Foreign Bank And Financial Account Reports +
College Financial Aid +
Top 10 Tips for Deducting Losses from a Disaster
you have a financial interest in or signature authority over a
foreign financial account exceeding certain thresholds,
the Bank Secrecy Act may require you to report the account
yearly to the IRS by filing a Financial Crimes Enforcement
Network (FinCEN) Form 114 (“Report of Foreign Bank and
Financial Accounts (FBAR)”).
Specifically, for 2014, Form 114 is required to be filed if
during the year:
1. You had a financial interest in or signature authority over
at least one foreign financial account (which can be anything
from a securities, brokerage, mutual fund, savings, demand,
checking, deposit, or time deposit account to commodity
futures or options, and a whole life insurance or a cash value
annuity policy); and
2. The aggregate value of all such foreign financial accounts
exceeded $10,000 at any time during 2014.
The FBAR is filed on a separate return basis (that is, joint
filings are not allowed). However, a spouse who has only a
financial interest in a joint account that is reported on the
other spouse's FBAR does not have to file a separate FBAR.
The 2014 Form 114 must be filed by June 30, 2015, and cannot
be extended. Furthermore, it must be filed electronically
The penalty for failing to file
Form 114 is substantial — up to $10,000 per violation (or the
greater of $100,000 or 50% of the balance in an account if the
failure is willful).
Please give us a call if you have any questions or would like
us to prepare and file Form 114 for you.
If you found this Tax Tip helpful, please share or forward it
with your friends & family.
Taxation Of College Financial Aid...
your college-age child is or will be receiving financial aid,
congratulations. Now, you'll probably want to know if the
financial aid is taxable.
Keep in mind that the economic characteristics of financial
aid, rather than how it is titled, will determine its
taxability. Strictly speaking, scholarships, fellowships, and
grants are usually awards of "money that is free" that are nontaxable.
However, these terms are also sometimes used to describe
arrangements involving obligations to provide services, in
which case the payments are taxable compensation.
awards. Scholarships, fellowships, and grants are awarded
based on the student's financial need or are based on
scholastic achievement and merit. Generally, for federal
income tax purposes, these awards are nontaxable as long as
(1) the recipient is a degree candidate,
(2) the award does not exceed the recipient's “qualified
tuition and related expenses” (tuition and enrollment fees,
books, supplies, and equipment required for courses, but not
room and board or incidental expenses) for the year,
(3) the agreement does not expressly designate the funds for
other purposes (such as room and board or incidental expenses)
or prohibit the use of the funds for qualified education
(4) the award is not conditioned on the student performing
services (teaching, research, or anything else).
arrangements. If the financial aid is conditioned on the
student performing services, the amount that represents
payment for such services is taxable income and will be
reported on a Form W-2 or Form 1099. This is true even if the
work is integrated with the student's curriculum or if the
payment is called a scholarship, fellowship, or grant.
Students typically work for the school they're attending.
However, they could work for other employers under the
auspices of a work-study program.
loans. Naturally, student loan proceeds are not taxable
income because the borrowed amounts must be paid back.
However, some college education loans are subsidized to allow
borrowers to pay reduced interest rates. Fortunately, college
loan interest subsidies are nontaxable to the same extent as
if they were provided in the form of an outright scholarship,
fellowship, or grant. An above-the-line deduction (i.e.,
available whether or not the borrower itemizes) of up to
$2,500 is allowed for interest expense paid by a taxpayer on a
loan to fund qualified higher education expenses. The
deduction is phased out for taxpayers with adjusted gross
income exceeding certain amounts.
happens when financial aid isn't free? Fortunately,
taxable scholarships, fellowships, grants, and compensation
from work-study programs count as earned income. Assuming the
student is your dependent, this means that for 2015 he or she
can offset this income by his or her standard deduction of the
greater of (1) $1,050 or (2) earned income plus $350, up to
Since taxable scholarships, fellowships, grants, and
compensation count as earned income, they increase the
student's standard deduction. If the student isn't anyone's
dependent for 2015, he or she can offset earned income of up
to $10,300 with his or her personal exemption ($4,000) and
standard deduction ($6,300). (Dependents are not entitled to a
Taxable financial aid in excess of what can be offset by the
student's personal exemption (if any) and standard deduction
is usually taxed at only 10%. (For 2015, the 10% bracket for
single taxpayers applies to taxable income up to $9,225.)
