AFRs and 7520 Rates for September 2013

AFRs - - When a taxpayer makes a loan or sells something on installment, a minimum interest rate normally has to be charged.  The minimum rate depends on the month of the loan or sale.  The IRS releases the Applicable Federal Rates (AFRs) each month.  They are broken down into short-term (3 years or less), mid-term (more than 3 years, but not more than 9 years), and long-term (more than 9 years).  They are further broken down into Annual, Semi-Annual, Quarterly, or Monthly compounding periods.

The September 2013 applicable federal rates (AFRs) are (annual, semi-annual, quarterly, monthly):
Short-term---0.25---0.25---0.25---0.25
Mid-term---1.66---1.65---1.65—1.64
Long-term---3.28---3.25---3.24---3.23

** IRC 7520 Rates – These rates are normally used when determining life estate & remainder interests when property has been gifted with the giver retaining a life estate.  The rate for September is 2.0%.

Revenue Ruling 2013-18

IRS Eases Rules for Late S Election

In the past we have had various Revenue Procedures (Rev Procs) dealing with making late S corporation elections.  These include Rev Procs 97-48, 2003-43, 2004-48, and 2007-62.  Now IRS has made Rev Procs 2003-43, 2004-48, and 2007-62 obsolete and modified Rev Proc 97-48.  Briefly this means Rev Proc 2013-30 is the Rev Proc that now applies (as of September 3, 2013).

In Rev Proc 2013-30 IRS has combined these revenue procedures into one place.  It addresses late S elections by corporations and noncorporate taxpayers, Electing Small Business Trusts, Qualified Subchapter S Trusts, and Qualified Subchapter S Subsidiaries.  In addition Rev Proc 2013-30 contains flow charts to help taxpayers determine whether they qualify for the late election procedures in this Rev Proc or if they have to apply for a letter ruling.

There are two reliefs available under this Rev Proc:  one with a 3 years and 75 day deadline, and one with no deadline.

Board of Directors Nominations for Terms ending 12/31/13

Pursuant to Article VI, section 2 of The Bylaws of the Massachusetts/Rhode Island Chapter of National Association of Tax Professionals, we, the nominating committee, appointed by Christine Miarecki, President and by the Board of Directors, hereby propose the following members to fill the expiring Director’s positions for the year ending December 31, 2012.

Region Term Name and Address
1 3 yr Christine Miarecki - 9 Fuller Rd  Palmer, MA  01069
2 3 yr Tracey Bell - 100 Doyle Rd   Holden, MA  01520
3 3 yr William Delaney - 35 Reservoir Rd  Westwood, MA  02090
4 3 yr Sharon Lynn Cummings - PO Box 474  S. Easton, MA  02375

Furthermore, please be aware that under Article IV, section 5 of The Bylaws,, notice of the election shall be provided to every member 30 days prior to the date set to announce the result of the director elections.  The notice of election may be sent by ordinary mail as either a separate mailing or within other content such as a regular newsletter or other communication.

The election will be held on Tuesday, October 29, 2013 at the annual meeting to be held at the Holiday Inn, Mansfield, MA.

Respectfully submitted:
Nomination Committee Members:
Paul T. Malone, Chair
John Horan, Member
Michele Hurd, Member

Drawing Scheduled for Tuesday to Allocate RI Historic Tax Credits

The Rhode Island Division of Taxation has scheduled a drawing on August 27, 2013, for applicants in the state’s newly reopened historic tax credit program.

The drawing will be held at a meeting to start at 10 a.m. in Conference Room A of the Department of Administration building (the Powers Building), One Capitol Hill, Providence, R.I., which is diagonally across from the State House.

The historic tax credit program has generally been closed since 2008. Certain projects were essentially grandfathered and continue. However, some other projects have been “abandoned” – leaving about $34.5 million in credits available but unclaimed as of May 15, 2013.

It is those unused credits that will be available to qualified applicants. The reopened program – which uses the term “historic preservation tax credits” – is a result of legislation approved by the General Assembly and signed into law by Governor Lincoln D. Chafee on July 3, 2013. The program is intended to encourage the redevelopment and reuse of historic buildings and help spur economic growth.

