GMT Client Alert Series

September 2012




Sep 14, 2012

U.S. - New ITIN (Form W-7) Filing Rules

 


Implications for Global Assignees and Employers Expected

Developing…since the new French Parliament swept into power earlier this year, the new government has been busy finalizing tax reforms encompassed in the 2012 Finance Act. International assignees and their employers are increasingly facing higher tax obligations in France as the Finance Act process comes to fruition.

The second Amended Finance Bill for 2012 was adopted by the French Parliament on July 31, 2012 and has been subject to judicial review by the French Constitutional Court. Published last month were various provisions affecting individuals. Several other measures impacting individuals are expected before the end of the year with the 2013 Budget discussion due to start in late September. Note that many of the measures are not being “grandfathered in” and instead are retroactive to a particular earlier date.

Measures objected to by the opposition party and being examined by the Constitutional Court regarding individual taxation are also highlighted below:

HIGHLIGHTED MEASURES

  • Increase in Employer/Employee Social Tax Contributions on Stock Options & Restricted Stock

Employer social tax contributions, due at grant, in relation to stock options and restricted stocks are increased from 14% to 30%. These changes apply to options and stocks granted on or after July 11, 2012. Employee social tax contributions for these equity instruments have also increased from 8% to 10%.

  • Increase in Social Taxes related to Non-Residents with certain Capital Gains

Non-Residents in France with certain Real Estate income & Real Estate capital gains are now subject to French social security and social surtax (CSG and CRDS) levies of 15.5% on income and gains arising in respect of French real estate. The taxation’s effective dates are: a) real estate income received since January 1, 2012 and b) real estate capital gains arising since August 17, 2012.

  • Temporary 2012 Wealth Tax Surcharge

Individuals with a net taxable wealth equal to or exceeding Euros 3m (and non tax residents of France with a net taxable wealth above Euros 1.3m) should receive in October a specific tax return for their exceptional wealth contribution. This additional wealth tax contribution is calculated on the basis of the 2012 net assets when they exceed Euros 1.3m and by applying progressive rates identical to those that were applicable for the 2011 wealth tax (from 0.55% to 1.80%) with tax bands starting at Euros 800k. The 2012 wealth tax, calculated prior to any tax allowance, is deductible from this exceptional wealth tax contribution. The amount of the exceptional wealth contribution is due to be paid by November 15, 2012 with the filing of a tax return. These measures are being examined by the Constitutional Court.

  • OT Hours now subject to Social Security and Income taxes

No longer will overtime hours be exempt from social security and income taxes for employees. The suppression of the income tax exemption is applicable on remuneration related to additional hours performed as of August 1, 2012 and the suppression of the social security exemption is applicable on remuneration related to additional hours performed as of September 1, 2012.

Employer social security contributions will also be due on employee additional worked hours except under certain conditions for companies with less than 20 employees. This employer measure is applicable on remuneration related to additional hours performed as of September 1, 2012. These measures are being examined by the Constitutional Court.

POTENTIAL 2013 MEASURES

Expectations are that the 2013 Finance Bill, which be enacted by the end of the 2012 year will include some or all of the following proposals:

  • Creation of a new 45% income tax band, which does not include the 3% and 4% contribution for high-income earners. In addition, a possible 75% income tax rate for individuals who have earnings above Euros 1m.
  • A global wealth tax reform is expected with rates and bands similar to 2011 (2011 progressive rates ranged from 0.55% to 1.8% with bands starting at Euros 800k). The threshold could also be set at Euros 800k (i.e. the 2012 threshold is currently set at Euros 1.3m).
  • The capital gains tax rate (currently at 19%-34.5%, including CSG and CRDS tax of 15.5%) could be more closely aligned to the progressive income tax rates (up to 41% in 2011 and as much as 45% in 2012). An increase in the CSG and CRDS tax rates may also be included.

GOING FORWARD

The recent 2012 Amended Finance Bill includes many provisions that will likely affect many global assignees working in France. Keep an eye on further developments as the year progresses, which may affect your global assignees and look for further guidance from GMT on these topics. The changes above will generally increase tax costs of assignments to France. The new measures also involve a variety of different effective dates, so be wary of when measures become applicable.

