Oregon Unclaimed Property Reporting Seminars

Are you doing business in Oregon? If so, were you aware that all businesses operating in Oregon are required to report any unclaimed property they possess, provided they are unable to contact the owner of the property? A few of the types of property this affects include: checks which have not been cashed, credits to the client, bank accounts which are inactive, and deposits that are unapplied. In addition to those mentioned here, there are a multitude of other types of unclaimed property that are required to be reported. 

The Oregon Department of State Lands is offering how-to seminars to assist businesses with the specifics of how to comply with this important program. Some of the topics to be discussed include: an unclaimed property overview, how to complete and submit the required report, what types of property are covered, how to maintain your database of potential unclaimed items, and what is required when attempting to contact the owners. All of the seminars are being offered for free, and each attendee will receive course-related materials and handouts. More than 10 seminars will be held between June and August.

For more information on seminar topics, dates and locations, visit the Oregon Department of State’s webpage dedicated to these free seminars.

Unclaimed Property System in Delaware

The system for reuniting unclaimed property with its rightful owner is generally very beneficial in most states; however, it has recently been discovered that the State of Delaware has been utilizing the system to collect large penalties and interest from business entities in the state. As a result, it has become the third largest revenue generator for the state of Delaware. 

Most states ask business entities to notify them of cash, accounts, or other property they have in their possession which has not been claimed by the owner after a period of some years. In California, unclaimed or undelivered property must be reported after three years, while Delaware businesses have five years. Participation is mandatory for any business holding unclaimed property and reporting must be initiated by the business. There is no reminder of upcoming deadlines provided by the state.  Information regarding the necessary forms for Delaware can be found at the following URL:  http://revenue.delaware.gov/unclaimedproperty.shtml

An Op-Ed piece published in Forbes earlier this month asserts that in 2012 Delaware returned $18.9 million in unclaimed property to the rightful owners, while collecting $319.5 million for the state’s coffers by liquidating property. Furthermore, the piece goes on to explain that the state estimates that in 2013 the General Fund revenue from unclaimed property will be more than $500 million. 

The primary concern put forth by the piece in Forbes is the extreme auditing practiced in the state to identify and penalize those businesses that have not notified the state of the unclaimed property that they hold.  Audits are performed that extend back twenty and thirty years, which places the business in a difficult situation since few would have records regarding unclaimed property extending back that far. As a result, many businesses have to pay the assessed value, as well as penalties and interest on property that there is no record that they owe. The numbers are simply extrapolated back and the State of Delaware keeps the revenue since there is no record of who might own this imaginary unclaimed property. 

Before writing this, I looked through Delaware’s unclaimed property website and even in the “handbook” could find no information about what the regulations are and what types of penalties and interest are levied on noncompliant businesses. If you are a Delaware business, be aware of these issues and be sure to maintain your compliance with the unclaimed property reporting requirements to avoid unreasonable fines.

Frequently Asked Questions about Tax Filing Status

As seasoned tax professionals, perhaps some of the most frequent questions we get asked are in regard to filing statuses. In fact, choosing the correct filing status is essential, as it creates the foundation for your federal income tax return—helping to determine your filing requirements, eligibility for credits and deductions and other important information. Below are some of the questions we encounter on a regular basis.

What are the possible filing statuses available?
There are five filing statuses to choose from. If you fit more than one status, it is best to choose the status that allows you to pay the least taxes. The five available statuses are:

1.       Single

2.       Married Filing Jointly

3.       Married Filing Separately

4.       Head of Household

5.       Qualifying Widow(er) with Dependent Child

I got married this past year. Should I claim Single or Married?
Your tax filing status is determined by your marital status on the last day of the year. Even if you were married on December 31^st, you should claim Married status. If you were divorced during the year, you have the ability to choose to file Married Filing Jointly or Married Filing Separate. Ask your tax professional which status would allow you to pay the lowest amount in taxes.

If I’m divorced, should I claim Single status? 
Single filing status is generally only applicable to individuals who are not married, divorced or legally separated. 

My spouse died last year. What status do I use? 
In this situation, you can still file a return using the Married Filing Joint status for the year; however, you will need to select another status for the following year. Depending upon the circumstances, options would include Single or Qualifying Widow(er) with Dependent Child.

What You Need to Know about Social Security and Taxes

In case you are not aware, Social Security Benefits may be taxable and if you are receiving benefits you will need to determine whether you must pay on your benefits.  If you are receiving benefits currently, you will be sent for SSA-1099 a Social Security Benefit Statement each year, no later than early February. 

