Monthly Archives: June 2013

chalkboard oops

I’ve filed my tax return, but I made a mistake!

Making an error when you file your tax return happens – especially when you’re unfamiliar with new tax laws or a change in your tax situation. Sometimes a form’s wording is confusing and people insert incorrect information or other times, someone makes a simple human error. In most cases, there are set steps you need to take if you’ve caught an error and need to make a correction.

Mathematical Errors

If you’ve added numbers incorrectly or something else of that nature, you probably don’t need to do anything. As your tax return is processed, errors like this are usually caught.

Forgetting to attach a schedule

Neglecting to attach addendum sheets, like: itemized deductions, dividend and interest income, business profit or loss, and capital gains will usually result in the IRS asking for whatever is missing. You will need to send in the information they ask for and then they will process your tax return. If you catch this before they do, get the sheets ready, but you don’t need to send them in until they ask for them.

Incorrect information

Submitting false information is more serious than simply forgetting a schedule or making a math error on your tax return. If you’ve realized that you forgot to claim some of your income or didn’t claim a credit you were eligible for, you will need to file an amended or corrected return.

How to file an amended or corrected tax return

  1. The first thing you will need to do is fill out a Form 1040X and explain your changes.
  2. If the corrections involve any schedules, you’ll need to submit these along with your Form 1040X.
  3. You usually have 3 years to file a corrected tax return if you’re claiming a return or credit.

Additional information:

  • The IRS should take 8-12 weeks to process your corrected tax return.
  • If you feel like it is taking longer than it should to hear back, you can check on your return with “Where’s My Amended Return?”
  • You cannot file an amended tax return electronically through e-file. You will need to mail paper copies of your forms and schedules.

If you would like help filing your amended tax return, get in touch with us. We are tax specialists and will gladly correct any of your mistakes and double check to make sure that you haven’t missed anything.

 

 

apple iMac

The Lowdown on Apple’s Tax Controversy

Arguably the biggest financial headlines, this week, all have to do with Apple. CEO Tim Cook has been forced to defend Apple’s tax practices and prove that they have been working strategically, but not illegally, to pay the least amount of taxes possible.

As tax specialists who work with cross-border tax situations, we will be following this story closely to see how Cook weathers this storm. Each news source seems to be focusing on different parts of the story, so we thought that it would be helpful to put together a little summary of why Apple was targeted, what they are claiming, and which tax laws are being called into question.

The Situation: Using offshore entities

“Today’s hearing was called to air accusations the iPhone maker has created a web of offshore entities to avoid paying billions of dollars in U.S. taxes.

Apple, in written testimony, denied any wrongdoing and said the company was one of the largest taxpayers in the U.S., having paid $6 billion last year.

Cook and two other executives — including Chief Financial Officer Peter Oppenheimer — were to appear before the Permanent Subcommittee on Investigations. The panel, led by Levin, in a report yesterday said Apple’s subsidiaries include three entities that have no home country for tax purposes.” – (Bloomberg)

The Specifics: Ireland’s involvement

“The U.S. investigation showed that Apple had paid just 2% tax on US$74 billion in overseas income, largely helped by Irish tax law, which allows companies to be incorporated in the country without being tax resident. Britain had a similar rule but changed it over 20 years ago to stop tax avoidance.

Unlike Britain, however, Ireland is heavily dependent on foreign companies such as Google, Pfizer and Intel for employment – 150,000 of a labour force of around 2 million – and for its much-vaunted economic model of export-led growth.

While Ireland has successfully repelled attacks on its corporate tax rate from European neighbours, U.S. pressure is more difficult to ignore.

By closing its own loopholes, Washington could threaten Ireland’s status as European hub for multinationals, and economists said it would be better for Ireland to act first.

‘In the long run, the U.S. Congress, if they wanted to, could wipe out those 150,000 real jobs, and we don’t want to provoke people by over-egging it, by doing things that are clearly upsetting the U.S.,’ said John FitzGerald, a professor at the Economic and Social Research Institute (ESRI), an Irish think-tank.” – (Financial Post)

The Future: What people are saying about the future of corporate tax strategy

Littered throughout all of the Apple tax controversy coverage are a few opinions about potential changes to American tax laws. Christopher Matthews of TIME Business writes:

“One idea that’s been bandied about for many years, but which hasn’t made a lot of headway, goes by the not-so-glamorous name “formulary apportionment.” Under this system, the U.S. could tax companies based on what percentage of sales occur here. For instance, if Apple sold 30% of its products in America, then the U.S. government would tax 30% of Apple’s income at the statutory corporate tax rate of 35%.

This sort of system would work best if it were implemented internationally, but as the Brookings Institute points out in its analysis of formulary apportionment, the U.S. could move to this sort of system unilaterally because the move would actually incentivize companies to report their profits in America. This is because we’d be taxing only a fraction of profits regardless of where they’re reported, and this dynamic would motivate other countries to jump aboard a formulary apportionment system as well.” (TIME)

If you’re dealing with US taxes while living in Canada or have any questions about doing business in other countries, talk to us! As I said before, we are tax specialists focusing on US and Canadian taxes.