GMT recommends the following actions on the part of companies with international assignees in/to France in light of the above legislation and anticipated future legislation:

  1. Companies should begin re-calibrating assignment tax costs for tax-equalized assignees and also net-pay calculations for those being permanently transferred. Tax accrual revisions and hypothetical tax recalculations for those French assignees working abroad may also be required.
  2. Assignees may also benefit from understanding these tax changes as they relate to equity & capital gain transactions, overtime compensation and even wealth taxes for some. GMT can advise on these topics during our tax briefings with assignees.
  3. GMT also recommends companies review their foreign assignment policies to capture the potential tax risks of not accounting for the above changes. Please consult your GMT advisors for assistance with crafting a comprehensive Global Assignment Policy. 

 


Who is "Resident"?  Clarity Forthcoming?

Over the summer, the UK’s HM Treasury (HMT) issued a summary of responses and draft legislation to implement the NEW Statutory Residence Test (SRT) for the UK effective from the April 6, 2013 UK tax year. These sweeping changes are still in the review stages of UK legislation, but expect a close semblance to the following details in the final law due out soon. What is clear at this time is that organizations with international assignees should carefully consider the current proposals as they will likely impact how assignments are structured to and from the UK commencing in April of 2013. 

UK’s residency rules oftentimes are difficult to ascertain as they have evolved from case law over many decades. The HMT has stated that the NEW rules would be “clear, objective, and unambiguous”, which if true, would be welcome news indeed. The SRT Rules as currently comprised are formatted into a 3-Part Test. If you meet the conditions of Part A, you are deemed a Non-Resident; if you meet the conditions of Part B, you are considered a Resident; and if neither of the first 2 parts apply, then Part C will determine your residency status. Let’s look deeper into each Part below.

SRT - Part A – NON-RESIDENTS

Only ONE of the following tests needs to be met to be Non-Resident. A person:

  • Who was not UK resident in the previous three UK tax years and is present in the UK for less than 46 days in the current UK tax year: or
  • Who, having been resident in the UK in one or more of the previous three UK tax years, is present in the UK for less than 16 days in the current UK tax year; or
  • Who leaves the UK to undertake full-time work abroad* and spends less than 91 days in the UK and less than 21 UK workdays** in the UK tax year

*“Full-time Working Abroad” definition: Employment abroad is regarded as full-time where:

  • The work covers one complete UK tax year (6 April to 5 April); and
  • The taxpayer must be employed and/or self-employed with total working hours of at least 35 hours per week

**“Less than 21 UK Workdays” defined: This test now includes any day working in the UK, including those spent on "incidental duties" ie training, reporting back to colleagues etc. The proposal defines any day worked for 3 hours or more in the UK will count as a UK workday. This already adds a complication as the individual may not be in the UK at midnight and so the day would not count as a UK residence day but may be a UK workday if the work-time during the day before midnight exceeded 3 hours.

The Consultation Document recognizes this complication and has introduced two new proposals, either:

  • A relaxation from less than 21 workdays to less than 26 workdays; or
  • A relaxation from 3 hours to 5 hours being determined a UK workday.

SRT - Part B – RESIDENTS

Only ONE of the following tests needs to be met to be Resident. A person:

  • Who has their only home in the UK*, or if they have more than one home, they are all in the UK; or
  • Who is not working full-time abroad and spends at least 183 days in the UK in the UK tax year; or
  • Who is working full-time in the UK. Full-time in the UK is deemed to cover a continuous period of more than nine months with no more than 25% of duties undertaken outside the UK. (Note: HMT is considering if this should be extended from 9 to 12 months).

*“Only Home in the UK”: HMT has not defined in the proposed legislation what is meant by “only home in the UK”, but they have offered the following clarifications:

  • A home does not need to be owned by the individual;
  • Holiday homes, weekend homes and temporary retreats will not count as a home for these rules;
  • Individuals who have a UK home and home(s) overseas will not meet the only home condition;
  • If the home is available for less than 91 days, it will not meet the only home condition.

SRT - Part C – Determining Residency (where Parts A or B are not conclusive)

Individuals will need to consider the conditions of Part C if they cannot clearly establish their residency position under either Parts A or B above. Part C works by determining an individual's residency status considering a combination of connecting factors and days spent in the UK.

The listed connecting factors are:

  1. Having spouse & children (family) in the UK;
  2. Having accommodations in the UK for at least one night, which includes holiday homes, weekend homes and temporary retreats;
  3. Has substantive UK employment or self-employment of at least 40 UK workdays where a workday is at least 3 hours long;
  4. Spending more than 90 days in the UK during the previous two UK tax years;
  5. More time spent in the UK than any other country or countries.

