) rules.
· It can be deducted on Form 1040 for the year in which you discover the loss. However, the loss must be reduced by claims for reimbursement for which you have a reasonable prospect of recovery.
· Losses that create a net operating loss can be carried back to the three previous years or forward to the next 20 years. You may also be able to carry back a net operating loss created by a 2008 Ponzi loss for up to five years.
· Losses are deductible in the year in which the loss was suffered. Determining the amount and timing of losses from these schemes is difficult and dependent on the prospect of recovering the lost money timing of losses from these schemes. Hence IRS now allows you to deduct a safe-harbor loss amount on the return for the year that the loss is discovered. The safe-harbor privilege is only allowed for losses discovered after 2007. IRS Revenue Procedure 2009-20 simplifies compliance for taxpayers by providing a safe-harbor means of determining the year in which the loss is deemed to occur and a simplified means of computing the amount of the loss.
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