The Division of Taxation began accepting applications for the credits on August 1, 2013. On that day, the credits were oversubscribed – the agency received requests for $54.5 million in credits, which is about $20 million more than are available. As a result, all of the 41 applications – which were received on or before August 1 – will be entered in the drawing.

For more details, please see the details online at the Rhode Island Division of Taxation.

MA Sales & Use Tax on Computer/Software "Services"

William Delaney

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

Early in my military service I learned to observe this word to the wise:  If it moves, salute it; if it doesn’t, paint it!  As applied to taxation, either hit it with an income tax or hit it with a sales tax (both would be even better).  The need to raise additional revenue is ever-present, so now we have a sales/use tax on computer system design services and software modification services effective on or after July 31, 2013.  See Mass. General Law, Chapter 46, Sections 48, 49 and 89 (An Act Relative to Transportation Finance), which the Governor vetoed (because it didn’t raise nearly enough money) and the legislature overrode his veto so that it became law without his signature(because it raised as much money as they would risk being associated with).

Save The Date - October 29th 2013 - For Our Annual Meeting & Educational Seminar

Join the Massachusetts / Rhode Island NATP Chapter on Tuesday, October 29th, 2013 for our Annual Meeting & Educational Seminar. This all day event will be held at the Holiday Inn in Mansfield, MA. Registration details will be forthcoming, and will be handled online by National this year. We will provide a link to the registration website once it is up and running. But until then, please take a look at the details on our speaker and topics provided in this great 8 CE Hour opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities.

MASS DOR Technical Information Release 13-12

Massachusetts Department of Revenue
Commissioner of Revenue v. AT&T Corporation

I.  INTRODUCTION

In Commissioner of Revenue v. AT&T Corporation, 82 Mass. App. Ct. 1106; 2012 Mass. App. Unpub. LEXIS 889 (Mass. App. Ct. July 13, 2012) (“AT&T”), the Massachusetts Appeals Court (the “Court”) upheld a decision of the Appellate Tax Board (the “ATB”) in favor of AT&T Corporation (the “Taxpayer”).[1]  The primary issue in the case was whether telephone calls that were originated by Massachusetts customers but terminated outside of Massachusetts resulted in “sales in the commonwealth” for purposes of calculating the sales factor in the income apportionment formula that is used to determine the share of the Taxpayer’s net income subject to corporate excise tax in Massachusetts.  This technical information release will briefly describe the decision in AT&T and the facts and circumstances that underlie the decision, and the implications of that case for other taxpayers and cases.

New IRS Form 8959 - Additional Medicare Tax

The IRS has issued a draft of its new Form 8959 which will be used to calculate the portion (if any) of the Medicare Tax W-2 withholding which may be applied against income tax liability arising from the 3.8% surtax on certain high-income taxpayers.

The issue for taxpayers and tax preparers is that the medicare surtax is an addition to the regular income tax which applies, so it is included in the calculation of required payments/withholding necessary to avoid an
underpaid tax penalty.  If the payroll system gets it right and withholds more than the otherwise required 1.45% on payroll to which the surtax applies, the Form 8959 then Identifies this supplemental medicare withholding included in box #6 on the W-2 form and reports it as part of the total federal income tax withholding on line #62 of Form 1040.

MA/RI NATP Chapter Welcomes Our Newest Members

We welcome our newest NATP members to our chapter. We hope to see you at an event soon.