These “connecting factors” are under Part C weighted against the amount of time spent in the UK. The “hope” by HMT is that most people’s residency will be determined by Parts A or B and that Part C will be seldom necessary.

 How these factors relate to days spent in the UK is set-out below:

A)      Individuals Not Resident in all of the previous three UK tax years (mainly UK In-bounds):

Impact of connecting factors on residence                                    Days spent in the UK

Always Non-Resident                                                                  Less than 46 days

Resident if individual has 4 factors or more                                  46- 90 days

Resident if individual has 3 factors or more                                  91 -120 days

Resident if individual has 2 factor or more                                   121 - 182 days

Always Resident                                                                         183 days or more

 

B)      Individuals resident in one or more of the previous three UK tax years (mainly UK Out-bounds)

Impact on connecting factors on residence                                   Days spent in the UK

Always Non-Resident                                                                  Less than 16 days

Resident if individual has 4 factors or more                                 16- 45 days

Resident if individual has 3 factors or more                                  46- 90 days

Resident if individual has 2 factor or more                                   91 -120 days

Resident if individual has 1 factor or more                                   121 - 182 days

Always Resident                                                                        183 days or more


Related Matters

The HMT is still working on finalizing details to clarify its position on some related UK tax concepts that will be affected by the SRT legislation, such as:

Ordinary Residence- this concept, which has been a cornerstone in determining UK residency for many years, will be abolished starting in April 2013 with the advent of the new SRT concepts. However, transitional rules are expected for continued relief of “not ordinarily resident” status for up to 2 years for those grandfathered in.

Overseas Workdays Relief- this will likely be retained and codified to a statutory basis. The rules for being eligible for such relief are expected to be slightly amended to be consistent with the new SRT.

Split-Year Concession- presently if an individual is resident at any point in a UK tax year, they are considered resident for the whole year in calculating their UK tax liability. However, a concessionary treatment allows the tax year to be split into periods before and after arrival or departure when an individual comes to or leaves the UK during the year. This “split-year treatment" is now part of the draft SRT legislation.

Going Forward

The HMT is seeking reaction and recommendations on their current proposals with draft legislation expected by the end of September 2012. A further draft of the legislation will be published in the Finance Bill 2013 later this year. A final version will then be published shortly after Budget 2013 (i.e. sometime in March 2013 for implementation effective from April 6, 2013). For more on the draft legislation thus far, please read from the HM Treasury:

http://www.hm-treasury.gov.uk/d/consult_condoc_statutory_residence.pdf

http://www.hm-treasury.gov.uk/consult_statutory_residence_test.htm#Responses

GMT recommends the following actions on the part of companies with international assignees to/from the UK in anticipation of the above legislation due to be effective April 6, 2013:

  1. Companies should prepare for changes to assignment tax costs, accruals, and hypothetical taxes due to changes in UK tax residency determination for both in-bound and out-bound employees. Available workday reliefs and grandfathered concessions will likely also be part of the equation. GMT can assist with planning for all of the above.
  2. GMT also recommends companies review their foreign assignment policies & “timing” of pending assignments ahead of the April 6, 2013 effective date to ensure the proposals set forth above are considered. Concepts such as “full-time working abroad” and the definition of “UK workdays” should be considered. Please consult your GMT advisors for assistance in these areas as well. 

 


Implications to International Assignment Program Costs

The Supreme Court’s decision over the summer to uphold the constitutionality of the Affordable Care Act mandated the survival of the new law's health-care surtax on investment income, which includes stock transactions. Beginning January 1, 2013, a 3.8% tax increase will be added to the existing capital gains tax for people with annual adjusted gross income (AGI) above $200,000 (above $250,000 for married joint filers). This surtax will also apply to sales of company stock from equity compensation. For these same taxpayers, Medicare taxes will also increase from 1.45% to 2.35%.

0.9% Medicare Tax Increase on Compensation

With the final Supreme Court decision on Healthcare, there will be new Employer withholding rules for the new 0.9% Medicare tax. Beginning in 2013, an additional 0.9% Medicare tax is imposed on individuals who receive wages over $200,000 ($250,000 in the case of a joint return filing or $125,000 in the case of a married taxpayer filing separate).  When added to the current 1.45% employee portion of the Medicare tax, a high-income taxpayer's wages will be subject to a 2.35% Medicare tax on wages above the threshold.  There is no employer match for the additional Medicare tax - the employer's Medicare tax rate on wages paid to employees will continue to be 1.45%. Stock compensation events triggering the 0.9% Medicare increase include the exercise of nonqualified stock options and the vesting of restricted stock or restricted stock units.

