Daddy’s little tax benefit

Daddy's Little Tax Deduction Onesie
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Last week, my wife and I welcomed our second child to this world.  It was a wonderful experience and no less fascinating than the first time I bore witness to such an event.  Aside from all the good feelings and smiles, there are important tax implications of this birth that must be addressed.  We will explore the actual and potential impacts on our federal tax liability as a result of the arrival of our little angel.

Dependency Exemption:

Parents of a dependent child like us are entitled to take a dependency exemption on their tax return ($4,050 for 2017).  This is a direct reduction to taxable income.  Cha-ching!  However, this amount is subject to a phase-out for “high income” taxpayers (between $313,800 and $436,300 for Married Filing Joint).  To me and my wife, this translates to about $2,025 in tax savings (assuming a 25% bracket).

Child Tax Credit/Additional Child Tax Credit:

Subject to a 7-item test, many taxpayers can get up to $1,000 per child in the form of a tax credit.  Unfortunately, this credit is subject to a phase-out as well ($110,000 to $130,000).  In addition, the credit is refundable if you have sufficient earned income to cover any excess portion of the credit over your tax liability.  Many proud parents will get to knock a few dollars off of their tax bill.

Earned Income Tax Credit (EITC):

Certain “low income” taxpayers that had already been eligible may be able to take better advantage of the EITC by having an additional child.  There are different tiers for the credit for those that have from 0 to 3 or more children so your new arrival may put you into the next tier.  This will not benefit my family, but can be a significant boon for those that are eligible.

Child and Dependent Care Tax Credit/Flexible Spending Account:

Married taxpayers that both have earned income and have expenses paid to a care provider in excess of those paid by their employer for a dependent child can also receive a nonrefundable credit.  There are provisions in the credit that allow for spouse that is a student, seeking employment, and/or disabled to still be eligible to take the credit.  The amount of the credit is 20% to 35% of up to $3,000 (or $6,000 if you have 2 or more children) of the expenses paid, phased over $15,000 to $43,000 of income.  This sounds complicated, but bear with me – assuming we will hit the $3,000 cap for each child (and we will), this credit will be worth $1,200. It may not sound like much, but I’ll take any help I can get; the cost of daycare is painful.  Married taxpayers can also set aside up to $5,000 in pre-tax dollars to a flexible spending account.  It is important to note that those funds must be used on qualified expenses in the same year they are set aside or they are lost forever.

Aside from adjusting to sleepless nights and sibling rivalry, we also have to consider the tax ramifications of our fourth family member.  There are additional federal and state tax implications to consider, such as saving for college (hoping for scholarships… fingers crossed), student loan interest, and college tuition credits, but the latter two are down the road a ways.  For now, we will just have to recognize the advantages that are available to us to help us best plan for the future.  Please take this moment to appreciate the simple pleasure of sleeping through the night.


evan_2Evan Piccirillo, CPA is a Tax Supervisor in Raich Ende Malter & Co. LLP’s Long Island office. Evan specializes in high net worth individuals, as well as closely-held corporations, S-Corporations, and small businesses. Contact Evan at epiccirillo@rem-co.com or (516) 228-9000.

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TRUMPWATCH 2017: 100 days of uncertainty

trumpwatch2017-blueOver the last 100 days, we have seen our new President push for many things in any number of directions.  The repositioning of certain postures taken during the campaign has ranged from slight to drastic.  This in consideration, one word to best sum up the actions of the current administration might be “unpredictable.”

The Republican Party currently controls the executive and legislative branches of government and has long taken issue with current tax law.  With both the means and impetus to achieve meaningful tax reform, the stage was set for quick and sweeping changes to the U.S. tax code.  Many experts were predicting just that: a tax overhaul, effective January 1, 2017.

Last week, the Trump administration, through Treasury Secretary Mnuchin and National Economic Director Cohn, reaffirmed its intent to reform the U.S. tax code.  The stated purpose of the plan is to lighten the financial burden of U.S. taxpayers, promote economic growth, and simplify compliance… and not add to the deficit.  In a word: Huge.

The plan has been called many things by pundits and news organizations, ranging from “a disaster” to “the savior” of the administration.  The White House describes it as “the biggest cut ever” and “phenomenal.”  Many arguments have been presented over the potential fallout of such reform, as citizens try to predict:

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© Matthew Woltunski via Flickr
  • Will this increase the deficit?
  • Will the tax cuts make up for the difference in tax revenue on their own by stimulating economic growth?
  • Who will benefit most—the wealthy, the poor, me (one can only hope)?
  • Can’t we please forget about the AMT?
  • And of course, will the reform disproportionately help the President’s personal tax burden?

