June 1, 1993
Gift Tax Compliance Program
Pursuant to IRC 2501 a gift tax return must be filed by a donor who makes a transfer by gift of cash and/or other property valued at more than $10,000 to any one individual, other than a spouse, in a calendar year. The IRC requires a donor to file a gift tax return and pay any tax that may be due by April 15 of the calendar year following the gift. The law also provides if the donor is unable to pay the tax, the donee is liable for the gift tax due.
The Manhattan District has begun testing to determine the level of compliance with the gift tax law. One such test relates to the transfer of real property. Information secured on transfer of real estate for nominal consideration shows there is a lack of public awareness in the gift tax area.
For those clients where we have urged them to file gift tax returns, we have been vindicated. For those who have not advised us or are contemplating transfers for less than adequate consideration please contact us so we can determine the potential courses of action.
ELDER LAW NOTE- a transfer to defeat Medicaid must be documented. A gift tax return is proof positive.
IRS Targets for Audit
Five industries will be targeted by the IRS for audits this year due to the amount of cash handled and their low level of compliance:
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Auto Dealers
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Commercial Fishing
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Lawyers
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Mortuaries
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Taxis
Upcoming on the list:
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Air Charters
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General Construction
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Bed & Breakfasts
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Health Care
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Entertainment
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Laundromats
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Fast Food Franchise
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Reforestation
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Gas Stations
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Travel Agencies
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Garment Contractors, Manufacturers
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Trucking
What to Do When the Tax Notice Comes
The Internal Revenue Service and State of New Jersey are relying heavily on the use of computer and computer generated notices to insure compliance with the tax laws. They are sending out many more taxpayer notices than they have in past years. This is generally due to the computerization of income matching and the formula method of computer selecting returns for audit.
In order to facilitate handling an Internal Revenue Service or State inquiry that you may receive during the year, please follow these proceures:
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Mail or drop off the notice at our office promptly;
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We will review the notice to determine what is required to respond to the inquiry;
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If we require additional information, documents, etc., we will contact you to arrange an appointment to obtain the necessary information.
Please remember a prompt response is essential in resolving any Federal or State inquiry you may receive during the year. Where we need to provide additional services to resolve a tax notice, we will provide a detailed bill of services rendered.
Another Billary Clinton Fast One
After the proposed tax bill was discussed and voted upon in the House Ways & Means Committee, the Administration purposefully and unethically changed the bill to suspend indexing of tax brackets until 1994; this has the effect of the government deriving increased revenues from inflation. The "Reagan Revolution" eliminated this "bracket creep", the government taxing more of your income due to inflation. The undisclosed benefit for 1993 only-$1,400,000,000. As Reagan would say-"There you go again, Billary."
I hope all of you have a Happy Father`s Day and for those of you near Freehold, we invite you to the Freehold Invitational Soccer Tournament to see Jeremy and the Freehold Bandits play during Father`s Day weekend.
If you have any questions about these or any other matters, please call us.