Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 5th 2017 - ONE WEEK AWAY!!!

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 5th 2017

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 5th, 2017 for our Annual State Update Seminar. This all day event will be held at the Sturbridge Host in Sturbridge MA. Registration details are below, and are handled online directly by National NATP. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours. Remember, if you sign up for this event at the October 25th 2016 event, you get 50% off of your registration!!

• Register online with credit card.
• For more information or to register by phone, fax or mail, use this form.
• After January 6, please register at the door with the form above.

Topics:

What You Need To Know Regarding FBAR & Form 8938 presented by William Delaney, EA of MA/RI NATP Chapter.

Massachusetts State Tax Update including Launch of MASSTAXCONNECT for Personal Income presented by Brian Lynch, Dana Ackerman & Gilbert Gonzalez of Massachusetts Department of Revenue.

Rhode Island State Tax Update presented by Scott Lewis of Rhode Island Division of Taxation.

New York State Tax Update presented by Kathryn Keane of New York NATP Chapter.

Federal Tax Update presented by Kathryn Keane of New York NATP Chapter. (2 Hours of CE Credits)

Featured Speaker - Kathryn M. Keane, EA.

Kathryn is a principal of Macanta, a small tax and related services practice located in Brooklyn, NY, serving over 850 individual clients and 50 businesses. In December 2006, Kathryn completed two three-year terms on the National Board of Directors of NATP and was twice awarded Chapter Person of the Year for 2002 and 2008 for her volunteer service to the community at large as well as to NATP. In addition to serving as an Education Committee member for NY NATP, she currently serves as Chair of the IRS Tri-Boro Practitioner Liaison Committee. Kathryn is a frequent speaker for NATP Chapters. She has also presented for VASEA, NCCPAC (Nassau-Suffolk County Chapter) and local chapters of NYSSCPA. Kathryn has a B.S. degree from Brooklyn College.

What is a Legitimate Seller of Marijuana To Do?

William Delaney, EA
Westwood, MA

Revisiting an Earlier Article Published on www.massrinatp.org

Jason R. Beck operated medical marijuana businesses in California, where it is legal (see below) to do so.  On January 11, 2007, Beck’s West Hollywood, CA business location was raided by the federal Drug Enforcement Administration (DEA).  While Mr. Beck’s operation was permitted under state law, it operated in violation of federal law.  Among other things, the DEA allegedly seized $600,000 of what would be classified in that industry as inventory, plus cash.

On his 2007 Schedule C, Mr. Beck reported $1,700,000 in gross receipts; $1,429,614 in cost of goods sold (COGS); and $194,094 in expenses.  His COGS total included the $600,000 seized by DEA.  All income and expense amounts were provided to the preparer by the taxpayer, through his attorney.  The tax preparer neither prepared any books and records nor questioned any of the taxpayer provided information.  Upon audit, it was determined that the taxpayer “…routinely destroyed most documents pertaining to the operation of both dispensaries.”  So, on the issue of substantiation, three strikes against the taxpayer.

However, the larger issue was whether anything could be deducted if documentation had been provided and someone did a decent job with the books and records.  The federal determination was that the taxpayer’s trade or business “…consists of trafficking in controlled substances…which is prohibited by Federal law.”  IRC Sec. 280E disallows deductions and/or credits “…if such trade or business…consists of trafficking in controlled substances…”  So, on the issue of allowable deductions, three strikes against the taxpayer regardless of whether or not he maintained adequate business records.

Does that mean report all of your income but don’t try to take any deductions?  What about COGS?  According to the Court in Jason R. Beck v. Comm., TC Memo 2015-149 (8/10/2015), “COGS is an offset to gross receipts in determining business income,” therefore the Court would allow COGS to the extent that it could be documented.  The Court determined that the $600,000 included in COGS as an adjustment for the value of seized inventory could not be documented, so it was disallowed.  Does that mean it would have been allowed if documented?  Well, not really.  To quote once again from the Beck decision:  “Actually, if petitioner (Beck) had provided substantiation, the seized marijuana would still not be allowable as COGS BECAUSE THE MARIJUANA WAS CONFISCATED and not sold.” (emphasis added)  Heads we win; tails you lose!

The case is silent as to what would happen if the DEA “disposed” of the marijuana by some legal means.  Would that mean that taxpayer Beck now has a $600,000 COGS deduction?  Somehow, I doubt it but I would not blame him for trying.

Now that MA has ‘legalized’ the sale and use of marijuana, what does that really mean?  Marijuana is still an illegal controlled substance under federal law.  A state law permitting its use and sale in MA does not make it legal to do so.  Federal law is supreme.  Federally chartered banks and credit unions in MA cannot do business with dealers in an illegal controlled substance; most state chartered banks will shy away for the same reason.  If Oregon is any guideline, marijuana sellers often must deal almost entirely in cash and pay their bills (including taxes) in cash.  A few state chartered financial institutions provide payroll related services, including the deposit of taxes, but cannot offer a full range of financial services (such as credit cards) without running into federal prohibitions, such as being denied federal wire transfer services.

Transmitting and/or transporting funds derived from the distribution of a controlled substance, such as marijuana, is illegal under federal law according to a statement made in court by a representative of the Federal Reserve Bank of Kansas City, citing 18 U.S.C. Sec. 1960 – See The Fourth Corner Credit Union (CO) v. Federal Reserve Bank of Kansas City, Civil Action No. 1:15-cv-01633-RBJ-NYW (9/10/2015).

Now comes the IRS Office of Chief Counsel in a memo dealing with an excise tax levied on medical marijuana by the State of Washington.  (CCM 201531016 – 7/31/15).  The memorandum cites IRC Sec. 280E and its disallowal of either a deduction or a credit when the trade or business involves “trafficking in controlled substances.”  So, what is the taxpayer to do---pay the excise tax (not an insignificant amount) and shut up---no deduction or credit allowed?  The memorandum also cites IRC Sec.164(a) which sets forth the general rule for allowing taxes as a deduction.  This would appear to offer no hope, given the wording of Sec. 280E.  However, Sec. 164(a) does state that “…any tax (not described in the first sentence of this section) which is paid or accrued by the taxpayer in connection with an acquisition or disposition of property shall be treated as part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition.”  Does this provide the taxpayer with a ray of hope?  Read on…

The memo then states that “We interpret the State of Washington marijuana excise tax to be a tax paid or accrued in connection with the disposition of property by a trade or business.  Accordingly, pursuant to Sec. 164(a), a taxpayer who paid the marijuana excise tax should treat the expenditure as a reduction in the amount realized on the sale of the property…this excise tax is neither a deduction from gross income nor a tax credit.  Consequently, Sec. 280E does not preclude a taxpayer from accounting for this excise tax as a reduction in the amount realized on the sale of the property.”

