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Keeping Your Balance: LLC return requires partner/member signature

James W. Rahmlow

James W. Rahmlow

Over the years, there has been some confusion as to whose signature is required for the filing of Form 1065 Partnership Tax Return to be valid. In order to clarify this, the IRS chief counsel issued CCA 201425011 to clarify the requirements.

In the situation at hand, the IRS received a Form 1065 from an LLC partly owned by a foreign entity. The foreign entity signed the return on behalf of the partnership. In addressing the case, IRS chief counsel determined that a valid return was not filed and that the statute period for assessment of penalties had not started. The conclusion reached was that either a general partner had to sign the return, or an LLC member manager and the foreign entity was neither.

Who pays the taxes?

Don’t hold me to these figures, but The Washington Post recently investigated the often-quoted claim that the top 1 percent of earners in the U.S. was responsible for paying 80 percent of all taxes. The Post article concluded that the top 1 percent pays around 26 percent of all taxes. I think that clarification of earned and unearned income needs to be factored into this analysis in the interest of completeness.

Applicable federal rates and adjusted AFRs issued for August 2014

In Rev. Rul. 2014-19, the IRS issued its Applicable Federal Rates and adjusted Applicable Federal Rates for the month of August 2014. Below is a summary of those rates.

 

                                                                                   Short          Mid          Long

                                                                                   Term          Term       Term

 

Applicable Federal Rate (monthly)                           0.36%         1.87%      3.05%

 

 

Adjusted AFR (monthly)                                           0.36%          1.38%      3.01%

 

Streamlined application process for small- and mid-size not-for-profits

As previously mentioned in this column, the IRS has issued guidance designed to simplify the tax-exempt application process for small and mid-size organizations seeking Code Sec. 501(c)(3) status. Qualifying organizations, including U.S. organizations with both assets valued at $250,000 or less and annual gross receipts of $50,000 or less may, submit Form 1023-EZ, which is a much less cumbersome version of the 26 page Form 1023.

It is important to note here that not all tax exempt organizations are eligible to use the Form 1023-EZ to apply for exempt status under Code Sec. 501(c)(3). In fact, Rev. Proc. 2014-40 identified 22 categories of organizations that are not eligible. Please go to www.irs.gov for details.

Truncated Taxpayer Identification numbers

Final regulations were issued in July making permanent and expanding the use of truncated taxpayer identification numbers (TTINs). The final regulations generally follow the proposed regs issued in 2013 and allow specified use of TTINs in lieu of a taxpayer’s Social Security number and certain other identifying numbers.

A TTIN prints out only the last four digits of the taxpayer’s identifying number, with asterisks or Xs replacing the first five digits of the number. For example, a Social Security number would be displayed as ***-**-5678. The goal of the process is to provide yet another method to prevent identity theft.

IRS may have issued more than $400M in erroneous payments

TIGTA issued a report that the IRS may have issued $439 million of potentially erroneous tax refunds based upon over 180,000 amended returns. At the present time, amendments may only be made on manually filed Form 1040X. TIGTA recommends filing online to minimize the number of clerical errors.

James W. Rahmlow, CPA, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com.

 

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