Unfortunately, those questions will continue to go largely unanswered.  The full nature and impact of Trump’s tax reform policy is still hard to ascertain.  Very little in the way of detail has been given to the major bullet points of the plan – in fact, the proposal presented last Wednesday was only one page in length and lacked any true elaboration.

To the administration’s credit, their position on tax reform has not changed drastically from what was put forth on the campaign trail (read about that here); however, the message needs to be clarified to sufficiently inform the American people.  Seeking that clarity, most have looked to the conservative tax blueprint drawn up by Kevin Brady and Paul Ryan, but we have already seen the President and others in the party sour to that plan, specifically the border adjustment tax proposed therein.

In spite of the 100-day timeframe, it is still impossible to gauge Trump’s tax reform policy with any degree of accuracy.  Perhaps the next 100 days will bring potential tax reform into better focus, but many of the experts I mentioned earlier are pushing expectation of anticipated tax reform back to 2018.  Additionally, in-fighting among factions of the GOP could delay new law for even longer than that.

For now, we will all have to deal with the Code as it is and wait anxiously to see if any changes are in store for the future.  Sad.


evan_2Evan Piccirillo, CPA is a Tax Supervisor in Raich Ende Malter & Co. LLP’s Long Island office. Evan specializes in high net worth individuals, as well as closely-held corporations, S-Corporations, and small businesses.
Contact Evan at epiccirillo@rem-co.com or (516) 228-9000.

Tick-tock on the tax clock

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How accountants feel after the tax deadline. Wikipedia

Time constraints coupled with the sheer volume of work makes tax season an incredibly stressful time for taxpayers and tax preparers.  Taxpayers will have to compile all of their tax information for the prior year and send it over to their accountant who will no doubt have a series of uncomfortable, probing questions.  The ever-present apprehension of having to write a large check looms overhead like a coming storm.  Tax preparers will spend countless hours poring over tax documents and IRS code sections trying to efficiently turn around tax returns, leaving no deduction or credit on the table.  The late nights and delivery food build up in preparers’ systems and erode their constitutions transforming them into mere husks of their former selves.

As each grain of sand runs through the hourglass, it feels as if the noose is tightening.

For taxpayers, the procrastination builds on itself like a cancer.  Dealing with all of this is painful, so why not put it off until tomorrow?  All of a sudden the calendar page turns and it is April 1st… not only has nothing been sent to the preparer’s office, the envelopes on many tax documents are still sealed and sitting in a pile on the desk.  In a frenzy, the documents (still sealed) are shoved into a large manila folder and mailed out, without a proper care and review.  Are some things missing?  Probably, but we have time right?  We can count on our trusted preparers!  There are still two weeks left!

For tax preparers, the work piles up and it seems impossible that there is a chance it will be completed on time.  Each day more packages arrive.  Each day the lists grow.  The arms on the clock spin at an astonishing rate.  How many returns did we get out today?  None!  This client still has open items, that client has yet to return their electronic filing authorizations, and by the way, they have a new trust return this year.  Tensions grow high and at any point a tiny spark could burst into a raging fire.  It is a marvel that we are able to maintain a level of calm in such conditions.

As the deadline comes into view just over the horizon, it feels like a blessing and a curse at the same time.  Knowing that it will soon come to an end is little solace when all one can think about is the final sprint to the finish line.  Tax preparers, many of whom have now fallen into the same rut as those for whom they are servicing, will likely still need to finish their own tax returns.  Many taxpayers are now growing anxious about making the deadline in addition to what they might owe in tax and that added stress pours like a waterfall over the preparers.

It builds and builds, panic turns to madness, the only thing fueling us is the little bit of adrenaline left in the tank.  Focus in such a torrent comes at a premium, and only the hardiest can maintain.  Frantically, the last of the returns are finalized and somehow all clients are either filed timely or on extension.  And then finally, as if waking from a nightmare, it is over.

Now that tax season is at an end, spring can truly begin.  Both taxpayers and tax preparers can breathe a collective sigh of relief and gather their wits.  Tax preparers can perhaps take some days off to be with their families, who at this point might have forgotten what they look like.  Taxpayers can worry about all of the other things in their life that need attention.  We can all forget what a test of wit and fortitude it has been until next year (actually four or five months).

So I say to you all as emphatically as I might: Happy End-of-Tax-Season!


evan_2Evan Piccirillo, CPA is a Tax Supervisor in Raich Ende Malter & Co. LLP’s Long Island office. Evan specializes in high net worth individuals, as well as closely-held corporations, S-Corporations, and small businesses.
Contact Evan at epiccirillo@rem-co.com or (516) 228-9000.

You Need My WHAT Now? New York Among States Requiring Driver’s License for Electronic Filing

nys-dlNew York State is so demanding already in terms of personal information required to file your individual tax return.  They want your name, address, social security number, date of birth, your income, employer’s name and address… the list goes on and on.  Starting in 2016, we get to add another piece of sensitive data to that list: your driver’s license information.