So, it’s a reduction of the gross sales price and the taxpayer would report the net amount as gross income.  A win for the taxpayer.  One would presume that if MA were to enact a similar tax (as provided for in the new “legal” MA statute), it could be treated in a similar manner on the federal income tax return.

Overnight Room Rate at the Sturbridge Host

For those attending our Annual Meeting & Seminar on Thursday January 5th, you may wish to stay overnight the Wednesday prior to our state tax update at the Sturbridge host Hotel & Conference Center. The Host is offering a special group rate.  To take advantage of this special rate one should make their reservation by calling the Host Hotel Reservation line at 508-347-7393 and indicate your attendance at the NATP seminar at their conference center.  Should there be any questions one can call the Host Hotel Customer Service at 508-995-0900

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 5th 2017

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 5th 2017

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 5th, 2017 for our Annual State Update Seminar. This all day event will be held at the Sturbridge Host in Sturbridge MA. Registration details are below, and are handled online directly by National NATP. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours. Remember, if you sign up for this event at the October 25th 2016 event, you get 50% off of your registration!!

• Register online with credit card.
• For more information or to register by phone, fax or mail, use this form.
• After January 6, please register at the door with the form above.

Topics:

What You Need To Know Regarding FBAR & Form 8938 presented by William Delaney, EA of MA/RI NATP Chapter.

Massachusetts State Tax Update including Launch of MASSTAXCONNECT for Personal Income presented by Brian Lynch, Dana Ackerman & Gilbert Gonzalez of Massachusetts Department of Revenue.

Rhode Island State Tax Update presented by Scott Lewis of Rhode Island Division of Taxation.

New York State Tax Update presented by Kathryn Keane of New York NATP Chapter.

Federal Tax Update presented by Kathryn Keane of New York NATP Chapter. (2 Hours of CE Credits)

Featured Speaker - Kathryn M. Keane, EA.

Kathryn is a principal of Macanta, a small tax and related services practice located in Brooklyn, NY, serving over 850 individual clients and 50 businesses. In December 2006, Kathryn completed two three-year terms on the National Board of Directors of NATP and was twice awarded Chapter Person of the Year for 2002 and 2008 for her volunteer service to the community at large as well as to NATP. In addition to serving as an Education Committee member for NY NATP, she currently serves as Chair of the IRS Tri-Boro Practitioner Liaison Committee. Kathryn is a frequent speaker for NATP Chapters. She has also presented for VASEA, NCCPAC (Nassau-Suffolk County Chapter) and local chapters of NYSSCPA. Kathryn has a B.S. degree from Brooklyn College.

May Massachusetts Impose an Estate Tax on Out-Of-State Real Property?

William Delaney, EA
Westwood, MA

The United States Supreme Court has long held that states cannot tax out-of-state real property since doing so would violate the due process clause of the constitution.  See, for example, Union Refrigerator Transit Co. V. Kentucky, 199 U.S. 194 (11/13/1905) wherein the Court said, in syllabus, “The power of taxation is exercised upon the assumption of an equivalent rendered in the protection of the property and person of the taxpayer, and if such equivalent cannot possibly be rendered because the property taxed is wholly beyond the jurisdiction of the taxing power, the taxation thereof within the domicil(e) of the owner amounts to a taking of property without due process of law.” (emphasis added)

Now comes the Estate of Anita D. Curtis, and its personal representative, F. Davis Dassori, who argue that the Curtis estate was unlawfully taxed by Massachusetts on the value of real property located in France.  See F. Davis Dassori v. Commissioner of Revenue, Middlesex County (MA) Probate and Family Court, Docket No. M114E0042GC (6/30/2016).  During her lifetime, Anita Curtis owned real property (an apartment) located in France titled in the name of an societe civile immobiliere (referred to as the SCI).  The SCI was found to be the MA equivalent of a nominee trust (“A nominee trust is a form of ownership of real estate which is in considerable use in Massachusetts as a title-holding device” – footnote #2, page 4 of the decision).

Not long after her death, the SCI sold the property.  Anita’s heirs paid a French inheritance tax on the transaction of approximately 300,000 (pounds) or $400,000 (U.S.).  Under French law, this was a sale of real property.

The Curtis estate filed a MA estate tax return, included the value of the French property in the gross estate, and paid an estate tax of $204,218 on an estate valued at $3,465,841.  Subsequently, the estate filed an abatement request for $176,881 which represented the proportionate estate tax on the real property located in France.  The abatement was denied by the Commonwealth.  Concurrent with the abatement request, the estate also prepared and filed an amended MA estate tax return which valued the French real estate at -0- for estate tax purposes and attached a statement – “The said property should not be subject to Massachusetts estate tax.”

Dassori, as personal representative of the Curtis estate, then filed in the Middlesex County Probate and Family Court a Motion for Summary Judgment contesting the imposition of “estate taxes on real property with a situs outside the state.”

Initially, the Commonwealth responded by pointing to the pro-forma Federal Form 706 which is attached to and made part of the MA estate tax return and argued that the Internal Revenue Code as of December 31, 2000 (which is used by piggy-back states such as MA in the computation of the state tax on estates) “…taxes the entire gross estate of an American citizen wherever situated.”  “Taxes paid to foreign countries are not included on line 3 of part 2 of the M-706.”   However, the Commonwealth subsequently abandoned that argument, for reasons not provided in the memorandum of decision, by conceding that out-of-state real property is not subject to MA estate tax (thereby accepting the Plaintiff’s argument based on the due process clause of the U.S. constitution) by arguing “that Anita’s estate held an interest in intangible personal property, not real estate.”   (emphasis added) [See Discussion, page 3].

