Part III: Special considerations when filing Form 1040NR

This three part series will look at who qualifies, requirements and exemptions of the form based on individual circumstances, and, finally, special considerations to note when filing a 1040NR: U.S. Nonresident Alien Income Tax Return.  Even after you have determined which form you should use for filing as an NRA as discussed in Part II, important special rules and considerations can play important roles in future tax planning when filing Form 1040NR.

The main focus of this segment will take a closer look at spouse elections under Section 6013 comparisons, filing status considerations for same-sex couples, and special rules for dual-status taxpayers.

Spouse elections considerations under Section 6013

Section 6013 (g) – Election to treat Nonresident Spouse as U.S. Resident: Only applies to married taxpayers with one spouse being a NRA and other must either be a U.S. citizen or resident at the end of the tax year.  This is a continuing election that can only be used once in a lifetime, meaning this election must be selected every future tax year after the initial tax year it is used.  Neither spouse can make another 6013 (g) election in the future even if the spouses separate, divorce, or remarry.  The death of either spouse will result in the termination of the election. Termination or suspension of the election by either spouse will result in the inability to use this election in any future tax years for either spouse as well.  Both spouses are taxed on worldwide income. Neither spouse is eligible to claim they are not U.S. residents under a tax treaty.

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Part II: What form should I file?

This three part series will look at who qualifies, requirements and exemptions based on individual circumstances, and, finally, special considerations to note when filing a 1040NR: U.S. Nonresident Alien Income Tax Return.  After establishing who is considered a U.S. nonresident alien (NRA) in Part I, the next step is understanding what conditions require an NRA to file this form.

This segment covers the qualifying conditions and exceptions for using Form 1040NR and 1040NR-EZ as well as additional form requirements based on triggering circumstances.

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Form 1040NR – U.S.Nonresident Alien Income Tax Return requires U.S. nonresident aliens (NRAs) to file this form if the NRA participated in any trade or business in the U.S. during the tax year and has U.S. source income.  Activities to include studying, teaching, or doing research in the U.S. are considered to be participating in trade or business within the U.S.  NRAs that were employees during the tax year and received wages would also need to file this income tax form.  For more information on Form 1040NR and its instructions, please visit this link:

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You, your employees or your clients may receive one or more forms that provide information about 2015 health coverage. These are Form 1095-A, 1095-B and 1095-C. The following health care tax tips provide some answers to common questions about these forms:

• Form 1095-A: What you need to do with this form
• Form 1095-B: What you need to do with this form
• Form 1095-C: What you need to do with this form

For more information on these forms, see Questions and Answers about health care information forms for individuals, or contact Freyman CPA P.C. for further assistance.

As a reminder during this tax season as well as throughout the year, it is important to keep in mind that the IRS will not contact you by phone or e-mail regarding tax liens or outstanding tax liabilities.  The IRS has strict protocols when contacting taxpayers regarding tax deficiencies, with letters of correspondence being their official method of first contact.

How to identify a tax scam:

• Demands immediate payment; extreme urgency to receive payments
• Tries to make you pay taxes without giving you the option to research the debt or file an appeal for the amount you allegedly owe
• Asks for payment using a credit or debit card especially over the phone
• Threatens to arrest you for not paying

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We understand that there are others in our industry that charge by the form.  At Freyman CPA, P.C., we go beyond the preparation of tax forms to find ways to reduce your tax burden and help plan for your financial future.  We take a holistic approach utilizing technology, experience, and knowledge to provide the best service for our clients.

When utilizing the services of a professional CPA firm, it is important to appreciate the values that are provided:

• Quality: Up-to-date knowledge of the most current tax regulations to provide and ensure their clients are receiving all the tax incentives available to them based on their unique tax situation.
• Consistency: Decades of experience in the industry
• Guidance: Provides advice, counsel, planning, and guidance for all of your tax needs
• Availability: Open year-round and are happy to help anytime
• Responsibility/Peace of Mind: Knowing that the firm and its staff will be available if you should run into issues later in the year

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With tax season upon us, we have compiled a list of hot topics the IRS has been known to closely examine with the filing of a Schedule C – Profit or Loss from Business.

The IRS’s primary concerns revolves around the reliability/duplication of information provided on the Schedule C as well as the methods used for recordkeeping and presentation in the following areas:

Gross Receipts

An increase in income within the business should be considered taxable.

If the payment of income would not have been received without the existence of the business, the income should be considered business income.  This includes IOUs, cash, etc. So remember, if the payment crosses the door of your business, that payment of income should be considered part of your business income.

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On December 18^th, right before shutting down for the holidays, Congress has passed 50 major changes for the upcoming tax filing season. Some of the tax extenders will be quite important, while others may go by without much notice. We’re taking a look at the notable changes.

Permanent Tax Extenders

Some of the previously enacted temporary provisions, have been made permanent:

• State and local sales tax deduction, an alternative to claiming state tax withholdings on the Schedule A, Itemized deductions, is now a permanent line item. It benefits not only people in states with no income tax, but also taxpayers whose state tax withholdings are not large, or certain AMT taxpayers.
• The now permanent teacher’s expenses deduction of $250 is being enhanced to include professional development expenses, in addition to classroom supplies. But teachers will have to wait one more year before they can begin using this deduction for continuing education, as the enhancement is not effective until 2016.
• IRC Section 179 was made permanent, with an expanded definition of what property qualifies. This will affect many taxpayers, especially small business owners. Limits on expensing tangible depreciable property have been raised dramatically, and offer a good year-end tax planning strategy.
• 15-year cost recovery on qualified leasehold improvements is now permanent, and could mean big savings to small business owners.

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Question
Our company owns a farm. According to IRS publication 225 most farmers use the cash basis of accounting since it is easier, but some farmers are required to use the accrual basis of accounting. Should our farm be on an accrual or cash basis? What should we use for our farm if we have an unincorporated business? Also, is the inventory method required?

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Question
Our companies employ 22 full-time employees. Do we have to issue the new ACA Forms 1094 and 1095 to employees and the IRS under the affordable care act (ACA)? I believe we are exempt, but I wanted to confirm if our company needs to issue these ACA forms.

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