	Jao DeAndrade	Brockton	Massachusetts
	Stephen Grizey	Harwich	Massachusetts
	Dorca Leticia Mejia-Cruz	Haverhill	Massachusetts
	Deborah Asselin	Holyoke	Massachusetts
	Alexis Currier	Lynn	Massachusetts
	Donna Dreher	Lynnfield	Massachusetts
	Jonatas Raineri	Newport	Rhode Island
	Bonnie Peruffo	North Andover	Massachusetts
	Karen Terwiske	North Grafton	Massachusetts
	Hayford Osafo	Pittsfield	Massachusetts
	Nadine Hawver	Sheffield	Massachusetts
	Diane Currier	Wakefield	Rhode Island
	Colleen Greenwood	Westford	Massachusetts

Equitable Recoupment Denied Aggrieved Misclassified Taxpayer

A computer technician named Ohan Karagozian (work performer) was for many years classified by his work provider (Coty USA, LLC) as an independent contractor.  When the work provider terminated his services in 2008, the work performer filed an unemployment compensation claim despite the fact that Karagozian had, for the years 2002 – 2007, filed his tax returns as a Schedule C independent contractor and paid both income tax and SE tax for those years.  If you have never seen this in your practice, stay tuned---you will, I guarantee it!

Karagozian’s state Dept. of Labor (NY) did not deny his claim.  Instead, they determined that the work performer had been misclassified by the work provider and an employee-employer relationship existed for the years 2002 – 2007.  Now, you know what that means.  Someone (the work provider – Coty) did not include the work performer (Karagozian) when they reported wages subject to state unemployment tax each year.  Once it became clear to Karagozian that something was not right, he filed an SS-8 form with the IRS and asked for a determination of his status for those years---was he an employee or was he an independent contractor for federal purposes?

Upcoming Board of Directors Meeting Reminder

Wine Room @ The Chateau Norwood

Do you have a knack for planning events? Do you love education? Are you a master at networking and love to meet new people? Get involved with The Massachusetts / Rhode Island NATP State Chapter and let us know what you can do to help our chapter grow and prosper!!

Join us at our upcoming Board of Directors Meeting this Thursday, August 15th, 2013 at The Chateau Restaurant in Norwood MA. Our meeting will start promptly at 10 am in The Wine Room. If you plan on attending, please let our Chapter Secretary know via jeff@nfsnet.com or phone at 800-560-4637 extension 14. We look forward to having you join us!!

The 2013 Massachusetts Sales Tax Holiday Weekend

Technical Information Release 13-11

I.  Introduction 

A recently enacted statute provides for a Massachusetts “sales tax holiday weekend,” i.e., two consecutive days during which most purchases made by individuals for personal use will not be subject to Massachusetts sales or use taxes.  St. 2013, c. XXX (“the Act”).  The Act provides that the sales tax holiday will occur on August 10 and 11, 2013 and on those days, non-business sales at retail of single items of tangible personal property costing $2,500 or less are exempt from sales and use taxes, subject to certain exclusions. The following do not qualify for the sales tax holiday exemption and remain subject to tax: all motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products and any single item whose price is in excess of $2,500.  The Act charges the Commissioner of Revenue with issuing instructions or forms and rules and regulations necessary to carry out the purposes of the Act.  

Individual Mandate Penalties for Tax Year 2013

TIR 13-9 updates and replaces TIR 13-1

Pursuant to G.L. c. 111M, § 2, the Department of Revenue is issuing this Technical Information Release to announce the penalty schedule for individuals who fail to comply in 2013 with the requirements under the Massachusetts Health Care Reform Act (the Act). See St. 2006, c. 58, as amended. The Act requires most adults 18 and over with access to affordable health insurance to obtain it. In 2013, individuals must be enrolled in health insurance policies that meet minimum creditable coverage standards defined in regulations adopted by the Commonwealth Health Insurance Connector Authority (the Connector). Individuals who are deemed able to afford health insurance but fail to comply are subject to penalties for each month of non-compliance in the tax year (provided that there is no penalty in the case of a lapse in coverage of 63 consecutive days or less). The penalties, which will be imposed through the individual’s personal income tax return, shall not exceed 50% of the minimum monthly insurance premium for which an individual would have qualified through the Connector.

Rhode Island Historical Tax Credit Applications Oversubscribed

The Rhode Island Division of Taxation has received applications for more than $54 million in historic tax credits -- which is about $20 million more than are available. As a result, a drawing will take place later this month.

The latest advisory from the RI Division of Taxation can be found HERE