The Court looked to whether there was a genuine issue of material fact (especially the issue of personal property v. real property).  The Commonwealth offered an affidavit which consisted of the U.S. – France Estate Tax Treaty and its Protocol, including a U.S. Treasury explanation.  The Court, however, found nothing in these documents to support a finding that the French real property was actually personal property under either French or U.S. law.  “Based on this Court’s review, the Court find(s) that there is no conflict under Massachusetts or French law.  Under Massachusetts law, the Apartment within the SCI is real estate.  While the SCI that holds the Apartment is not recognized in Massachusetts, it is similar to a nominee trust, which is recognized.  Nominee trusts are used to hold legal title to real estate.”

The Court, therefore, found for the Curtis estate and allowed the abatement request in full.

What to take from this decision?  It appears that MA has conceded that out-of-state real property cannot be reached and taxed on a MA estate tax return (whether or not it is subject to tax in another state).  The Commonwealth shifted gears and argued that this was personal property (which is subject to tax) because of the SCI ownership (i.e., we can’t reach it as real property but we can reach it if it is personal property).

The Court concluded that an SCI is the mirror image of a nominee trust in MA (which is recognized as formed to hold title to real property, not personal property). How would it now be possible for the Commonwealth to reverse itself and reassert that the estate tax does reach out-of-state real property.  It has already abandoned that argument. The fact that this is a decision rendered by a single Associate Justice of the Court would not seem to be critical because it was not jammed down the Commonwealth’s throat by the Court; the Commonwealth lost on the issue of whether or not an SCI should effectively be a disregarded entity for estate tax purposes.
What to do when preparing a MA estate tax return?  The pro-forma Federal 706 will include the out-of-state property value; federal law allows taxation on worldwide income/assets.  On the MA return, I would recommend preparing a statement for Part 1, line 1 (total gross estate) to remove out-of-state real property.  Likewise, on line 2 the credit for state death taxes should be recalculated after removing out-of-state real property.  Ignore Part 2 and carry the recalculated Mass. Estate tax to Part 4, line 1.

Issue:  Should the Part 1, line 2 recalculation be based on a pro-forma federal 706 after deleting the out-of-state real property or should there be a proportionate recalculation based on a ratio.  The proportionate method favors the Commonwealth.  My preference would be the result which favors the taxpayer.

At the bottom of page 2 of the M-706, I recommend inserting this statement:

Prepared in accordance with the Dassori decision – MA Probate and Family Court,      Middlesex Division, Docket #M114E0042GC (6/30/2016).

IRS E-Services Changes

E-Services is an opportunity for tax professionals and representatives to obtain information from IRS regarding taxpayers’ accounts, documents, tax returns, and other tax matters.  It has also been a place where limited questions can be asked of IRS and the reply sent to a secure email box inside E-Services.

Unfortunately the cybercriminals, including crooked tax professionals, have been able to get into E-Services and obtain information to use for ill gotten gain.  Many of these criminals have entered E-Services by using stolen ID information.   As a result of this, IRS is taking steps to try to limit E-Services to those who can verify they are indeed the tax professional or representative.

IRS is strengthening the identity authentication process for several IRS.gov self-help tools including E-Services.  The term given to these changes is Secure Access.  Letters have started going out from IRS to those that have used E-Services within the past year.  When you get your letter, you will have approximately 30 days to authenticate your true identity.  (The target date was originally October 24, 2016, but IRS had to finish working out the kinks and is now ready.)

An EXISTING user is directed to log in to E-Services update the account information through the Secure Access process which includes identity proofing, financial verification, and mobile phone verification.  Once the authentication process has been completed, an activation code will be generated and sent to the mobile phone via text. Don’t forget you only have 30 days to authenticate your identity.  If an existing user does not complete the authentication process within the required time frame, the user will be removed from E-services and will have to register as a new user.

NEW E-Service users will be required to have specific information in order to complete the Secure Access Authentication process.  More specific information can be found at www.irs.gov by going to E-Services (found under the Tax Professionals tab in the top right hand corner of the page).

IRS Interest Rates for First Quarter Announced

Revenue Ruling 2016-28 announces interest rates for the quarter beginning January 1, 2017. The

rates are as follows:

• 4% for overpayments (3% in the case of a corporation).
• 4% for underpayments.
• 6% for large corporate underpayments.
• 1.5% for the portion of a corporate overpayment exceeding $10,000.

System Upgrade Coming Soon for MassTaxConnect

Currently, MassTaxConnect is available for business tax types only. Beginning on December 5, many new tax types will be added including: individual income, fiduciary, partnership, and estate taxes.

To prepare for the addition of more tax types, a system upgrade has been scheduled. During the upgrade MassTaxConnect will have limited functionality from November 29 until December 2. You will be able to make payments and submit requests in the system, but they will not be processed until Tuesday, December 6. In posting the activity to your account, DOR will use the date you actually made the request or payment in the system.

MassTaxConnect will be unavailable Saturday, December 3 and Sunday, December 4. The system will be back online on December 5, 2016 at 9:00 a.m. for all taxpayers.

Thank you for your patience during this transition period.

Happy Thanksgiving from MA/RI NATP!

RI Division of Taxation Computer system changeover successfully completed

Taxes, fees now maintained and accessed on single, agency-wide system

PROVIDENCE, R.I. – The Rhode Island Division of Taxation has successfully implemented the
third phase of its changeover to a new agency-wide computer system.

During this phase of the changeover, which began November 7, services were limited.
However, the changeover was completed yesterday and, as a result, the Division resumed all
services in full this morning. All services are now in full operation.

Before the overall computer conversion project began, the more than 50 tax types and fees
administered by the Division were kept in a variety of places, including Access databases,
computer spreadsheets, and a mainframe computer which uses 1970s-era COBOL language.

With the third phase of the project now complete, Division of Taxation personnel now maintain
and access substantially all tax types and fees on a single, agency-wide computer system,
known as an integrated tax system.

“We appreciate the patience of taxpayers, tax professionals, and many other Division
stakeholders as this latest annual phase of the project was implemented,” said Acting Tax
Administrator Neena S. Savage. “My thanks, as well, to all Division of Taxation employees for
their team work on this important project. I also appreciate the work performed by Revenue
Solutions Inc. (RSI), our technology partner in this venture,” she said.

