Six Things For Extension Filers To Remember

Oct. 15 is almost here, and it’s the last day to file for most people who requested an automatic six-month extension for their 2017 tax returns. These taxpayers should remember that they can file any time before Oct. 15 if they have all their required tax documents. They can also pay their tax bill in full, or make a partial payment, anytime, by visiting IRS.gov/payments.

As extension filers prepare to file, here are some things they should know:

  • They can still use IRS Free File.  Nearly everyone can e-file their tax return for free through IRS Free File. The program is available on IRS.gov now through Oct. 15IRS e-file is easy, safe and the most accurate way for people to file their taxes. E-file also helps people get all the tax benefits they’re entitled to claim.
  • A refund may be waiting.  Anyone due a refund should file as soon as possible to get their money. The sooner someone files, the sooner they’ll get it. Don’t forget to use Direct Deposit. It is the best and fastest way for taxpayers to get their tax refund electronically deposited for free into their financial account.
  • They should consider IRS Direct Pay.  Taxpayers who owe taxes can pay them with IRS Direct Pay. It’s the simple, quick and free way to pay from a checking or savings account. Taxpayers can just click on the ‘Pay’ at IRS.gov.
  • Here’s what taxpayers should do about a missed deadline. Anyone who did not request an extension by this year’s April 17 deadline should file and pay as soon as possible. This will stop additional interest and penalties from adding up. IRS Direct Pay offers a free, secure and easy way to pay taxes directly from a checking or savings account. There is no penalty for filing a late return for people who are due a refund.
  • Taxpayers should remember the Oct. 15 Deadline.  Taxpayers who aren’t ready to file yet should remember to file by Oct. 15 to avoid a failure-to-file penalty. Taxpayers who owe and can’t pay their balance in full should pay as much as they can to reduce interest and penalties for late payment. They can use the Online Payment Agreement tool to apply for more time to pay or set up an installment agreement. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty.
  • More Time for the MilitaryMembers of the military and others serving in a combat zone get more time to file. These taxpayers typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.

Is your organization a charity applying for tax-exempt status?

Is your organization a charity applying for tax-exempt status, but don’t know how to determine the type of organization? Here’s a little help.

Before applying for tax-exempt status, a charitable organization should determine if it’s one of the following:

  • Trust
    trust is formed under state law. An organization should review the law in the state where it is organized. For a trust to qualify as a 501(c)(3) tax-exempt organization, its organizing document must contain certain language. Publication 557 contains suggested language.
  • Corporation
    In general, a corporation is formed under state law by filing articles of incorporation. The state must generally date-stamp the articles before they’re effective. For a corporation to qualify as a 501(c)(3) organization, its charter or articles of incorporation must contain certain language. Publication 557 contains suggested language.
  • Association
    In general, an association is a group organized for a specific purpose. To qualify as a 501(a) of the Code, the association must have a written document showing its creation. This document could be articles of association. The organization must date the document, and at least two people must sign it.

The definition of an association can vary under state law. The organizations should consult the law of the state where it’s organized. For an association to qualify as a 501(c)(3) tax-exempt organization, its articles of association must contain certain language. Publication 557 contains suggested language.

More Information:

Treasury, IRS issue proposed regulations on charitable contributions and state and local tax credits

The U.S. Department of the Treasury and the Internal Revenue Service issued proposed regulations providing rules on the availability of charitable contribution deductions when the taxpayer receives or expects to receive a corresponding state or local tax credit.

The proposed regulations issued today are designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. The proposed regulations are available in the Federal Register.

Under the proposed regulations, a taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive.

For example, if a state grants a 70 percent state tax credit and the taxpayer pays $1,000 to an eligible entity, the taxpayer receives a $700 state tax credit. The taxpayer must reduce the $1,000 contribution by the $700 state tax credit, leaving an allowable contribution deduction of $300 on the taxpayer’s federal income tax return. The proposed regulations also apply to payments made by trusts or decedents’ estates in determining the amount of their contribution deduction.

The proposed regulations provide exceptions for dollar-for-dollar state tax deductions and for tax credits of no more than 15 percent of the payment amount or of the fair market value of the property transferred. A taxpayer who makes a $1,000 contribution to an eligible entity is not required to reduce the $1,000 deduction on the taxpayer’s federal income tax return if the state or local tax credit received or expected to be received is no more than $150.

Treasury and IRS welcome public comments on these proposed regulations. For details on submitting comments, see the proposed regulations.

Design Patent, Copyright, or Trade Dress?

By Debby Winters

I recently met with a client who wondered if they should register their product for a copyright, a patent; either design or utility, or for trade dress protection. Sometimes it is hard to decide between the various types of intellectual property protection and sometimes you can use several for the same product. Because borders between the types of protection are not always clear, it may be that some subject matter is eligible for protection in more than one category. It may also be that qualifying for protection in one category excludes the subject matter from protection in another.

Design patents protect the ornamental features of a manufactured article (while utility patents protect the utilitarian features). The drawings of a design patent show the parameters of design patent protection. Design patents remain in force for 14 years from the date the patent was granted if the application was filed before May 13, 2015 and for 15 years from the date the patent was granted if the application was filed on or after May 13, 2015.

Trade dress is a type of trademark that protects packaging or product configuration. Like other trademarks, trade dress marks serve as indicators of source. To qualify for trade dress protection, packaging or product configuration must be non-functional (that is, the features protected as trade dress must not be necessary for competitors to have to compete against the claimant) and must be either inherently distinctive or have acquired distinctiveness. Product configuration marks are considered inherently not distinctive and must acquire distinctiveness in order to qualify for trademark protection. Trade dress marks (like other marks) may be protected for an indefinite length of time.

A product design or feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article. There are several factors one may consider to determine if a feature is functional. One factor is whether the features that are the subject of an application seeking to register trade dress were also the subject of claims in a utility patent. If so, the utility patent is strong evidence that the features are functional and therefore ineligible for trade dress protection.

But if a feature is protected by a design patent, that fact weighs against a finding of functionality (since design patents protect ornamental features) and may mean the design could be eligible for trade dress protection (even though it is still possible for other evidence to establish functionality). If the features are conclusively determined not to be functional, trade dress protection and design patent protection may exist for the same subject matter, either concurrently or consecutively, so long as the features are determined to be distinctive.

Deciding when, whether, and how to pursue design patent protection and/or trade dress protection may depend on a number of factors, including whether the design has been available in the marketplace before one files a patent application, and if so, for how long, and whether the features are inherently distinctive or need to acquire distinctiveness before they can serve as an indicator of source. Having a design patent may aid in the development of trade dress rights by giving the features in question the time to acquire distinctiveness while the design patent remains in effect and prevents others from using the design. It is possible to facilitate the acquisition of distinctiveness through the use of “look for” advertising that instructs consumers of the product to identify the features as an indication of the source of the goods and services. Then, when applying for registration of the trade dress mark, the applicant can present evidence of the advertising in support of its claim of acquired distinctiveness. If the advertising is effective, this should also allow the applicant to produce evidence that consumers recognize the features as an indicator of source. Thus, the applicant may secure trade dress protection prior to or after the design patent’s expiration.

Of course, not all packaging or product configurations that are worth protecting by design patents will merit trade dress protection. While obtaining a patent is typically more expensive than obtaining a trademark registration, design patents tend to be significantly less expensive to obtain than utility patents, and trade dress applications are often more expensive to prosecute than traditional trademark applications.

Consulting with an experienced intellectual property attorney will help decide the appropriate strategy for each case.