This is the fifth part of our multi-part series of blogs on tax benefits for education. Any present or former student should utilize the knowledge, experience and expertise of the tax professionals at the Thorgood Law Firm to ensure that they take advantage of all the credits and deductions that the law allows for students of higher education.
Qualified Tuition Programs (529 plans)
A Qualified Tuition Plan (QTP), also called a 529 Plan, is a program established to allow prospective students to either prepay or contribute to an account established for paying a student’s qualified education expenses at a post secondary institution. States and eligible educational institutions are entities that may establish and maintain programs that allow a student taxpayer to prepay these qualified education expenses.
There are many reasons for choosing a tax attorney. Some reasons are reactive or defensive, others are cost-preventive. It is more than wise to retain a tax attorney when:
- Subject to an audit or collection activity;
- Filing an appeal of a tax court decision;
- Trying to save money on behalf of a business; and
- Trying to take advantage of tax credits or deductions.
Choosing a tax attorney involves the assessment of various factors, which include the following:
A Review Of The New Federal Filing Deadlines Under The Surface Transportation and Veterans Health Care Choice Improvement Act
On its face, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) doesn’t sound much like legislation that affects the filing of taxes, because such legislation rarely does. The enactment of this Act promulgates changes to the tax filing process consequently affecting just about every taxpayer. These changes include revised due dates for filing certain tax forms, which potentially further impact the filing of state taxes. Individual and business taxpayers alike should consult a tax professional to conduct a detailed review of the Act in detail to determine which significant deadline changes affect them most.
I.R.C. § 6038 requires U.S. taxpayers to file Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) with their tax returns. The reporting requirements of § 6038, as well as § 6046, require Form 5471 to be filed by certain U.S. persons who are officers, directors, or shareholders in certain foreign corporations.
A person required to file Form 5471 who fails to file the form, or files a late or incomplete form, subjects himself to steep monetary penalties. Also, the statute of limitations on assessment for the taxpayer’s entire return remains open until three years after the required information is submitted to the IRS.
The Consolidated Appropriations Act of 2016, enacted Dec. 18, 2015, extends a long list of expired tax provisions into the future. Unlike in past extension legislations, Congress extended many provisions permanently. The Joint Committee on Taxation estimates that the total cost of the tax provisions in the bill will be $622 billion over 10 years. Without Congress extending these various provisions, millions of Americans were in danger of losing these beneficial tax breaks by 2017.
Energy tax incentives: Provisions for energy expenses extended through 2016 include:
- § 25C, which provides a 10% credit for qualified nonbusiness energy property. The law also updates the Energy Star requirements.
U.S. taxpayers that have paid or accrued foreign taxes to a foreign country or U.S. possession, while subject to U.S. tax on the same income, may be able to take either a credit or an itemized deduction for these payments for foreign taxes. The foreign tax credit intends to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived.
Qualifying Foreign Taxes
Taxpayers may only claim a credit for foreign taxes that are imposed by a foreign country or U.S. possession. The tax must meet four tests to qualify for the credit:
The Consolidated Appropriations Act of 2016, enacted Dec. 18, 2015, extends a long list of expired tax provisions into the future. Unlike past extension legislation, Congress extended many provisions permanently. In more traditional fashion, some of the others were extended for five years, and many for two years. The Joint Committee on Taxation estimates that the total cost of the tax provisions in the bill will be $622 billion over 10 years. Without Congress extending these various provisions, millions of Americans were in danger of losing these beneficial tax breaks by 2017.
Here are some provisions for individual taxpayers that were extended by Congress for two years:
Form 8938 refers to the Statement of Specified Foreign Financial Assets while FinCEN Form 114 refers to an FBAR or Report of Foreign Bank and Financial Accounts. U.S. taxpayers that own foreign assets need to distinguish the requirements related to both of these forms. The following is the second part of a blog that compares Form 8938 and FBAR requirements.
What is reported?
The maximum value of specified foreign financial assets is reported on Form 8938. These assets include financial accounts with foreign financial institutions and certain other foreign non-account investment assets. The maximum value of financial accounts maintained by a financial institution physically located in a foreign country is reported on an FBAR.
Form 8938 refers to the Statement of Specified Foreign Financial Assets while FinCEN Form 114 refers to an FBAR or Report of Foreign Bank and Financial Accounts. U.S. taxpayers that own foreign assets need to distinguish the requirements related to both of these forms. The following is the first part of a blog that compares Form 8938 and FBAR requirements.
*Who must file these forms?
U.S citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold must file Form 8938. U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold, must file an FBAR.