“We are moving to a new system that will eventually save everyone time and give taxpayers and
tax professionals more tools and improved online access,” Savage said. “To get to that point,
we must change over the old system to the new system. But to keep disruption to a minimum,
we are doing the changeover gradually, in stages over time,” she said.

The first phase of the changeover was completed in July 2014. The second phase was
completed in November 2015. The third phase took place from November 7, 2016, through
November 14, 2016. In each phase, multiple tax types were migrated over to the new computer
system. This month’s migration, for example, included the corporate income tax, sales and use tax, and withholding. Future plans include migrating estate tax records over to the new system;
moving the revenue accounting system onto the new system; and constructing a taxpayer
portal, which would, among other things, let taxpayers log in and manage their accounts, grant
online access to tax professionals, make payments, and check balances.

Massachusetts Senior Circuit Breaker Credit Limitations Updated for 2016

The MA Senior Circuit Breaker Credit eligibility requirements have been updated for 2016.  See MA TIR 16-8 (10/4/2016).  The maximum credit amount of $1,070 has NOT changed.  The maximum assessed value of the principal residence has increased by $27,000 to $720,000.  (It’s expensive to live in MA, as we know).

The maximum income thresholds for 2016 are:  Single - $57,000; head of household - $71,000; married filing jointly - $86,000.

MassTaxConnect to Include Estate Tax in December

Massachusetts DOR is looking forward to expanding MassTaxConnect – the Commonwealth’s new, state-of-the-art electronic tax system – to include estate and several other taxes on December 5, 2016.

Estate tax compliance can be completed electronically through MassTaxConnect.

What will you be able to do through MassTaxConnect as of December 5, 2016?

• File returns (including amended)
• File for extension
• Make payments
• Dispute penalties or audit assessments
• Request expedited lien releases
• Assign account access electronically
• Print copies of returns
• View pending returns
• View notices from DOR

Estate tax form changes

There are estate tax form changes in the works that will be effective as of December 5, 2016. For more information, see Estate Tax Forms and Schedules.

The MassTaxConnect page is regularly updated with new information and includes Frequently Asked Questions, covering a range of topics, and How to Tutorials, describing the features of the new system.

New 529 Plan Contribution Deduction Approved for MA Taxpayers Effective for Tax Year 2017

William Delaney, EA
Westwood, MA

The devil is really in the details on this one.  As part of H Bill 4569, An Act Relative to Job Creation and Workforce Development (123 pages in length), an income tax provision was tucked into Sections 64 through 66 and Section 138 of the Act.  Essentially, it has amended Chapter 62, Section 3A(a)(19) of the MA tax statute to allow a deduction from MA Part A income for “…the purchase of an interest in, or the amount contributed in the taxable year to an account in, a prepaid tuition program or college savings program established by the commonwealth or an instrumentality or authority of the commonwealth (emphasis added),…”  According to the web site www.savingforcollege, the eligible funds are U Fund College Investment Plan and U Plan, both managed by Fidelity.

There is a deduction recapture provision if a distribution is NOT used to pay qualified higher education expenses (as defined in the federal Code), or for a reason other than the beneficiaries death, disability or receipt of a scholarship.

The deduction per year shall not exceed $1,000 for a single person or a married person filing separately, or $2,000 for married filing jointly.   Furthermore, the deduction is limited to taxable years beginning on or after January 1, 2017 through the tax year beginning on January 1, 2021.

2017 IRA and Pension Plan Limitations Announced

The 2017 IRA and pension plan limitations have been announced.  Below are some of the more
common amounts for 2017.

The defined benefit plan limitation remains at $215,000 ($210,000 for 2016).

The defined contribution plan maximum remains at $54,000 ($53,000 for 2016).

The annual compensation limit for most employer contributions remains at $270,000 ($265,000 for 2016).

The Retirement Savers Credit is completely phased out at:  MFJ = $62,000, HH = 46,500, and all others = $31,000 (up from $61,500, $46,125, and $30,750 respectively for 2016).

A year of service for SEP coverage remains at $600.

The maximum elective deferral for §401(k), §403(b), §457, and SARSEPs remains at $18,000.  The catchup contribution limit for those aged 50 or older as of the end of the year remains at $6,000.

The maximum elective deferral to SIMPLE plans remains at $12,500.  The catch-up maximum remains at $3,000.

The maximum contribution to IRAs remains at $5,500.  The catch-up for IRAs is not subject to annual indexing and remains at $1,000.

The modified AGI phase-out ranges for 2017 are:
$62,000-$72,000 (up from $61,000-$71,000); MFJ = $99,000-$119,000 (up from $98,000-$118,000); and MFJ when the taxpayer is not covered but the spouse is = $186,000-$196,000 (up from $184,000-$194,000).

Roth IRA AGI phase-out limits increase to $118,000-$133,000 (up from $117,000-$132,000 applicable for 2016).  For MFJ these amounts are $186,000-$196,000 (up from $184,000-$194,000 applicable for 2016).

The definition of highly compensation for purposes of section 414(q)(1)(B) is $120,000 (same as 2016).

The IRS News Release also has the other pension related indexed amounts such as key employee, top heavy, and “control employee” limits.

A copy of Notice 2016-62 can be found at www.irs.gov/pub/ by clicking on irs-drop and then clicking on n-2016-62.


This text has been shared with you courtesy of:  David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111).

2017 Federal Income Tax Rates, Etc

Most of the inflation adjusted amounts are indexed based on inflation factors as of August 31st each year.  Various tax reference sources, such as CCH and RIA, make projections based on these factors.

We have chosen to wait until the official numbers have been released.  Here are the official 2017 amounts.

Revenue Procedure 2016-55 contains most of the inflation adjusted amounts for 2017.  A copy of the Rev. Proc. can be found at www.irs.gov/pub/ by clicking on irs‑drop and clicking on rp-2016-55.

