New York State to Suspend Driver’s Licenses of Tax Delinquents!

New York State Governor Andrew M. Cuomo recently announced "a new initiative Monday to encourage individuals who owe significant back taxes to the state to pay their bills by suspending their New York State driver licenses when their past-due tax liability exceeds $10,000."
According to New York State, this "crackdown is the result of legislation introduced as part of the executive budget and signed into law earlier this year." The New York Governor stated that "tax scofflaws who don’t abide by the same rules as everyone else are not entitled to the same privileges as everyone else."
“These worst offenders are putting an unfair burden on the overwhelming majority of New Yorkers who are hardworking, law-abiding taxpayers. By enacting these additional consequences, we’re providing additional incentives for the state to receive the money it is owed and we’re keeping scofflaws off the very roads they refuse to pay their fair share to maintain.”..Read more…

Form 8606 is Confusing

Please Help me..
I was trying to fill-up Form 8606...and I was stuck by LINES 1, 2
What is the worksheet they are talking about found in Form 1040 (Publication 17)?
What is the worksheet they are talking about in Publication 590?

Answer :

What is the worksheet they are talking about found in Form 1040 (Publication 17)?===============For example, if you need to use the IRA Deduction Worksheet in the Form 1040 or 1040A instructions, you need to subtract line 12 (line 10 for Form 1040A) of the worksheet (or the amount you chose to deduct on Form 1040 or Form 1040A, line 17, if less) from the smaller of line 10 or line 11 (line 8 or line 9 for Form 1040A) of the worksheet. Enter the result on line 1 of Form 8606. You cannot deduct the amount included on line 1. For IRA deduction W/S visit the website here; http://apps.irs.gov/app/vita/content...heet_1040i.pdf
What is the worksheet they are talking about in Publication 590.======= You need to use Pub 590 W/S for figuring amount of net income due to IRA contribution and the total amount to be recharacterized (Worksheet 1-3), Worksheet 1-3. Determining the Amount of Net Income Due To an IRA Contribution and Total Amount To Be Recharacterized Figuring modified AGI (Worksheet 1-1), Both contributions for 2012 and distributions in 2012.Roth IRAs.For example,.for MAGI for Roth IRA Purposes, yo need to fill in Worksheet 2-1 Publication 590 (2012), Individual Retirement Arrangements (IRAs) Publication 590 (2012), Individual Retirement Arrangements (IRAs)
Basically, IRS Form 8606 is used to report nondeductible contributions to traditional IRA, and to report any withdrawals from SEP, SIMPLE or traditional IRA…Read more…

Under what circumstances will NJ State grant "Retro-Active New Jersey S Corporation Election?"

According to New Jersey, "in order to provide uniform relief for corporations who have inadvertently failed to make a timely valid New Jersey S Corporation election, the Division of Taxation has adopted a retro-active S Corporation election procedure.
Regulation 18:7-20.3, which was recently promulgated details the procedure that can enable a corporation and its shareholder(s) to cure a defective New Jersey S Corporation election.
Taxpayers requesting a retroactive election will need to file form CBT-2553-R and remit the required fee. Taxpayers should take care to ensure that they qualify for the new procedure, since the required fee is not refundable if the retro-active election is denied.
A retro-active election will only be granted providing all of the following criteria are satisfied:
1) A completed form CBT-2553-R is submitted containing the signature of all shareholders along with a non-refundable administrative fee equal to $100.00 for each year being impacted by the backdating.
2) The Corporation is authorized to do business in New Jersey and registered with the Division of Taxation.
3) All appropriate Corporation Business Tax returns have been timely filed and taxes timely paid as if the New Jersey S Corporation election request had been previously approved.
4) The New Jersey S Corporation retro-active request is received prior to a final assessment for a year covered by the requested becoming final.
5) The Division has not issued a notice denying a previous late filed New Jersey S election request, and the taxpayer has not protested the denial within ninety (90) days.
6) All shareholders have filed appropriate tax returns and paid the tax in full when due as if the New Jersey S Corporation election request had been previously approved, and the taxpayers have reported the appropriate S Corporation income on those returns."

