No time for tricks on April Fool’s Day

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IRA owners who turned age 70½ in 2016, but opted to wait until 2017 to begin taking their required minimum distributions (RMDs) for 2016, must receive their 2016 RMDs by April 1. A participant in a qualified retirement plan generally must begin taking distributions from it by April 1 of the calendar year following the later of (a) the year in which he or she reaches age 70½ or (b) the year he or she retires. Note: April 1 falls on a Saturday. The IRS says that that is the deadline, NOT the following Monday, April 3.

District Court Upholds $4.3 Million penalty

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A business owner is responsible for unpaid employment taxes. A U.S. District Court has upheld a $4.3 million trust fund recovery penalty that resulted from a $100,000 “preferential payment.” Denying a motion for reconsideration, the court upheld its decision that the owner of a medical practice who lent his business $100,000 to pay its next payroll, after learning an employee had embezzled millions of withheld taxes, was liable for the full “responsible person” penalty under the tax code. The sentence is 100% of the unpaid amount. (DC-TX 3/6/17, 2017-506)

Tax deadlines loom

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March 31 is the deadline for employers, businesses and others to file certain information returns with the IRS electronically. Forms with a March 31 deadline include W-2G (Certain Gambling Winnings), 1096 (Annual Summary and Transmittal of U.S. Information Returns), 1098 (Mortgage Interest Statement), 1098-T (Tuition Statement), 1099 (except 1099-MISC for nonemployee compensation), 3921 (Exercise of an Incentive Stock Option Under Section 422(b)), and 8027 (Employer’s Annual Information Return of Tip Income and Allocated Tips)

No risk, no deduction

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Taxpayers may deduct losses up to the amount of their at-risk investment, under certain conditions. But deducting a loss if no risk was involved could lead to a civil fraud penalty of 75% of the resulting underpayment. A U.S. District Court denied one taxpayer’s loss, stating he hadn’t engaged in an at-risk financial activity, and that his capital contributions were made to an account in a Cayman Island entity that he could freely draw from. Based on a finding of fraudulent intent, the court imposed the penalty. (DC UT, 3/8/17, 2017-519)