Tax Rates - Ceilings

Single
10% bracket tops at $9,325
15% tops at $37,950
25% tops at $91,900
28% tops at $191,650
33% tops at $416,700
35% tops at $418,400
39.6% applies to anything over $418,400

MFJ
10% bracket tops at $18,650
15% tops at $75,900
25% tops at $153,100
28% tops at $233,350
33% tops at $416,750
35% tops at $470,700
39.6% applies to anything over $470,700

Head of Household
10% bracket tops at $13,350
15% tops at $50,800
25% tops at $131,200
28% tops at $212,500
33% tops at $416,700
35% tops at $444,550
39.6% applies to anything over $444,550

MFS
10% bracket tops at $9,325
15% tops at $37,950
25% tops at $76,550
28% tops at $116,675
33% tops at $208,350
35% tops at $235,350
39.6% applies to anything over $235,350

Estates & Trusts
15% bracket tops at $2,550
25% tops at $6,000
28% at $9,150
33% at $12,500
39.6% applies to anything over $12,500

- Exemption amount is $4,050.

- Standard deduction amounts are:  MFJ-$12,700, Single & MFS-$6,350, HH-$9,350, Additional amounts for aged/blind-$1,550 for unmarried and $1,250 for married status.

- Exemption and itemized deduction phase-outs begin for MFJ/QW at $313,800, HH at $287,650, S at $261,500, and MFS at $156,900.

- Kiddie Tax
Standard Deduction is $1,050, the next $1,050 is taxed at child’s rate, and the excess is taxed at parent’s rate.  AMT Exemption amount is the child’s earned income plus $7,400.

- AMT – The exemption amounts are:
MFJ/QW = $84,500
S/HH = $54,300
MFS = $42,250
Estates/trusts = $24,100

The excess taxable income level (where the 28% AMT rate applies) is:
MFJ/QW/S/HH = $187,800
MFS = $93,900

- Adoption Credit - $13,570 is the maximum for the credit or assistance amounts.  The phase out starts at $203,540 and is completely phased out at $243,540.

- Child Tax Credit – refundable portion uses an income base of $3,000.

- Education Credits.  The phase-out for the American Opportunity Credit starts at $80,000 ($160,000 for MFJ).  The phase-out for the Lifetime Learning Credit $56,000 ($112,000 for MFJ)

- EIC maximum AGI/earned income for MFJ is $45,207 for one child, $50,597 for two children, $53,930 for three or more children, and $20,600 for no children.  The EIC maximum AGI/earned income for other taxpayers is $39,617 for one child, $45,007 for two children, $48,340 for three or more children, and $15,010 for no children.  Excessive investment income level for EIC is $3,450.

- Transportation Fringe maximum exclusion for monthly parking is $255/month as well as for commuter highway vehicle and transit passes.

- Savings Bonds for Education phase out level starts at $117,250 for MFJ and $78,150 for other filing statuses.  This is completely phased out at $147,250 for MFJ and $93,150 for other filing statuses.

- §179 election maximum is $510,000, with a phase-out starting at $2,030,000.

- Foreign Earned Income exclusion is $102,100.

- Long-term care premiums are limited to:
Age
40 or less-------$410
>40, but not >50------$770
>50, but not >60------$1,530
>60, but not >70------$4,090
>70------$5,110

- Long-term care contract benefit amount is $360 per day.

- Student loan interest maximum is $2,500, with a phase out starting at $65,000 ($135,000 for MFJ).  This is completely phased out at $80,000 ($165,000 for MFJ)

- Annual gift tax exclusion remains at $14,000, while the limit on gifts to noncitizen spouses is at $149,000.

- Exclusion amount for Estate/Gift tax is $5,490,000.

- Attorney Fee Awards are limited to $200 per hour.

- MSA
Self-only coverage annual deductible is not less than $2,250 nor more than $3,350, with out-of-pocket limits not in excess of $4,500.

Family coverage annual deductible is not less than $4,500 nor more than $6,750, with out-of-pocket limits not in excess of $8,250.

- Educator Deduction – The maximum above-the-line deduction for qualified educators remains at $250.

- Cafeteria Plan – The dollar limitation for §125 health FSAs increases to $2,600.

- Small Business Health Insurance Credit – The dollar amount for purposes of limiting this credit is $26,200.

- Penalty for failure to file a Partnership or S corporation return is $200 per month per Schedule K-1.

- Penalty for failure to file correct Forms 1099 is $260.

- Nanny Tax – The wage threshold for FICA is $2,000.


This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111).

Rhode Island DOT Computer System Changeover Starts on November 7

Office will stay open, services will be limited, during conversion period

PROVIDENCE, R.I. – The third phase of the Rhode Island Division of Taxation’s
changeover to a new agency-wide computer system will start on November 7, 2016,
and continue through November 14, 2016.

During the computer conversion period, the Division will remain open to the public, but a
number of services will not be available. Taxpayers and tax professionals should
therefore plan ahead. All services will resume in full on November 15, 2016.

The following at-a-glance calendar shows when this phase of the conversion begins,
when it ends, and the intervening period – including two regularly scheduled holidays.

• Nov. 7 Monday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 8 Tuesday Holiday: Closed (Election Day)
• Nov 9 Wednesday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 10 Thursday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 11 Friday Holiday: Closed (Veterans Day)
• Nov. 14 Monday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 15 Tuesday Open: Full service resumes 8:30 a.m. to 3:30 p.m.

Some services temporarily unavailable

The Division of Taxation, at One Capitol Hill in Providence, will remain open during
normal business hours while the computer system conversion occurs, and many
services will continue to be available. For example, the agency’s website and email
system will remain fully functional, payments will be received, and electronically filed tax
returns will be received and acknowledged.

However, a number of services will not be available during the conversion, mainly
because the old computer systems and the new system will be tied up with the
changeover. For example, during the changeover period, the Division will be unable to
issue letters of good standing, unable to release license and registration blocks, and
unable to check on a taxpayer’s account balance.

Taxpayers and tax practitioners should plan ahead. For example, if someone is blocked
from renewing a driver’s license, professional license, or motor vehicle registration
because that person owes back taxes, that person should pay the tax debt before
November 7. The Tax Division is in the process of mailing a letter to each person who is
subject to a license or registration block, urging them to resolve their tax matter prior to
November 7. (To make arrangements to pay tax debt before November 7, call the
Division of Taxation at (401) 574-8941 from 8:30 a.m. to 3:30 p.m. business days.

Impact on services

The following table shows some of the services that will continue to be available, and
some that will not be available, during the changeover period.