Source : 

http://www.asktaxguru.com/8207-under-what-circumstances-will-nj-state-grant.html

Rent-to-own sale

I started renting my former primary residence in 01/2012 after having it on the market for a year (moved to take a job elsewhere). In 04/2012 I purchased a home in my current city. I am sure you can understand why I might want to sell my former home.
Anyway, I currently have someone interested in a rent-to-own agreement on my rental property. I have not made any decisions concerning lease-option vs. lease-purchase; I need to speak to a lawyer. However, I would appreciate any feedback on the potential taxes associated with such a sale.
I purchased the home for $126,500 in 06/2006. I put about $20k in repairs into it while I was living there. The rent-to-own option I advertised online (which I expected no one to respond to) was $5k down, $1k per month rent, with option to buy within 3 years for $112,500. I will likely give them 10% of their rent toward purchase price.
I am currently renting the house for $900 per month, which is only $84 more than my mortgage...so at the end of the year, with upkeep and depreciation figured, I am at a $3.7k loss. I just received my real-estate tax statement that quotes the market value of the property at $144.5k ($28.9k for the land).
So my questions are:
1. What sort of taxes am I going to have to pay on this sale if we assume an agreement to begin in 01/2014, and the buyer purchases at the end of the three-year term (12/2017)?
2. What is the $5k down? Do I pay taxes on it immediately, or hold it as a deposit?
3. Is this a good idea, or should I keep renting until a conventional buyer comes along?
Like I said, I will make arrangement to consult a real-estate lawyer soon, but any info that I can get beforehand would be great.

Answer :

A lease option isn't for everybody. If you need all the money from the sale of your home right away, you're better off with a straight sale. In addition, the majority of lease options aren't exercised, so you may have to begin the process of selling your home all over again after the lease term. You might also think twice about a lease option if you don't want to, or aren't able to, keep up with the responsibilities of continuing to own the home. In the lease option scenario, the owner must continue to pay property taxes and insurance and is generally still responsible for major repairs during the lease term. A rent-to-own agreement should be handled with two separate documents: a lease and an option to purchase contract. The terms of both contracts are negotiable. The owner of a piece of property under a rent-to-own agreement retains the deed to the property while the tenant is still renting and has not yet exercised the purchase option. You , as an owner , get all the tax write-offs that go to homeowners. If you have to make repairs to the home for the tenant, the cost of those repairs is tax deductible. All expenses associated with renting out a property are tax write-offs, and you get the benefit of these deductions as a property owner and business person. Because you count the two to three years of payments from the tenant as rent, this is deducted from the selling price of the home. If and when the tenant buys the property, you, the seller, will show a lower purchase price for it. This will save on taxes because the selling price will be closer to the cost basis of the property. You, as a landlord, who offers a rental home through a rent-to-own deal often has a mortgage from purchasing the property. Prior to renting the home out, and throughout the option period, the landlord can take a mortgage interest deduction on your income taxes. This deduction is available to you on top of any mortgage interest deduction you take for another mortgage on the home you occupy. Once the tenant exercises the lease option and gets a mortgage to buy the home, he becomes the owner and gains rights to the mortgage interest tax deduction.you re also responsible for paying property tax until a new owner takes possession. This means that for the duration of the option period, you can take an income tax deduction equal to the value of property taxes. This same deduction will apply to the tenant once the tenant elects to exercise the lease option and purchases the home, thereby becoming responsible for its annual property taxes.
You need to make sure that if you will be requiring a Down payment from your "Buyer" that it is clearly marked as a non-refundable down payment. You can usually still deduct your mortgage interest payments from your income taxes during the term of the lease option. In general, you also do not need to pay any tax on the option money until the lease ends. At that point,....Read more..

What can a Taxpayer do if they only filed a Federal S Corporation Election but did not File a CBT-2553 "New Jersey S Corporation Election?"

Per New Jersey Division of Taxation, an authorized corporation may elect a New Jersey S corporation status effective retroactively to a prior return period. The Corporation (Taxpayer) must submit an original CBT-2553, along with a completed NJ Form CBT-2553-R. This NJ Form CBT-2553-R form contains the following 4 parts.
Part I: Name of Corporation:
Taxpayers must either type or print the name exactly as it appears on form NJ-REG and the CBT-2553 along with Federal Employer Identification Number (FEIN):
Part II Required Payment
A payment of $100.00 (non refundable) must be included for each and every year or privilege period for which this retroactive request applies.
Part III: Corporate Attestation
Print the name and title of the current corporate officer signing this document and the CBT-2553. Both documents must be signed by the same corporate officer.
Part IV: Shareholders Consent Statement
All shareholders including original and subsequent shareholders for the retroactive period in question must sign and consent to New Jersey taxation in Part IV.
The completed form CBT-2533 and CBT-2533-R should be mailed to the following address as shown below:
New Jersey Division of Revenue,
PO Box 252, Trenton, NJ 08646-0252.
After the application is reviewed, the taxpayer will be notified if the retroactive election is granted. 

