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Keeping Your Balance: Cybercrime, tax credits and more from the IRS

Applicable Rates for June 2015

In Rev. Rul. 2015-14, the IRS issued its short-term, mid-term and long-term monthly applicable interest rates and adjusted AFRs for June 2015. Below is a summary of those rates.

Applicable Federal Rates (AFR)                                   short:  0.43%         mid: 1.58%          long:  2.47%

Adjusted AFRs                                                                short: 0.43%          mid: 1.51%           long: 2.47%

Please note that the long-term tax-exempt rate for ownership changes during the current month. The highest of the adjusted federal long-term rates for the current and the prior two months is 2.50 percent.

Small employer health insurance tax credit

In recent pronouncement HCTT-2015-31 which is available on the IRS website, the Internal Revenue Service reminded small employers of the details of the Code Sec. 45R small employer health insurance tax credit. The credit is targeted to employers that have less than 25 full-time equivalent employees with average annual wages of less than $50,000.

The employer must cover at least half of these full-time employees’ premium costs. The IRS also noted that for tax years beginning in 2014 or later, the small employer generally must contribute toward the premiums on behalf of each employee enrolled in a qualified health plan through the SHOP Marketplace.

James W. Rahmlow

James W. Rahmlow

A little late, but a good move

In a May 11 press release, the IRS indicated that its Criminal Investigation Division has created a cybercrime unit to combat the growing trend of identity theft related tax fraud. Richard Weber, chief of the IRS Criminal Investigation Division, indicated that the creation of the unit was dictated not only by the increase in identity theft cases, but also since the problem has now extended to data breaches and has become an international problem.

Weber has been in the job as chief of the Criminal Investigation Division for about three years.  He indicated that identity theft used to take up less than three percent of his department’s activity but now averages 18 percent at its 25 field offices, with offices such as Tampa and Miami spending close to 50 percent.

As it relates to data breaches, the IRS release indicated that “data breaches are occurring at various types of businesses such as payroll companies, department stores and medical facilities” and that there are “probably hundreds of millions of records that have been breached from companies across America.” So far this year, there have been at least 270 data breaches in companies across the U.S. (http://bit.ly/1H0yvJ6)

Additional private delivery services added as intermediaries for the “Timely Mailed is Timely Filed Rule”

While many taxpayers now file their federal and state tax returns manually, snail mail is still a perfectly acceptable method of transmitting tax returns and other documents to the IRS on a timely basis. Historically, the U.S. Postal Service was the delivery service of choice. Recently, the IRS in Notice 2015-38 updated its list of designated private delivery services that a taxpayer may use. Additionally, five qualifying services from the prior list were removed.

Effective May 6, 2015, the new carriers are: Fed Ex First Overnight, FedEx International First Next Flight Out, FedEx International Economy and UPS Next Day Air Early AM. The following services were removed from the list because the carrier had substantially altered or discontinued services on the list since it was last updated: DHL Same Day Service, DHL Next Day 10:30 am, DHL Next Day 12:00 pm, DHL Next Day 3:00 pm and DHL 2nd Day Service.

Alternative FBAR filing method available

An alternative e-filing method for individuals filing a Report of Foreign Bank and Financial Accounts has been developed by the Treasury’s Financial Crimes Enforcement Network. The new method downloads as a read only copy of the information submitted and cannot be edited for reuse.

The original method uses an Adobe PDF form which allows users to save the form locally or it may be reused or resubmitted as an amendment. This is a subtle distinction, but one worth noting. Please be aware that these forms are available only to individuals filing an FBAR.  They are not available to agents filing an FBAR on behalf of a client who must register to become an e-filer and file as an institution.

There’s not a lot of time for certain late 5500 filers, but …

In an informational release (IR-2015-74) the IRS reminded businesses that have failed to timely file certain Form 5500 series returns that they only have until June 2, 2015, to file their required documents and take advantage of a one-year penalty relief program which could eliminate penalties of up to $15,000 per return.

To date, approximately 6,000 delinquent returns have been filed under this special penalty relief program. The relief is provided for plan administrators or plan sponsors of certain plans, including owner-spouse and one-participant plans. The program is also available to certain foreign plans.

NFL to drop tax exempt status

The National Football League (NFL) has announced that it is voluntarily relinquishing its tax-exempt status under Code Sec. 501(c)( 6). It is not known whether the announcement follows legislation that had been introduced in Congress (H.R. 547) the Properly Reducing Over Exemptions for Sports Act to remove professional sports leagues from the list of tax-exempt organizations.

Since most estimates indicate that very little incremental Federal tax will be paid by the league, the move is being viewed primarily as being made for two reasons: Public relations and privacy. The public relations aspect is obvious. From a privacy standpoint, the for profit return that the IRS files will not be available for the public and thus will not include such things as NFL Commissioner Goodell’s recent salary amount in excess of $40 million per year.

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

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