In July, the IRS released some additional guidance on company obligations to withhold this additional Medicare Tax. Some of the specific guidance included:

  • Regardless of the employee's filing status, companies must withhold the additional 0.9% Medicare tax on compensation paid in excess of $200,000 during a calendar year - it doesn't matter if you are married and your combined joint income is below $250,000.
  • Any excess Medicare tax that is withheld is credited on your tax return as additional income tax paid.
  • Companies do not need to withhold this tax on the ENTIRE payment; meaning, income from a stock option exercise that pushes your yearly income above the $200,000 threshold should not have the tax withheld on the entire amount. The additional tax withholding only applies to compensation above the threshold.
  • There are no special rules for nonresident aliens and U.S. citizens living abroad related to this provision.                                      
  • If an employee receives wages from an employer in excess of $200,000 and the wages include noncash fringe benefits, the employer calculates wages for purposes of withholding Additional 0.9% Medicare Tax in the same way that it calculates wages for withholding the existing 1.45% Medicare tax.  The employer is required to withhold Additional Medicare Tax on total wages, including noncash fringe benefits, in excess of $200,000.  The value of noncash fringe benefits must be included in wages and the employer must withhold the applicable Additional Medicare Tax and deposit the tax under the rules for employment tax withholding and deposits that apply to noncash fringe benefits.

The IRS has published guidance in the form of Frequently Asked Questions (“FAQs”) to assist employers and payroll service providers when reviewing existing procedures and making changes to payroll processing systems that may be impacted by the law changes. The IRS also announced its plan to release drafts of revised payroll tax forms. Please find the IRS FAQ link here:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax

3.8% Surtax on Net Investment Income

The Supreme Court’s Affordable Care Act decision also ensures the survival of the new law's health-care surtax on investment income, including stock. Starting in 2013, an extra 3.8% tax will be added to the usual capital gains tax for taxpayers with yearly adjusted gross income (AGI) of more than $200,000 (more than $250,000 for married joint filers).

Net Investment Income (NII) includes capital gains, interest, dividends, royalties, rents, and passive income. It does not include distributions from qualified retirement plans and IRAs. Also not included in NII is income on the exercise of compensatory options and income on the vesting of restricted stock. The net gain on incentive stock options would be subject to the 3.8% surtax, reducing the beneficial treatment of this equity.

Also note that the additional 3.8% surtax applies to AMT as well.

GMT recommends the following actions on the part of companies with international assignees and high-income individuals exceeding the income thresholds stated above:

  1. Companies should re-evaluate costs of assignments for these AHCA Medicare tax increases. Both the company and assignee may be impacted by these changes either with increased actual or hypothetical Medicare tax costs. As noted above, these costs may be relevant due to equity income or even taxable assignment benefits. Accruing for increased tax costs of current & future assignments and adjusting assignee hypothetical tax withholdings may be required. GMT can assist with all of the above cost projections.
  2. GMT also recommends companies review their foreign assignment policies to adjust for these changes specifically as it relates to hypothetical taxes on equity income. We can assist with re-drafting these policies.
  3. For high-income taxpayers, these surtaxes will also apply to sales of company stock from equity compensation. This change may present a tax planning opportunity to sell shares and accelerate income into 2012 before the end of this year. GMT can assist with this tax planning position.

 


Correcting Compliance Gaps in Tax Returns and FBARs

The IRS has unveiled a New initiative (IR-2012-65) to “help” US citizens residing overseas with filing back tax returns and Foreign Bank Account Reports (FBARs – Form TDF 90-22.1) with a launch date of September 1,2012. This “amnesty program” for low-risk filers (generally people who owe $1500 or less in back taxes for any year) is available for up to 3 years of delinquent tax returns (including certain elections like RRSP Forms 8891) and 6 years of unfiled FBARs. This program can be helpful or hurtful to taxpayers wishing to come into compliance, so the risks and benefits should be fully understood prior to entering the program.

Previously, taxpayers with unreported offshore bank accounts are eligible for amnesty as long as they have not received an audit notice or under criminal investigation. Under the new program, taxpayers will no longer be eligible to apply for amnesty once the IRS learns about their unreported foreign bank accounts. This important change makes coming into compliance more urgent; however there are risks to be considered as noted below.

