Rhode Island Division of Taxation Releases its Quarterly Newsletter

The Rhode Island Division of Taxation's quarterly newsletter is now available. It includes:

* a status report on the agency's new computer system;
* a summary of some recent changes in state tax law;
* a look at the agency's new chief legal officer;
* plans for e-filing Form RI-1041; and
* regular features, such as "Legal Corner" and "Practitioners' Corner."

Click here to view the newsletter online.

Another Case Where Charitable Receipts Were Denied

In 2012 we wrote an email about the Durden case where the taxpayer lost the deduction for charitable
contributions because the receipts provided to IRS and Tax Court were late and/or did not contain the proper terminology.  Now we have another case where the deduction was denied because the receipts were dated late.

During 2009 Ronald and Genine Thompson contributed $6,140 and $5,936, respectively, to their church. Upon audit during 2012 they produced receipts dated September 27, 2012, verifying the contribution.  IRS denied the deduction since the receipts did not meet the requirements of IRC 170 which states the receipts must be in the taxpayer’s hands prior to the earlier of 1) filing the tax return, or 2) the unextended due date of the tax return.   Obviously a receipt dated September 27, 2012, is well beyond both of these dates.

When Are You An Independent Contractor?

William Delaney

Written by William Delaney, EA, ATA of Westwood, MA

An engineer was retired from the service of his employer, a corporation, on December 31, 1954, and was engaged immediately thereafter by the corporation to render services, beginning in 1955, similar to those performed for it prior to his retirement.  The services are performed in the engineer’s own research laboratory.

Due to the circumstances involved, the engineer renders services solely for the corporation.  Held, under the particular facts in this case, the engineer is not an employee of the corporation for Federal employment tax purposes.

The engineer is engaged in a trade or business, the income from which should be considered in computing net earnings from self-employment for purposes of the Self-Employment Contributions Act of 1954.  (See Rev. Rul. 57-10) Today, we would consider this determination, and the need for it, as rather quaint. Of course this is self-employment income and, of course, it would be subject to FICA tax (Medicare had not been enacted).  However, the Internal Revenue Service felt that this 1957 revenue ruling needed amplification and so, in 1982, it addressed essentially the same fact pattern in Rev. Rul 82-210 and came to grips with this…

Mortgage Interest Deduction Limitations for Co-Owners

There are two limits on mortgage interest debt.  First, is an Acquisition Indebtedness limit of $1,000,000. Second, is a Home Equity Indebtedness limit of $100,000.  (Home Equity Indebtedness can be used for any purpose including purchasing the residence.)  The question in this case is whether these limitations are to be applied per taxpayer or per residence.

An UNMARRIED couple jointly owned their principal residence in California as joint tenants.  They held a mortgage of $2,000,000 on the residence and took out an additional $300,000 line of credit secured by the residence.  On their respective tax returns each claimed mortgage interest on $1,100,000 of indebtedness.

2014 Rhode Island Income Tax Law Changes

The FY2014 budget bill (enacted July 3, 2013) includes a few notable changes effective for tax year 2014.

• Section 179 expense deduction – Previously limited to a maximum of $25,000 will now follow whatever the federal maximum may be.
• Domestic Production Activities Deduction – IRC Sec. 199 (corporate returns) has been repealed. The federal deduction must be added back for RI State return purposes.
• Paid Preparer Penalties – for paid preparers “…who prepare Rhode Island returns with the intent to wrongfully evade or reduce a tax obligation.”
• Civil penalties include failure to be diligent in determining EIC eligibility ($500 fine); failure to be diligent in determining eligibility for statewide property tax relief credit ($500 fine); willful preparation of a return with the intent to wrongfully claim property tax relief credit or with the intent to evade or reduce a tax obligation ($500 or $1,000 fine)
• Criminal penalty may be imposed on top of a civil penalty upon a subsequent court determination of continued willful misconduct (imprisonment of up to five years and a fine of up to $50,000, or both)

The full Summary of the Legislative Changes can be found by clicking here.

- Rhode Island Division of Taxation

Journal from the National Conference - Final Day

Well, Phoenix is now a memory and my brain is slowly returning to normal. There is so much information at these conferences that it takes time to sort it out and figure out how to apply all that was learned.

Journal from the National Conference - Day 4

ALERT! ALERT!!!

Did I get your attention? Melinda Garvin got mine today at the session on Audit Proofing Your Office, it was a little scary, I thought I was quite secure but after her class realize I still have much to do in that area.

Our offices are under the IRS microscope and we are being audited. Thousands of our offices are being targeted each year.

Journal from the National Conference - Day 3

It's Tuesday and this morning I woke up ready for more taxing information! Today's sessions went well. I learned about Form 1041, filing of Powers of Attorney and different ways to figure out all the ways the IRS receives information, like W2s & 1099's, etc.

Journal from the National Conference - Day 2

Well Monday, first official start of Annual Conference, first on agenda, annual meeting, followed by an incredible keynote speaker. For the first time it was not a representative from the IRS but a well known motivational speaker. Have to admit, I was a bit hesitant to go, but boy am I glad I went. His name was Jon Petz and he was very entertaining with some magic, some comedy and he threw in the midst ways to getaway from boring meetings. I was so I inspired  I actually bought his book!

Journal from the National Conference - Day 1

Sunday was a day for Chapter Leaders to attend various breakout sessions, I am very happy to say we had 7 of our Chapter Leaders in attendance . National had a new format this year, sessions geared to officer positions, and it worked well. I guess to someone looking in, it appears to be a gabfest, but in actuality it is a great way to see how others work within their chapters on many issues. All in all it was a productive afternoon .

Happy 4th of July from the Massachusetts / Rhode Island Chapter of NATP

As many members of the chapter get ready to attend the National NATP conference in Phoenix next week, the board of directors want to wish everyone Happy 4th of July!! Stay safe and celebrate our freedom!!

This nation will remain the land of the free only so long as it is the home of the brave.  ~Elmer Davis 

Rhode Island Tax News – Administrative Decision

The Rhode Island Division of Taxation has posted a new Administrative Decision. It deals with a married couple's claims for refunds of personal income tax. The claims were denied because they were not timely filed. Here's the link to click :

http://www.tax.ri.gov/AdministrativeDecisions/2013/2013-03.pdf

Mass DOR Enhances Online Feature for Correcting Returns and Disputing Tax Bills

(Boston, MA)-Massachusetts Revenue Commissioner Amy Pitter announced that the Department of Revenue has enhanced its online application to amend income tax returns and appeal a tax bill or penalty giving thousands more taxpayers’ access to this quicker processing service.

“We know from our experience with income tax returns, that if you offer a more convenient, safer and faster way to file, taxpayers will utilize the electronic service,” said Commissioner Pitter. “The enhancements to our online “WebFile for Income” give more taxpayers the opportunity to have amendments or appeals of their income tax returns resolved quicker because DOR can process them more efficiently.”