Division of Taxation services for computer conversion period Nov. 7 through Nov. 14

Services available:

• Office remains open, sections remain open
• Phones, emails answered (for general information only, not account‐specific)
• Letters and other deliveries received by Division
• Payments received by Division (credit card, debit card, ACH debit, ACH credit, checks) 
• Employer Tax section (includes state unemployment insurance, TDI)
• E‐filed tax returns received, acknowledged
• Paper‐filed tax returns received 
• Requests for forms, instructions accepted
• General questions answered   
• Website, including online services, open
• Audits and examinations continue
• Division accepting new business registrations (but not issuing permits or licenses)
• Hearings held, legal papers received   

Services not available:

• Issuing letters of good standing
• Releasing license blocks
• Releasing registration blocks
• Releasing Collections liens and levies
• Checking on taxpayer account status, history
• Answering taxpayer‐specific inquiries
• Issuing liquor license certificate of good standing

The Division is moving to a new, agency-wide computer system that will eventually save
everyone time and give taxpayers and tax practitioners more tools and improved online
access. To get to that point, the Division must change over the old system to the new
system. But to keep disruption to a minimum, the Division is doing the changeover
gradually, in stages over time.

The changeover process that starts on November 7 will last four business days. It
involves converting the corporate income tax, sales and use tax, and certain other tax
types to the new, agency-wide computer system.

When the process is completed, Division staff will be able to access corporate income
tax, sales and use tax, and certain other records via the new computer system. The
entire Division of Taxation will resume full, normal services for the public starting
Tuesday, November 15, 2016.

2017 PTIN Renewal Period Underway for Tax Professionals

WASHINGTON –– The Internal Revenue Service today reminded the nation’s more than 725,000 federal tax return preparers that they must renew their Preparer Tax Identification Numbers (PTINs) for 2017. All current PTINs will expire Dec. 31, 2016.

Anyone who prepares or helps prepare any federal tax return, or claim for refund, for compensation must have a valid PTIN from the IRS. The PTIN must be used as the identifying number on returns prepared.

“We ask that you renew your PTIN as soon as possible to avoid a last-minute rush,” said Carol A. Campbell, Director, IRS Return Preparer Office. “It’s easy to let this slip as the holiday season approaches.”

For those who have a 2016 PTIN, the renewal process only takes a few moments online. The renewal fee is $50. If you cannot remember your user ID and password, there are online tools to assist you. Preparers can get started at www.irs.gov/ptin. If you are registering for the first time, the PTIN application fee is $50.00 and the process may also be completed online.

Paper Form W-12, IRS Paid Preparer Tax Identification Number Application and Renewal, is available for paper applications and renewals, and takes four to six weeks to process. Failure to have and use a valid PTIN may result in penalties. All enrolled agents, regardless of whether they prepare returns, must have a PTIN in order to maintain their status.

Annual Filing Season Program Participation Kicks Off

The voluntary IRS Annual Filing Season Program is intended to encourage non-credentialed tax return preparers to take continuing education (CE) courses to increase their knowledge and improve their filing season readiness. Participation generally requires 18 hours of CE, including a course in basic tax filing issues and updates, ethics, as well as other federal tax law courses. More information on the types and amounts of CE required for the program is available at www.irs.gov/Tax-Professionals/Annual-Filing-Season-Program.

Preparers desiring to receive an Annual Filing Season Program - Record of Completion for 2017, must (1) complete their continuing education requirements by Dec. 31, 2016; (2) have a valid 2017 PTIN; and (3) consent to adhere to specific practice requirements in Treasury Department Circular No. 230.

The IRS has a video to demonstrate how to sign the Circular 230 consent and print the Record of Completion.

Enrolled agent credential

The Annual Filing Season Program is a filing season qualification while an enrolled agent license provides professional status. The enrolled agent credential is an elite credential issued by the IRS to tax professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation and representation matters.  Enrolled agents have unlimited representation rights; allowing them to represent any client before the IRS on any tax matter.  As non-credentialed return preparers consider the next steps in their professional career, the IRS encourages them to consider becoming an enrolled agent.

Enrolled agents and participants in the Annual Filing Season Program are included in the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications created on IRS.gov to help taxpayers make wise decisions when choosing tax return preparers.

The directory also contains information on attorneys, certified public accountants (CPAs), enrolled retirement plan agents (ERPAs) and enrolled actuaries who are registered with the IRS.

IRS.gov has a page that explains the various tax return preparer credentials and qualifications, as well as a page with information regarding how to become an enrolled agent.

IR-2016-142, Oct. 28, 2016

Give This Taxpayer An "A" For Creativity; An "F" In Application of Tax Law

William Delaney, EA
Westwood, MA

Dear Readers---you can’t make up this stuff!  Here are the facts in Hatcher v. Comm., T.C. Memo 2016-188 (10/6/2016).

Taxpayer Mary B. Hatcher was employed for ten years by Blockbuster Corp., including three years as Senior Vice President and Treasurer.  Her responsibilities included tax matters.  She possessed an undergraduate business degree and an MBA in corporate finance.  After her employment ended, in 2010, she continued with Blockbuster as a 1099-MISC consultant.

While still single (she married in 2010), she made a series of loans to her boyfriend, Brad Carpenter.  She advanced $75,000 in March 2004, and obtained a promissory note to be repaid “based on mutually agreed company performance, beginning 1 year following distribution or licensing agreement” of a comic strip which Carpenter hoped to develop and syndicate.  In April of the same year, she advanced $50,000 which Carpenter used to purchase a Hummer vehicle, apparently with Hatcher’s approval.  Hatcher continued to advance funds, and by October of 2005 (when they had stopped dating) the total was $430,500.

The 2004 promissory note was superseded by one issued June 1, 2006, which stated that the purpose of the loans was “to fund Carpenter’s personal expenses and the development of his comic strip.”  The note was due on December 31, 2007.  Carpenter did not pay the note.  In February 2008 and April 2010 the past-due note was amended.  The second amendment required monthly installment payments of $1,000 (no mention of interest although the past-due note carried a 5% rate of interest).  Payments totaling $7,000 were made between March and October 2010; then, the payments stopped.  No interest was attributed to the repayments.