The IRS’ plan to help U.S. citizens residing overseas, including dual citizens, is designed to have these taxpayers come into full compliance with their tax return filing obligations. To help these taxpayers, the new procedures allow taxpayers who are low-compliance risks to become current with their tax filing requirements without facing penalties or additional enforcement action. These people generally will owe $1,500 or less in tax for any of the covered years.

The new procedures will also allow the reporting of certain foreign retirement plans (such as Canadian Registered Retirement Savings Plans) to come into compliance. In some cases, dual income tax treaties allow for deferral of income from these pensions under U.S. tax law, but only if an election is made on a timely basis. The new procedures will allow low-compliance risk taxpayers to make this election even though not timely made.

The Amnesty Process

The new amnesty program is available for U.S. citizens who have resided outside of the U.S. since January 1, 2009 and who have not filed a U.S. tax return during the same period. Taxpayers opting under the program must file their delinquent tax returns for the past three years and to file delinquent FBARs for the past six years. If you filed during this period and seek and amended return, you cannot use this program. The “level” of review will vary according to the level of compliance risk presented by each submission.

Taxpayers will be required to submit: (1) delinquent tax returns for the past three years, (2) delinquent FBARs for the past six years, and (3) any additional information regarding compliance risk factors required by inspectors.

Payment of any federal tax and interest due must also be made with the filing. Any taxpayer claiming reasonable cause for failure to file a tax return, information return, or FBAR will have to submit a statement, signed/dated under penalties of perjury, explaining why there is reasonable cause for previous failure to file.

Any taxpayer seeking relief for failure to timely elect deferral of income from certain retirement or savings plans, where permitted by treaty, will be required to submit:

• A statement requesting extension of time to elect to defer income tax and identifying the treaty position,

• For RRSP Canadian plans, a Form 8891 for each tax year and description of the type of plan, and

• A statement describing:

a) The events that led to the failure to make the election,

b) The events that led to the discovery of the failure, and

c) If the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities.

Compliance Risk

The IRS will determine the level of “compliance risk” with each submission based on certain information provided on the tax returns and based on other required information.  Low risk will apply to simple returns with little or no U.S. tax due. Where no high risk factors reside, submitted tax returns with less than $1,500 in tax due in each of the years should be treated as low risk. In general, the risk level will increase in proportion to the level of income and assets of the taxpayer. If there is evidence of sophisticated tax planning or if there is material economic activity in the U.S., the risk level will also rise.

The risk level may also rise if any of the following are present:

  • If any of the returns submitted through this program claim a refund;
  • If the taxpayer has not declared all of his/her income in his/her country of residence;
  • If FBAR penalties have been previously assessed against the taxpayer or if the taxpayer has previously received an FBAR warning letter;
  • If the taxpayer has a financial interest in an entity or entities located outside his/her country of residence;

For those taxpayers with a low-compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Submissions with higher compliance risk are not eligible for the expedited review and will be subject to a more thorough review, and possibly a full tax audit, which in some cases may include more than three years! Tax, interest and penalties may be imposed in these cases.

In addition, retroactive relief for failure to timely elect income deferral on certain retirement and savings plans, where deferral is permitted by relevant treaty, will be available through this process. The proper deferral elections with respect to such arrangements must be made with the submission.

Other Points to Consider

Taxpayers who are concerned about risk of criminal prosecution should be advised that this new procedure does not provide protection from criminal prosecution if the IRS and Department of Justice determine that the taxpayer’s particular circumstances warrant such prosecution. Taxpayers concerned about criminal prosecution should consult their legal advisers about the Offshore Voluntary Disclosure Program (OVDP), announced on January 9, 2012, which offers another means by which taxpayers with undisclosed offshore accounts may become compliant. It should be noted, however, that once a taxpayer makes a submission under the new procedure described here, OVDP is no longer available. It should also be noted that taxpayers who are ineligible to participate in OVDP are also ineligible to participate in this procedure.

For much more on this program, please visit the IRS website at: http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers for frequently asked questions and answers about the program. There are new Streamlined Procedures for filing released by the IRS on August 31, 2012, which should be reviewed prior to any submissions.

