What will be the basic Medicare Part B Premium in 2012?

In 2012, the basic Medicare Part B premium will rise to $99.90 per month, up from the current amount of $96.40. But this will be an apparent reduction for seniors who first enrolled in 2010 or 2011.

Higher Income seniors will still have to pay a significantly larger Part B premium if their modified adjusted gross incomes for 2010 exceeded $170,000 for married filing joint taxpayers and $85,000 for single filing taxpayers.

Furthermore, another burden on Higher Income Seniors will be that they will also "owe a surcharge on Part D premiums for coverage of their Prescription drug costs."

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Rental Income to Sibling

AskTaxGuru.com Junior Member, nmp2001, asked:

Hello - I have a question on the tax implications of rental income from a sibling who is a part owner of the property (I know this sounds strange).

I purchased a condo with my sister a couple of years ago and I am the sole person on the mortgage (although her name is included on the deed for the property). While I have been using the condo as a primary residence and taking mortgage deductions, I have since gotten married and want to potentially purchase a new home with my wife. If and when that happens, my sister will be moving into the condo. I am wondering whether I can "lease" her the apartment while receiving rental income and continuing to deduct the mortgage interest (and also deducting the mortgage interest of my new primary residence). Are there any complications to this since she technically is an owner of the property? And would I be able to charge her a below market rent so that I don't recognize any net income (i.e. charge her the amount of the mortgage interest as rent)?

Thanks in advance.

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Deduct VA mortage insurance (VA funding fee)

AskTaxGuru.com Junior Member, randystoker, asked:

I deducted a VA funding fee I paid in '09 on my 2009 tax return. According to publication 936, VA mortgage insurance is known as a funding fee and is fully deductible in the year paid as qualified mortgage insurance. However, this year I received a letter from the IRS stating that my mortgage insurance deduction for '09 was corrected to $0 and that I owed more than $4K in back taxes for 2009. I replied with a copy of my HUD-1 showing the VA funding fee paid and the page from IRS pub. 936 showing that the VA fee paid was considered mortgage insurance and was fully deductible in the year paid. The IRS replied back with a letter requesting to see a copy of my "corrected" 1098 showing the mortgage insurance paid. However, my bank (Chase) replied in an e-mail that they do not put VA funding fees on their 1098's (even though I referenced IRS instructions for 1098 that these fees should be included in box 4 if over $600). Chase said they were sorry and could not comply with my request for a corrected 1098. My question, can the deduction for mortgage insurance be taken if not on the 1098?

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Under what circumstances will income for personal services performed in the United States as a nonresident alien is not considered to be from U.S. sources and is not subject to U.S. taxation?

The IRS has stated that "if the following three conditions exist, income for personal services performed in the United States as a nonresident alien is not considered to be from U.S. sources and is not subject to U.S. taxation."

If you do not meet all three conditions, your income from personal services performed in the United States is U.S. source income and is taxed.

These three conditions identified by the IRS are as follows:

1)You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U.S. corporation, a U.S. partnership, or a U.S. citizen or resident.


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Tips for Managing Your Tax Records

After you file your taxes, you will have many records that may help document items on your tax return. You will need these documents should the IRS select your return for examination. Here are five tips from the IRS about keeping good records.

1. Normally, tax records should be kept for three years.
2. Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
3. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.
4. Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.

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Why should taxpayers make a voluntary disclosure?

The IRS has stated that, "Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues.

Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts. Moreover, increasingly this information is available to the IRS under tax treaties, through submissions by whistleblowers, and will become more available as the Foreign Account Tax Compliance Act (FATCA) and Foreign Financial Asset Reporting (new IRC § 6038D) become effective."

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What are some of the potential civil penalties that might apply to taxpayers who don't come in under voluntary disclosure and the IRS examines these taxpayers?

Per the IRS, US taxpayers could be subject to substantial "potential civil penalties" that include the following;

1. A penalty for failing to file the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”). United States citizens, residents and certain other persons must annually report their direct or indirect financial interest in, or signature authority (or other authority that is comparable to signature authority) over, a financial account that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000 at any time during the year.

Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

2. A penalty for failing to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Taxpayers must also report various transactions involving foreign trusts, including creation of a foreign trust by a United States person, transfers of property from a United States person to a foreign trust and receipt of distributions from foreign trusts under IRC § 6048.This return also reports the receipt of gifts from foreign entities under section 6039F.The penalty for failing to file each one of these information returns, or for filing an incomplete return, is 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

3. A penalty for failing to file Form 3520-A, Information Return of Foreign Trust With a U.S. Owner. Taxpayers must also report ownership interests in foreign trusts, by United States persons with various interests in and powers over those trusts under IRC § 6048(b).The penalty for failing to file each one of these information returns or for filing an incomplete return, is five percent of the gross value of trust assets determined to be owned by the United States person.

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