Warning: The "kiddie tax" rules may cause investment
income (such as interest, dividend, and capital gains)
received by students who are under age 24 to be taxed at
the parent's higher rates instead of at the student's
lower rates. The student's earned income (including
taxable scholarships, fellowships, grants, and
compensation) is not subject to the kiddie tax.
Please give us a call if you have questions or want more
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Top 10 Tips for
Deducting Losses from a Disaster
mark National Hurricane Preparedness Week, the IRS wants you
to know it stands ready to help.
If you suffer damage to your
home or personal property, you may be able to deduct the
losses you incur on your federal income tax return. Here are
10 tips you should know about deducting casualty losses:
Casualty loss. You may be able to deduct losses based on
the damage done to your property during a disaster. A casualty
is a sudden, unexpected or unusual event. This may include
natural disasters like hurricanes, tornadoes, floods and
earthquakes. It can also include losses from fires, accidents,
thefts or vandalism.
Normal wear and tear. A casualty loss does not include
losses from normal wear and tear. It does not include
progressive deterioration from age or termite damage.
Covered by insurance. If you insured your property, you
must file a timely claim for reimbursement of your loss. If
you don’t, you cannot deduct the loss as a casualty or theft.
You must reduce your loss by the amount of the reimbursement
you received or expect to receive.
When to deduct. As a general rule, you must deduct a
casualty loss in the year it occurred. However, if you have a
loss from a federally declared disaster area, you may have a
choice of when to deduct the loss. You can choose to deduct
the loss on your return for the year the loss occurred or on
an amended return for the immediately preceding tax year.
Claiming a disaster loss on the prior year's return may result
in a lower tax for that year, often producing a refund.
Amount of loss. You figure the amount of your loss using
the following steps:
- Determine your adjusted basis in the property before the
casualty. For property you buy, your basis is usually its cost
to you. For property you acquire in some other way, such as
inheriting it or getting it as a gift, you must figure your
basis in another way. For more see Publication 551, Basis of
- Determine the decrease in fair market value, or FMV, of the
property as a result of the casualty. FMV is the price for
which you could sell your property to a willing buyer. The
decrease in FMV is the difference between the property's FMV
immediately before and immediately after the casualty.
- Subtract any insurance or other reimbursement you received
or expect to receive from the smaller of those two amounts.
$100 rule. After you have figured your casualty loss on
personal-use property, you must reduce that loss by $100. This
reduction applies to each casualty loss event during the year.
It does not matter how many pieces of property are involved in
10 percent rule. You must reduce the total of all your
casualty or theft losses on personal-use property for the year
by 10 percent of your adjusted gross income.
Future income. Do not consider the loss of future profits
or income due to the casualty as you figure your loss.
Form 4684. Complete Form 4684, Casualties and Thefts, to
report your casualty loss on your federal tax return. You
claim the deductible amount on Schedule A, Itemized
Business or income property. Some of the casualty loss
rules for business or income property are different than the
rules for property held for personal use.
You can call the IRS disaster hotline at 866-562-5227 for
special help with disaster-related tax issues. For more on
this topic and the special rules for federally declared
disaster area losses see Publication 547, Casualties,
Disasters, and Thefts. You can get it and IRS tax forms on
IRS.gov/forms at any time.
Remember you can call our
offices if you have any questions about these or any other accounting, tax,
financial planning or insurance related issues, at 313-388-0300.
Regards, Philip Schreiber, CPA
Schreiber Advisors, PC