The taxability of your benefit is determined by your level of income and your filing status.  If Social Security is your only income, the benefit is probably not taxable because your income will be less than the base amount required for taxes to be assessed.  But, if there was income coming in from other sources, you will need to determine whether taxes apply.

To make a quick determination, divide your Social Security benefit in half and add that amount to all of the other income from that tax year.  This includes interest from banks and other investments as well as interest from tax-exempt securities such as state and municipal bonds.  Compare this total to the following base amounts:

• $25,000 for single, head of household, qualifying widow(er) with a dependent or married individuals filing separately who did not live with their spouse at any time during the year. 
• $32,000 for married couples filing jointly
• $0 for married persons filing separately who lived together at any time during the year.

Using a tax professional to prepare your taxes will ensure that the calculations are done correctly and there are no future surprises. 

Saving for Retirement Can Be Rewarding

If you set aside money towards your retirement by contributing to an IRA or an employee sponsored retirement plan such as a 401K, you may be eligible to claim the Retirement Savings Contribution Credit also known as the Saver’s Credit. This credit allows you to make this contribution up to the due date of your tax returns, giving you the flexibility to have your taxes prepared, see how the numbers are looking and make your final contribution for the year. 

Married couples filing jointly can receive a credit of up to $2,000, while individuals may receive a credit of up to $1,000. Some of the criteria that determines eligibility for the credit are as follows:

·         For someone Single, Married Filing Separately, or Qualifying Widow(er), income

cannot be greater than $28,750.

·         For those filing as Head of Household, income cannot exceed $43,125.

·         For couples that Married Filing Jointly, income cannot be greater than $57,500.

In addition, you cannot have been a full-time student during 2012, cannot have been claimed as a dependent on anyone else’s tax return and you must be at least 18 years old. 

It is possible that you may also be eligible for additional tax benefits based on your income level. Often all or part of any contributions to a traditional IRA can be deducted. Check with your tax professional to find out what benefits you may be eligible for.

 

IRS-Related Scam Targets Students

Young adults enrolled in colleges are being approached by tax scammers and fooled into giving up their identification information.  Most college students feel they are pretty familiar with scams and don’t think they could be caught off guard, but this scam is working on many.   The IRS has identified thousands of bogus refund claims in the past few weeks.

Scammers contact students and tell them they are eligible for the American Opportunity Tax Credit, which will get them a refund check of up to $1,000.  They offer to file all of the necessary documents if the student pays them $500 up front.  The lure of an extra $500 appears to be attractive enough to escape the radar of even scam-savvy students.  Unfortunately, they instead come to find out they have lost the $500 for good and will not receive a check from the IRS.  Many of these students have never filed a tax return and think it would be easier to have someone else handle it for them.  Thus, they get pulled into the scam.  

If you know a college student, be sure to warn him or her to be aware of and avoid this particular scam.  While it is possible that some students are eligible for the American Opportunity Tax Credit, they should use a reputable tax preparer to assist them, and be sure to check the company’s credentials with the Better Business Bureau. 

You can always give FlemmerAssociates, LLP a call.  We’ll be happy to see whether you are eligible for the tax credit and prepare the filings for you. 

Paying Back the First-Time Home Buyer Credit

Those taxpayers who purchased their first home in 2008 and claimed the First-Time Home Buyer Credit, are required to pay the credit back in 15 equal annual installments. Despite the name, during 2008 the credit was more like a no-interest loan than a true credit, and payments should have begun on your 2010 tax return. If you haven’t begun the payback yet, you need to consult with a tax professional to ensure you get started with your payments as soon as possible.

If you purchased your home after 2008, you are not required to pay back the credit unless you sold the home or stopped using it as your primary residence within 36 months of the purchase. In this scenario, as well as the same scenario for homes bought in 2008, you will be required to repay the entire credit on the following tax return. 

To show the annual repayment on your return, use line 59b on form 1040. For the one-time complete repayment, because you no longer use the home as your primary residence, use form 5405 Repayment of the First-Time Homebuyer Credit and attach it to your return.

The IRS even has a tool to help you determine the correct information for reporting the repayment. Find it online at http://www.irs.gov/Individuals/First-Time-Homebuyer-Credit-Account-Look-up. You will need to provide your social security number, date of birth and address in order to utilize this tool. If the credit was claimed on a joint return, you will also need to look up your spouse’s share of the credit because the IRS assumed each spouse claimed half of the credit.

The online tool will provide you with the original amount of the credit, the annual repayment amounts, the total amount paid thus far and the balance still remaining. Print the page to assist your tax preparer in completing your returns, making sure to keep a copy for your personal records.