In an effort to strengthen identity fraud protection, New York has added this required information as a new layer to identity verification within their electronic filing system.  Taxpayers must provide this information to their preparers to comply with the new rule.  New York accepts a valid driver’s license or state-issued ID to satisfy this requirement.  A third option exists: if you don’t have either (or are deceased, in which case you’re probably not reading tax blogs), then your preparer can “opt out” of providing the information.

New York is emphasizing that this is required for all taxpayers and is advising preparers that they must collect and enter this information to their tax software.  The “opt out” should only be used when the taxpayer doesn’t have such a document (or has passed on). New York State’s official FAQ publication posted on the Tax Department’s website regarding compliance states:

Q: If my client is known to have a valid driver license or state-issued ID, but chooses not to disclose it, can I check the No Applicable ID box without repercussion? Am I required to disclose this (similar to when a taxpayer refuses to e-file)?

A: As with any return data, you should submit the information as it’s provided by your client.

Interpret that answer at your own risk, but at an FAE conference in January of 2017, Nonnie Manion, the Executive Deputy Commissioner of the New York State Department of Taxation and Finance, advised preparers to “just check the “No Applicable ID” box for now” in cases where the taxpayer has an ID issued by any state other than New York.

I applaud New York’s effort to combat identity fraud, which is a real issue facing taxpayers everywhere, but putting even more sensitive identity data in a single place seems like it is begging identity thieves to increase their efforts to target tax preparers.  For taxpayers attempting to safeguard their information, sharing information is a major activity to avoid.  In a way, New York’s effort is in direct opposition of basic identity protection.

I just hope that in 2017, New York doesn’t require your first pet’s name and the street where you grew up as additional layers of electronic filing identity verification.  For now, New York taxpayers will have to provide to their preparers one of the three options New York State is willing to accept.


evan_2Evan Piccirillo is a Tax Supervisor in Raich Ende Malter & Co. LLP’s Long Island office. Evan specializes in high net worth individuals, as well as closely-held corporations, S-Corporations, and small businesses.
Contact Evan at
epiccirillo@rem-co.com or (516) 228-9000.

Worried About Your Undisclosed Foreign Assets? The Offshore Voluntary Disclosure Program May Offer a Solution

ovdp-article-globeAs I said before: Being a good tax citizen is important.  Sometimes it is difficult to navigate the stormy seas of compliance to achieve that end.  One such hazard is the difficulty of adhering to complex international reporting requirements.

I must pause here to note that if you do have significant international compliance issues, you should consult legal counsel in addition to a tax professional due to the many civil and criminal consequences imposed by the Department of Justice and Department of the Treasury.

Imagine a normal day in the life of a hard-working taxpayer.  She always files her tax return on time and doesn’t take any undue deductions.  One day she learns a wealthy relative left her interest in a profitable commercial property in Croatia.  How fortunate!  But wait, this wealthy relative left it to her a couple of years ago and it has been generating income this whole time.  Oh no!  There are full pages in the IRS instructions detailing penalties for the forms she didn’t file over that period that could amount in many thousands of dollars and even jail time.  What is our hard-working taxpayer to do?

The IRS, in an effort to provide a bridge to compliance, has enacted the 2012 Offshore Voluntary Disclosure Program (“OVDP”), modified effective July 1, 2014.  This program is designed to incentivize taxpayers (entities and individuals) to come to the IRS with undisclosed assets and accounts rather than the IRS having to hunt them down; it offers a reduction in penalties and potential elimination of the risk of criminal prosecution.  The penalties described in the Internal Revenue Code for failing to comply with foreign reporting are incredibly brutal; in some cases 100% of the highest value of an asset during a given year, plus other penalties, plus interest, plus criminal prosecution.  That, coupled with the increasing risk of being detected by the US Government by their new, more aggressive approach to treaties and policy, creates a very compelling argument for taxpayers to come forward.

This relief a taxpayer receives from this program is not completely painless.  Paying the offshore penalty of 27.5% plus the accuracy-related penalty of 20% is a hard pill to swallow, but when weighed against the alternative (potentially 100% and criminal prosecution), it should go down a little easier.

Eligibility for the OVDP is contingent upon coming forward before the IRS is aware of the unreported foreign assets; if they find you, OVDP is off the table.  In some cases, a taxpayer may have already amended and submitted reports, referred to as a “quiet disclosure.”  These taxpayers still run the risk of full penalties and criminal prosecution if they don’t apply to the OVDP.