Source :  http://www.asktaxguru.com/8206-what-can-taxpayer-do-if-they-only.html

1099 and U.S. Employee living in Canada

Does my company need to file a 1099 for one of our part-time employees that is a U.S. citizen, but residing in Canada at this time? I was told by our payroll officer that we needed to collect a W-9 for him. Where is this information in the IRS regulations if this is needed? Thank you!

Answer : 

#1:As a non US company, you do not issue a 1099MISC to your EE that is a US citizen; A 1099 is normally issued to individuals living in the U.S. and who are also citizens of the US. Any person making more than $600 per year is issued a 1099-MISC for income earned in the U.S.. However, foreign corporations are not issued this document. They are not subject to this filing since they are foreign entities. A 1099-MISC is a type of tax form. It is used to report miscellaneous income, such as income earned as a non-employee, as well as fees, commissions, rents, or royalties paid during the last tax year
#2: As mentioned above. A Form W-9 is a document that is issued by the US dept. of the Treasury's IRS and is used when a person or company needs..Read more..

Advice on complex situation?

#1:I currently live in France but will be moving and working in NYC by the end of the year (got married to a US citizen + getting Green Card). I have a full time job starting soon in the US.I also have a company here in France doing business online (selling software), with clients mainly in Europe (no U.S. clients). I do not technically own the company (no shares) and I am not an employee, so I have been paying myself by charging "management fees" through another French company (good legal way to optimize taxes here).
#2:Now that I am moving to the US, I would like to choose the new best US structure to combine my employee salary and the income I can withdraw from my French company.
What would be your advice on that? Do keep in mind that I am discovering the US legal and tax systems, and that I am not necessarily planning on staying in the US for the rest of my life.
#3:I have explored a bit the following topics:
- US tax rules (especially the fact that here we are taxed on our worldwide incomes)
- the advantages of writing off expenses in the US
- incorporating in Delaware, offshore, or in NYC
- the different corporations you have in the US (C, S, LLC, etc)
- the difference between paying myself in salary or dividend
I tend to think that, since I have a total freedom of place where to incorporate and since I am living in a country where the original company is not doing any business, there might be a clever way to optimize the situation.
I currently see 2 main "overall strategies":
- incorporate in a "tax heaven", and charge French company (transfer intellectual property and transfer royalties? Or just management fees?). The offshore company would pay 0% taxes and I would pay myself dividends. So 15% overall tax rate?
- incorporate in US (NYC, Delaware?) and charge the French company. Write off a max of expenses (portion of rent, utilities, etc.). Pay myself (dividend, salary?). So higher taxes, but less taxable incomes? Would the company pay federal/local taxes since it would not do any business in the US?

Answer :

#1:As a US person, as a US resident, you are subject to US taxes on your US source and world wide income that you earn in France.As long as you pay tax(es) to French taxing authority(ies) on your income that you earn in France, you have a choice as to whether you deduct any foreign taxes paid or accrued during the year as an itemized deduction on your Form 1040 Sch A or as a credit using Form 1116. The choice needs to be made each year that you have foreign taxes and it can change from year to year. While you can choose whether to use a credit or a deduction year to year, you can't use some as a credit and some as a deduction in the same year. The IRS recommends filling out your taxes both ways to see which one provides you with the most benefit. Not all foreign taxes qualify to be used as a credit. Generally, only foreign income taxes can be used as a credit on your U.S. taxes. All other taxes can be used as a deduction. While the general rule is that you can mix and match foreign tax credits and deductions in the same year, there is an exception. If the foreign taxes were incurred in a trade or business or in the production of income, the taxes can be deducted even if you took the tax credit for foreign income taxes. You can change your choice as to..Read more..