Mary believed that no further payments would be made, especially since Carpenter had e-mailed to her on December 17, 2010 that “I have no money.”  Hatcher sent to Carpenter a formal notice of default and, on February 15, 2012 she obtained a court awarded judgment for damages of $573,175 (principal - $430,500; interest - $142,675) and attorney fees of $50,000.

In an effort to collect, Hatcher, via discovery, alleged that he was receiving $7,500 per month of disability income plus unexplained bank deposits.  This occurred in 2012, so the Court noted that “As of December 31, 2010, the Carpenter note had not become completely worthless.

So far, a not uncommon fact pattern.  Love blinds one to the other persons faults, and may cause you to do things which you would normally not do, such as lend large sums of money while failing to check on the background and credit worthiness of the borrower.  The Court made note of this, and of Hatcher’s extensive financial background, when arriving at its determination.

It appears that Hatcher thought about a bad debt deduction on her 2010 personal income tax return and may have concluded that this defaulted obligation should not be classified as a personal bad debt (with the limitation on how much could be deducted each year); she wanted a business bad debt deduction which would wipe out her jointly filed 2010 income plus create an NOL which would carryback to 2008 (a year in which she had significant income).  Ah, so how to tax plan for the desired result, thought this business major with an MBA!  I’ve got it…

Hatcher formed an LLC, MBH Partners LLC (apparently a single member LLC because it filed a Schedule C) and, almost immediately, contributed the Carpenter note to the LLC.  At the end of 2010, the LLC held the note and nothing else.  It had not engaged in lending or other trade or business activities; it had no customers, although it was formed to provide advisory and consulting services.

Here's Some Info on Our Chapter Makeup

Say Hello to Our Newest Board of Directors Member

Ronald Fisher, EA
Whitinsville, MA

My name is Ron Fisher and I have lived in the Uxbridge/Whitinsville area my entire life. I currently reside in Whitinsville with my wife Carol. I have one daughter (Alison) who lives in Uxbridge and works for me during tax season.

I attended Bryant University and have a BSBA in Accounting. For the past 40+ years I have held various full time Finance and Credit Director Positions for local consumer products manufacturers including Hasbro, Safety 1st, Teknor Apex and Honeywell.

I started preparing tax returns part time out of a home office in 1981. Since then, I have built a tax practice that today includes over 450 clients mainly in the Blackstone Valley area.  In 2013 I made my tax practice my full time pursuit and I opened a tax office in Whitinsville. I have been an enrolled agent since 2002 and a member of both the NATP as well as the NAEA since 2003. I also belong to both Massachusetts and RI local NAEA organizations.

Thank you for voting for me and I am looking forward to being more involved with NATP in a director role.

Ron was voted to the Massachusetts / Rhode Island Board of Directors at the chapter's Annual Meeting on October, 26th, 2016. His 3 Year Term beings on January 1st, 2017.

Court Cases For Today's Seminar Session

Welcome to the Massachusetts/Rhode Island Annual Meeting and Seminar.

Below, you will find references to the court cases that Cheryl Morse will be referring to during the sessions.

Court Cases

Ashworth v. Commissioner of IRS

Eichler v. Commissioner of IRS

English v. Commissioner of IRS

Hugee v. Commissioner of IRS

Johnson v. United States

Morris v. Commissioner of IRS

Olivo v. Commissioner of IRS

Weiss v. Commissioner of IRS

Thank you for attending today's session.

2017 MA / RI NATP Annual State Update Seminar

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 5th 2017

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 5th, 2017 for our Annual State Update Seminar. This all day event will be held at the Sturbridge Host in Sturbridge MA. Registration details are below, and are handled online directly by National NATP. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours. Remember, if you sign up for this event at the October 25th 2016 event, you get 50% off of your registration!!

• Register online with credit card.
• For more information or to register by phone, fax or mail, use this form.
• After January 6, please register at the door with the form above.

Topics:

What You Need To Know Regarding FBAR & Form 8938 presented by William Delaney, EA of MA/RI NATP Chapter.

Massachusetts State Tax Update including Launch of MASSTAXCONNECT for Personal Income presented by Brian Lynch, Dana Ackerman & Gilbert Gonzalez of Massachusetts Department of Revenue.

Rhode Island State Tax Update presented by Scott Lewis of Rhode Island Division of Taxation.

New York State Tax Update presented by Kathryn Keane of New York NATP Chapter.

Federal Tax Update presented by Kathryn Keane of New York NATP Chapter. (2 Hours of CE Credits)

Featured Speaker - Kathryn M. Keane, EA.

Kathryn is a principal of Macanta, a small tax and related services practice located in Brooklyn, NY, serving over 850 individual clients and 50 businesses. In December 2006, Kathryn completed two three-year terms on the National Board of Directors of NATP and was twice awarded Chapter Person of the Year for 2002 and 2008 for her volunteer service to the community at large as well as to NATP. In addition to serving as an Education Committee member for NY NATP, she currently serves as Chair of the IRS Tri-Boro Practitioner Liaison Committee. Kathryn is a frequent speaker for NATP Chapters. She has also presented for VASEA, NCCPAC (Nassau-Suffolk County Chapter) and local chapters of NYSSCPA. Kathryn has a B.S. degree from Brooklyn College.

Mortgage Interest Deduction Denied by IRS

James Jackson claimed Schedule A deduction for mortgage interest expense.  IRS denied the deduction.  Tax Court agreed with IRS.

Mr. Jackson’s girlfriend, Julie, obtained a loan and purchased a residence back in 2005.  Only Julie’s name was on the loan and the property’s title.  Mr. Jackson was unable to join Julie on the loan because he had personal debt problems.

Mr. Jackson claimed a little over $15,000 of interest expense while the 1098 issued to Julie showed almost $2,000 less. He testified that he gave Julie $1,000 in cash every month for each year under examination.  He produced a letter from Julie that stated he had given her this cash every month for the past 10 years.  He also testified that Julie paid all real estate taxes and insurance on the home. The Court rejected Mr. Jackson’s argument that Nevada’s community property laws as it relates to domestic partners gave him ownership.

IRS denied the deduction stating Mr. Jackson was not liable for the debt and therefore not allowed the deduction.  Tax Court ruled in favor of IRS.

