April 17 is just a few weeks away, but if you owe income taxes and don’t have a clue how to come up with the money, it may be a day to dread.
A short time after the turn of the New Year, I wrote a post detailing the four issues that were destined to destroy this tax season. The post was tailored towards tax preparers rather than taxpayers – the idea being that while these four issues — the repair regulations, net investment income tax, Obamacare insurance penalty, and the premium tax credit — would greatly complicate the life of those charged with understanding and administering the rules, their effects would largely go unnoticed by the majority of clients.
If you cheat on your taxes, file late or commit some other offense, do you have a good explanation? Your dog ate your tax return or your receipts? Some excuses can be basic, perhaps too much so. Remember the “I forgot” defense popularized by Steve Martin on Saturday Night Live? It’s unlikely to be effective. There are many tax excuses, and some work better than others. Unfortunately, there’s no excuse to get you out of paying tax entirely. Still, some excuses can obviate penalties. Some will even avoid criminal liability. Relying on a professional tax adviser is one of the classic excuses. It goes like this: I hired a professional, and they told me to do it that way.
Practitioners need to be aware of the tax-free IRA rollover rules that took effect on Jan. 1, 2015 to protect their clients from major tax problems and penalties. For many years the IRS indicated in Publication 590 that if you have multiple IRAs, it was permissible to do multiple IRA rollovers. The old rules, as described in Publication 590, stated, “Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover.
Imagine owing up to $600,000 in penalties on, say, a $20,000 bank account simply because you didn't report it to the IRS. It sounds unbelievable. But such a gobsmacking penalty is possible if your account has been held overseas at a non-U.S. financial institution for years and you knowingly never disclosed it to the U.S. government. You could be subject to lesser penalties if you voluntarily disclose the account or can prove you weren't being "willful" by not disclosing it.
Donna Freeman isn’t ready to retire. But she’s nearing a deadline facing many baby boomers who are close to turning 70. That deadline is one the IRS doesn’t want her to miss: taking the first required withdrawal from her IRA and other retirement accounts. The Sacramento resident, who turns 70 in August, said she has “so many questions” about when and how much to take in mandatory withdrawals from her multiple IRA accounts. Read more here: http://www.sacbee.com/news/business/personal-finance/claudia-buck/article16442237.html#storylink=cpy
Millions of Americans have enrolled in ACA-compliant health plans in 2014, and the majority of those who purchased their coverage through the exchange are happy with both the price and the coverage. But clearly, not everyone is happy with the reforms – or the individual mandate that requires Americans to purchase health coverage. Many folks have given serious consideration to the idea of simply not purchasing coverage. If you’re one of them, one of your first concerns will be whether you’ll be subject to a tax that’s built into the law – and if you are, what penalty you might expect to pay.