Tax Tidbits

  Summer 2015

By Cody Daniels, M&S Senior Tax Associate

Did you know whether an individual has converted his or her personal property to one held for the production of income is a question of facts and circumstances?

In the case of a residence converted from personal use to a rental property the Tax Court has established a five factor test. The five factors to determine the taxpayer’s intent are:

  • The length of time the house was occupied by the individual as his residence before placing it on the market
  • Whether the individual permanently abandoned all further personal use of the house
  • The character of the property (recreational or otherwise)
  • Offers to rent
  • Offers to sell

No one factor is determinative and all of the facts and circumstances must be considered. This five factor test should be analyzed when considering claiming Schedule E deductions or taking a loss deduction under §165 for property converted from personal use to rental.

Did you know April 18th will be the 2016 tax deadline for individual taxpayers?

When April 15th falls on a Saturday, Sunday or legal holiday, returns are due on the next succeeding day that is not a Saturday, Sunday, or legal holiday. Emancipation Day is a legal holiday generally observed on April 16th. However, when April 16th falls on a Saturday, as it does in 2016, the holiday is observed on the preceding Friday. So because April 15th is the legal observance of Emancipation Day, and April 16th and 17th fall on Saturday and Sunday, individual taxpayers have until April 18th to file their 2015 tax returns.

Did you know the Illinois deadline for electronically filing Form W-2 is now February 15th?

Prior to 2014, the due date for submitting W-2s electronically was March 31st. Under a temporary rule filed in late December of 2014, Illinois Department of Revenue accelerated the filing date for 2014 W-2s to February 15th. This earlier due date has been made permanent for all calendar years after 2013.

Did you know the IRS released simplified procedures for filing delinquent FBARs?

The IRS has provided procedures for filing delinquent FBARs for taxpayers not required to use either the Offshore Voluntary Disclosure Program or the Streamlined Filing Compliance Procedures. Taxpayer should confirm they are not required to use the OCDP or Streamlined Filing Compliance Procedures before following these alternative filing procedures. According to the IRS, the following steps should be followed to file delinquent FBARs:

  • Review the instructions
  • Include a statement explaining why the FBARs are being filed late
  • File all FBARs electronically with the Financial Crimes Enforcement Network (FinCEN)
  • Select a reason for filing late on the cover page of the electronic form

The IRS will not impose a penalty for the failure to file delinquent FBARs if the taxpayer properly reported and paid tax on the income from the foreign financial accounts and has not previously been contacted regarding an income tax examination or a request for delinquent returns for the years which the delinquent FBARs are submitted