GMT recommends the following actions on the part of companies with US citizen assignees who may not be in full US tax return (last 3 years) or FBAR (last 6 years) compliance:

  1. The IRS is offering this amnesty program for “low risk” taxpayers, which are described in part above. Any higher risk taxpayer may be putting themselves in “harm’s way” with this IRS initiative and could face prosecution or at least an expanded review of their tax affairs. This is a program that warrants careful consideration with tax professionals such as your GMT advisors and possibly also legal counsel.
  2. Companies should carefully consider potential future IRS compliance risks as this program is unlikely to continue much farther into 2013. Understanding that the IRS is ratcheting up their enforcement of non-compliers should require companies to further support strict compliance with tax filings both in the US & Abroad for its assignees. Enhancing a Tax Equalization Policy or International Assignment Letter with language directed at this issue should be considered.
  3. This program further highlights the IRS direction of its international enforcement program – to uncover foreign assets and accounts. GMT highlights this increased enforcement focus in our Tax Briefings and Tax Return Process to make sure all foreign assets and FBARs are properly and timely reported. 

 


Interim Process Changes Revealed

The IRS recently released an important interim change to its procedure for issuing new Individual Taxpayer Identification Numbers (ITINs) from now through the end of the year. Designed specifically for tax-administration purposes, ITINs are only issued to people who are not eligible to obtain a Social Security Number. These interim procedures apply to applicants seeking ITINs on Form W-7 for the purposes of filing U.S. individual income tax returns.

Changes for New Applicants Filing U.S. Tax Returns during the Interim Period

The IRS has implemented interim guidelines — effective immediately — and will only issue ITINs when applications include original documentation, such as passports and birth certificates, or certified copies of these documents from the issuing agency. During this interim period, ITINs will not be issued based on applications supported by notarized copies of documents. In addition, ITINs will not be issued based on applications submitted through certified acceptance agents unless they attach original documentation or copies of original documents certified by the issuing agency.

During this interim period, people who need ITINs to get their tax return processed can do so by submitting by mail their original documentation or certified copies of their documentation. Documentation will be accepted at IRS walk-in sites but will be forwarded to the ITIN centralized site for processing.

The changes for the interim period are designed to minimize impact on taxpayers and protect the integrity of the ITIN process. Final rules will be issued before the start of the 2013 filing season when most ITIN requests come in.

Some Applicants Not Impacted By Changes

Some categories of applicants are not impacted by these interim changes, including spouses and dependents of U.S. military personnel who need ITINs. People who should follow the current procedures outlined in the Form W-7 instructions include:

  • Military spouses and dependents without an SSN who need an ITIN (Military spouses use box e on Form W-7 and dependents use box d). Exceptions to the new interim document standards will be made for military family members satisfying the documentation requirements by providing a copy of the spouse or parent’s U.S. military identification, or applying from an overseas APO/FPO address.
  • Nonresident aliens applying for ITINs for the purpose of claiming tax treaty benefits (use boxes a and h on Form W-7). Non-resident alien applicants sometimes need ITINs for reasons besides filing a U.S. tax return. This is necessary for nonresident aliens who may be subject to third-party withholding for various income or need an ITIN for information reporting purposes. ITIN applications of this category that are accompanied by a US tax return will be subject to the new interim document standards.

GMT recommends the following action on the part of companies with US assignees and their family members who may require an ITIN as part of this new legislation:

  • Initiate exit tax briefings with your Tax Service Provider prior to transfer in order to analyze whether this application requirement will exist for your US assignees and their families. The required documentation may be more easily obtained if acquired before the transfer takes place.

 


Return Filing and Tax Payment Deadlinee Extended to January 11, 2013

The IRS is providing tax relief to individuals and businesses affected by Hurricane Isaac. Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced on September 5th that affected taxpayers in Louisiana and Mississippi will receive tax relief, and other locations may be added in coming days based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred on or after Aug. 26. As a result, affected individuals and businesses will have until Jan. 11, 2013 to file these returns and pay any taxes due. This includes corporations and businesses that previously obtained an extension until Sept. 17, 2012, to file their 2011 returns and individuals and businesses that received a similar extension until Oct. 15. It also includes the estimated tax payment for the third quarter of 2012, normally due Sept. 17.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. In addition, the IRS is waiving failure-to-deposit penalties for federal employment and excise tax deposits normally due on or after Aug. 26 and before Sept. 10, if the deposits are made by Sept. 10, 2012. Details on available relief, including information on how to claim a disaster loss by amending a prior-year tax return, can be found on the disaster relief page on IRS.gov.

The tax relief is part of a coordinated federal response to the damage caused by the hurricane and is based on local damage assessments by FEMA. For information on disaster recovery, individuals should visit disasterassistance.gov.

So far, IRS filing and payment relief applies to the following localities:

  • In Louisiana: Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany parishes;
  • In Mississippi: Hancock, Harrison, Jackson and Pearl counties.