One key we see in this case is included in the Court’s reasoning.  It specifically mentioned regulation 1.163-1(b) which states, in part, “interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.”  The key in this phrase is the words “or equitable owner”.  This has been interpreted by the Court as saying, briefly, that a taxpayer whose name is not on the loan and/or the title may still be able to deduct the interest the taxpayer paid AS LONG AS the taxpayer is an equitable owner.  An equitable owner is someone who has the burdens and benefits of ownership of the property.  This can be shown to exist when the taxpayer can prove he/she:

1) Has the right to possess the property and to enjoy its use, rents, or profits,
2) Has a duty to maintain the property,
3) Is responsible for insuring the property,
4) Bears the property’s risk of loss,
5) Is obligated to pay the property’s taxes, assessments, or charges,
6) Has the right to improve the property without the owner’s consent, and
7) Has the right to obtain legal title at any time by paying the balance of the purchase price.
Mr. Jackson did not prove any of the above items.

The Court’s decision refers to other cases for and against this equitable ownership position.  Reading this case and the others it refers may be helpful if you have a situation where “equitable ownership” may be an issue.

Side note – Mr. Jackson claimed the mortgage interest expense on line 10 of Schedule A, which may be the reason the return was selected for examination.  Line 10 is where deductible mortgage interest expense is reported if the taxpayer has received a Form 1098 in his/her name and SSN.  Since the 1098 issued in connection with Mr. Jackson’s residence was issued to Julie in her SSN, there was a mismatch IRS found in connection with Mr. Jackson’s return.  Line 11 is where deductible mortgage interest expense is reported when the taxpayer has NOT received a Form 1098 in his/her name and SSN.

James David Jackson, TC Summary 2016-33

This text has been shared with you courtesy of:  David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111).

Online Seminars from the 2016 IRS Nationwide Tax Forums are Now Available

WASHINGTON — The Internal Revenue Service today reminded tax professionals that they can earn continuing education credits online through seminars filmed at the 2016 IRS Nationwide Tax
Forums. The forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues; in 2016, they were held in five cities across the nation.

More than a dozen self-study seminars are now available on the IRS Nationwide Tax Forums Online (NTFO). Self-study seminars provide information to participants through interactive videos, PowerPoint slides and transcripts.

The 2016 online forum seminars cover many topics of interest to tax professionals including:

• Is Your Case Ready for Appeals? (Examination Edition)
• Foreign Tax Credit for Individuals
• Emerging Issues in Tax Practice Due Diligence
• ACA Employer and Coverage Provider Information Reporting Requirements

The online seminars are registered with the IRS Return Preparer Office and the National Association of State Boards of Accountancy (NASBA) as a qualified sponsor of continuing education. For a fee, CPAs, Enrolled Agents and Annual Filing Season Program participants taking NTFO seminars can earn continuing education credits. To earn credit, users must create an account, answer review questions throughout the seminar and pass short tests at the end of the seminars.

The seminars can also be audited for free. Individuals who choose to audit seminars will not have access to the review questions or final examination and will not receive credit for the seminar.

In addition to the recently added seminars, NTFO also offers many seminars from prior-year IRS Nationwide Tax Forums. For more information, please visit www.irstaxforumsonline.com.

IR-2016-134, Oct. 17, 2016

Communications Being Sent to Massachusetts WebFile for Income Users

As you may recall, MassTaxConnect will be open for individual taxpayers on December 5, 2016. We10 additional tax types and that WebFile for Income will be phased out on November 6, 2015 at midnight.
are currently sending communications to WebFile for Income users and other stakeholders to let them know that MassTaxConnect will begin accepting

Massachusetts recently joined the Free File Alliance to increase free filing options for taxpayers as MassTaxConnect will not accept personal income tax returns. DOR estimates that approximately 70 percent of taxpayers will qualify to file their state and federal returns together for free.

Upcoming Form Changes

The integration of personal income and other  tax types into MassTaxConnect requires some tax form changes for the upcoming tax season. Please click on the links below to learn more.

• Estate
• Fiduciary
• Partnership
• Personal Income Tax

Deadline for Payments Made Via WebFile for Income

All current bills must be paid electronically through WebFile for Income before it shuts down on November 6, 2016. After that date, any outstanding bills must be paid by mail using the attached payment coupon. Payments may be made through MassTaxConnect for bills issued after December 5.

Important Shutdown Dates

The transition to MassTaxConnect will require some interruptions in our online services, please note the following shutdown dates:

• October 26, 2016 Last day to make Small Payment Arrangements on the web
• November 6, 2016 Last day to:
• Use WebFile for Income to make payments
• To access the Check Your Refund application
• Request Certificates of Good Standing online
• All of these functions will be available through MassTaxConnect beginning on December 5. If you need assistance during the off-line period please contact customer service at (617) 887-6367.

Rhode Island Online Payment of Personal Income Tax by Credit Card or Debit Card

PROVIDENCE, R.I. – Taxpayers may now use their credit cards or debit cards to pay their Rhode
Island personal income tax online, through the Rhode Island Division of Taxation website.

This provides taxpayers with another, convenient option for paying their personal income tax. It
is available now, on the Division of Taxation website, in time for the extended due date of October 17, and in time for the next full tax-filing season, which begins in January 2017.

The credit card and debit card online payment service, created through a partnership with
Rhode Island Interactive LLC, is available through the Division of Taxation website:
http://www.tax.ri.gov/misc/creditcard.php.

The system will accept credit cards and most debit cards and can be used for payments of the following taxes:

• personal income tax
• corporate income tax
• sales and use tax
• withholding tax

For each transaction with a credit card or debit card, the taxpayer will be charged a transaction
fee equaling 2.0 percent of the transaction amount, plus a $1.00 flat fee.1 You will be notified of
the fee amount before making your payment.

Other payments

Taxpayers may continue to pay their Rhode Island personal income tax by check. In addition,
for personal income tax payments with final returns, taxpayers may pay by automatic debit of
their bank or credit union accounts. (Arrangements for automatic debits are made using tax preparation software and must be completed before the return is electronically filed.)

Certain business taxes may be paid online, via ACH debit/credit, through the following Division
of Taxation website: http://www.tax.ri.gov/onlineservices/

For additional info, check out Notice RI ADV2016-19.