Many folks arrive here with a search engine query that goes something like “why don’t I have my K-1, should the partnership go to jail?” A quick reminder of what a K-1 does, and why they often arrive late in the tax season.
K-1s come from partnerships, S corporations and trusts. Partnerships and S corporation businesses don’t pay the tax on their income. The income is instead taxed on your 1040. They have to compute their own taxable income first — as you might imagine, a more complex process than doing the average 1040. They then have to sort the income into a bunch of different bins so that all the pieces end up on the right spot on the owner 1040s. The K-1 is best understood as the collection bins for your shares of the various pieces of the business’ income and expense items.
Furthermore, many businesses and trusts that issue K-1s are awaiting K-1s of their own. Even if they have their own tax information ready, if the business is still waiting on a K-1, it can’t issue yours.
But, but! Aren’t K-1s supposed to be out by January 1? You’re thinking of 1099s. K-1s are due with the S corporation returns (March 15) or the partnership returns (April 15), but they can be, and often are, extended to as late as September 15 — legally.
So what to do? If you don’t have your K-1 yet, try to at least get an idea of what the income will be, and extend your own return accordingly. It’s always better to extend than to amend.
This is the first 2014 filing season tip — come back for one each day through April 15!
Russ Fox, Bozo Tax Tip #6: Just Don’t File
The campus could take up to 6 weeks to process a [paper] extension, and it will not show up on the transcript until processed. With that time delay, it is helpful to have the acknowledgement of an e-filed extension.
With the delay in processing of the extensions, remember if you file a return within that 6 week timeframe, it may not show the extension on the module, and your client could get a penalty for filing late if there is a balance due. This will also have an impact on refund returns if they are later picked up for audit, a balance due results, and the extension was not processed properly.
And why, if you do paper file, you shouldn’t bundle extensions for your family or clients to save postage.
Jana Luttenegger, DIY Will is a ‘Cautionary Tale’ (Davis Brown Tax Law Blog). “As a result, two of Ann’s nieces received property that it appears clearly from the will and attempted amendment was meant for Ann’s brother instead.”
Kay Bell, 3 popular refundable tax credits: Are they worth it? Good question, and no.
Peter Reilly, Easement Valuations Not So Easy Anymore
Keith Fogg, Reliance on Counsel to Avoid Tax Liability. (Procedurally Taxing). Not likely to work.
TaxProf, The IRS Scandal, Day 333. Featuring the Washington Post “fact checker” calling shenanigans on IRS Commissioner Koskinen for denying that IRS had “targeted” Tea Party groups. It’s safe to say Mr. Koskinen has botched his entrance.
Andrew Lundeen, Senate Finance Committee Passes $85 Billion Tax Extenders Bill (Tax Policy Blog)
Tax Justice Blog, Five Key Tax Facts About Healthcare Reform. Ones they like that I despise: “Only two percent of Americans will pay the tax penalty for not having insurance“ and “95 percent of the tax increases included to pay for health reform apply solely to businesses or married couples making over $250,000 and single people making over $200,000.”
This attitude is exactly what is awful about the TJB mindset. No matter how fickle, arbitrary, unworkable or economically harmful a tax is — and the Obamacare taxes are all of those — we’re supposed to be OK with them as long as they apply only to “the rich.” Carried to the logical conclusion, it would be just fine to execute the 1-percenters, confiscate their property, and sell their families into slavery — it only affects the rich anyway, and they don’t count.
Arnold Kling has a little reminder for folks hung up on inequality, quoting Lawrence Kotlikoff:
The US fiscal gap now stands at an estimated $205 trillion, or 10.3 percent of all future US GDP. Closing this gap is imperative, and requires a fiscal adjustment of an immediate and permanent 37 percent reduction in spending (apart from servicing official debt), an immediate and permanent 57 percent increase in all federal taxes, or some combination of the two. The necessary size of this adjustment increases the longer it is put off.
And remember, the rich guy isn’t picking up the tab.
O. Kay Henderson, No traction for increasing state gas tax. Not happening this year, apparently.
The film industry and lawmakers doubtless believe that film credits are a great deal for everyone involved — and that would be fantastic if it were true — but the most credible studies don’t reflect that.
Her article (unfortunately available only to State Tax Notes subscribers) discusses the funky analysis that film credit boosters use to justify the subsidies. The boosters like to overstate the tourism effects of films and assume fantastical “multiplier” effects of film spending. They also ignore opportunity costs — assuming that if the taxpayer money was not spent on Hollywood, it would just crawl in a hole and die.
Career Corner. Crime May Not Pay But Whistleblowing Certainly Does (Going Concern)
Tags: 2014 filing season tips, Andrew Lundeen, Arnold Kling, Career Corner, filing season tips, film credits, Going Concern, harold hill, Jana Luttenegger, Jennifer Carr, Kay Bell, Keith Fogg., Kristy Maitre, O Kay Henderson, Peter Reilly, Russ Fox, Tax Justice Blog, TaxProf, William Perez