Gunnip Blog

On Friday, the IRS issued final regulations requiring taxpayers that obtain employer identification numbers (EINs) to update their information with the IRS (T.D. 9617). The regulations, which will apply beginning Jan. 1, 2014, to give the IRS time to publish the relevant form and instructions, adopt without change proposed regulations that were issued last year (REG-135491-10).

The IRS issues EINs (which take the form 00-0000000) to employers, sole proprietors, corporations, partnerships, nonprofit associations, trusts, estates, government agencies, certain individuals, and other business entities for tax filing and reporting purposes. Apparently, many EINs are issued to nominees that act on the applicant’s behalf but then are no longer authorized to represent the applicant.

To address this problem, the IRS revised Form SS-4, Application for Employer Identification Number, to require the disclosure of the applicant’s “responsible party” and that person’s Social Security number, individual taxpayer identification number, or EIN. The definition of responsible party depends on the type of entity applying for the EIN and is listed in the instructions to Form SS-4.

The final regulations require any person that has been issued an EIN to provide updated information to the IRS in the manner and frequency required by the forms, instructions, or other appropriate guidance. According to the preamble, following the publication of the final regulations (scheduled for May 6, 2013), the IRS will publish a form for persons issued an EIN to use to disclose the correct application information to the IRS. The relevant form will require these persons to update application information about the name and taxpayer identifying number of the responsible party within the applicable time frame. The regulations apply to all persons possessing an EIN on or after Jan. 1, 2014 (which means the rules apply retroactively and not only to persons that applied for or were issued EINs after the effective date).

Credit:  Sally P. Schreiber, Journal of Accountancy

If you need more time to file your 2012 income tax return, you can get an extension.

You may have a very good reason for wanting more time to file your 2012 individual income tax return. For instance, you might want to hold off funding a retirement plan such as a Keogh or SEP until you can save more money. Perhaps you're waiting for a tax form from a trust, a partnership, or an S Corporation. Or maybe you've just been busy.

It doesn't matter. Whatever the cause or motivation, you can usually put off filing for up to six months beyond April 15. That means you could have until October 15, 2013, to finalize your return -- assuming you follow the rules.

Here's what you need to do:

* Estimate your total tax liability for 2012, subtract what you've already paid in withholding or estimated payments and remit most or all of the balance, and

* File an extension request form (generally Form 4868 for an individual return) by April 15.

You can file the extension request form electronically, by phone, or by mailing it to the IRS. If you owe taxes, you can pay with an electronic funds transfer, your credit card, or a check.

Requesting an extension for your personal return also gives you additional time to file a gift tax return for 2012. The gift tax return extension is automatically included. You don't even have to check a box. But if you owe gift tax (or generation skipping transfer tax), or are requesting an extension only for a gift tax return, you'll need to use Form 8892.

One more quirk: If you live and work outside the United States, you may qualify for an automatic two-month extension of time to file without having to send in a form.

If you have special circumstances such as military service, or think you might have difficulty paying the tax due with your extension, please contact us. We can help you work through the rules.

You can reach into the past and future to cut your taxes. How? Through the use of tax carryforwards and carrybacks. Here is what you should know about these tax savers.

Some tax deductions have a maximum amount that you can use in any one year. In these situations, the rules generally allow you to apply the unused tax deduction to a past or future tax return. One of the most popular examples of this is the “net operating loss” or NOL. Business owners whose qualified expenses exceed their income are allowed to apply the NOL to taxable income earned in the second prior year, and if there is still loss available, to apply it to last year’s income. Any further unapplied NOL can be used to offset future taxable income.

But there are a few twists to the NOL rules. If your NOL is the result of a theft or disaster, you may be able to carry it back three years. An NOL from farming can be carried back five years. And you may opt to apply all your NOL to future years only, which might not be a bad strategy if you expect to be taxed at higher rates in future years.

Net capital losses, such as from the sale of stocks, can be carried forward (but not back) to offset future capital gains and up to $3,000 of ordinary income. You can also carry forward charitable contributions that exceed 50% of taxable income for up to five years.

It’s important to save all records related to carryback and carryforward deductions for at least three years after the year they are applied. If you have any questions about your potential for tax carryback and carryforward deductions, contact our office. We’ll help you keep an eye on your tax situation, past, present, and future.

The filing status you choose when you file your 2012 tax return will affect the tax breaks you’ll qualify for, your standard deduction amount, and ultimately the amount of tax you’ll pay. Are you single, head of household, married filing jointly, or married filing separately?

Here are seven facts that will help you choose the right status.

1. Your marital status as of the last day of the year is your marital status for the entire year.

2. If you qualify for more than one status, choose the one that results in the lowest tax liability for you.

3. Single filing status is likely to be your filing choice if you are not married or you are divorced or legally separated.

4. Married individuals can file a joint return. If your spouse died during 2012, you generally may still file a joint return for 2012.

5. Married couples may file “married, filing separately” if they choose.

6. “Head of household” status is available to you if you are not married and you paid more than half the cost of maintaining a home for yourself and a child.

7. The status “qualifying widow(er) with dependent child” is available if your spouse died during 2010 or 2011 and you have a dependent child. Other conditions may apply.