In our example, the hard-working taxpayer has the ability to compile all information on the property and the unreported income and then submit an application via Forms 14454 and 14457 to the IRS OVDP.  If accepted, original and amended tax returns accounting for the foreign income and forms reporting the foreign transactions and activity must be prepared and submitted. In addition, the taxes, penalties, and interest due must be paid or arrangement to pay must be made.  All this just to be a good tax citizen!

The Offshore Voluntary Disclosure Program offers a bumpy path to compliance that is not without its difficulties.  It is important for someone considering this path to enlist the counsel of professionals in law and accounting.


evan_2Evan Piccirillo is a Tax Supervisor in Raich Ende Malter & Co. LLP’s Long Island office. Evan specializes in high net worth individuals, as well as closely-held corporations, S-Corporations, and small businesses.
Contact Evan at
epiccirillo@rem-co.com or (516) 228-9000.

Voluntary Disclosure Programs: A Saving Grace

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Being a good tax citizen is important for businesses. However, businesses do not always adhere to that notion in practice. When a taxpayer does business in a jurisdiction, the decision to comply with applicable tax law is many times governed by the risk of exposure. This is especially true when businesses operate in multiple jurisdictions; compliance is assessed on a case-by-case basis. The cost burden of compliance resulting from registering to do business and filing tax returns in every required state can outweigh the benefits of the activities performed in those jurisdictions. Perhaps at that point, the decision not to register or not to file is made by the taxpayer and business goes on. However, over time the risk of exposure for not filing due to tax liability and mounting interest and penalties may grow to an unacceptable level. In addition, not registering to do business may have certain legal repercussions that can interfere with operations.

The questions then become:

  • Should I start filing now?
  • Should I have started filing already?
  • If I don’t file, will the tax man come after me?
  • What if the taxing authority requires me to have registered previously?
  • What if information requested from prior years reveals additional liability?

Luckily, many states have a viable answer: Voluntary Disclosure Programs. These programs allow a taxpayer to come to the taxing authority, with hat in hand, and diminish some of the exposure. Specifics vary by state, but generally the taxpayer is forgiven of penalties in exchange for payment of tax and interest due over the applicable look-back period. Look-back periods can also vary, but most fall into a 3- to 4-year range. Other conditions include, but are not limited to:

  • Registering to do business with the appropriate department
  • Continued future compliance
  • Not having been contacted in the past by that jurisdiction
  • Not currently being under audit

A taxpayer can anonymously apply to most programs through a representative (usually their accountant or lawyer). Once accepted, the taxing authority will set forth a timeline and list of what the applicant must do in order to complete the agreement. Generally, a signed document disclosing the identity of the taxpayer and outlining required compliance must be sent. The tax returns, tax due plus interest that apply to the look-back period must also be submitted.

Voluntary disclosure programs offer a path to compliance that can limit a significant amount of exposure. If you believe that you are noncompliant and your exposure risk is too high for comfort, you should consider entering into a voluntary disclosure program via a trusted representative.


evan_2Evan Piccirillo is a Tax Supervisor in Raich Ende Malter & Co. LLP’s Long Island office. Evan specializes in high net worth individuals, as well as closely-held corporations, S-Corporations, and small businesses.
Contact Evan at
epiccirillo@rem-co.com or (516) 228-9000.

Don’t Overlook the New York Investment Tax Credit

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There is a significant tax credit available to certain taxpayers doing business in New York State that, in many cases, may go unclaimed: the Investment Tax Credit (ITC).  The credit amount ranges from 4% to as much as 9% of the cost of property placed in service in New York.  In addition, the credit can be enhanced in subsequent years by an employment incentive credit which provides an additional 1.5% to 2.5% of the ITC.

What businesses are eligible for the credit?  A variety of industries are eligible, including manufacturing, retail, research and development, film production, and financial services, as well as others.

What property qualifies for the credit?  Generally, any property or equipment you place in service in New York that is principally used in your business.  Qualifying property may vary by industry.  For example, let’s say you’re a manufacturer, and you purchase a machine for use in your production facility.  By claiming that equipment as an investment in your business, you can receive a credit against NY taxes.

What if I can’t use the credit in the year I placed property in service?  Not to worry, you can carry the credit forward for up to 15 years (10 if you are an S Corporation shareholder).  If you qualify as a “new business”, you can even take the credit as a refund.

If you are planning to invest in your business in New York, you really do need to factor the value of this credit into the amount of your investment.  That being said, there is quite a bit of complexity involved in correctly identifying qualifying property and claiming the ITC.  If you need assistance with navigating the rules, or would like to hear more details on the ITC, contact us.


evan_2 Evan Piccirillo is a Tax Supervisor in Raich Ende Malter & Co. LLP’s Long Island office. Evan specializes in high net worth individuals, as well as closely-held corporations, S-Corporations, and small businesses.
Contact Evan at
epiccirillo@rem-co.com or (516) 228-9000.