Tax planning and compliance for investors
Free Online Guides
November 7, 2013
This is the first year of the Medicare tax on net investment income, and we’re still waiting for final regulations, which are promised by the end of the year. This tax will cause taxpayers with income above a threshold amount to pay an additional 3.8% tax, on top of regular income tax and/or alternative minimum tax (AMT), on net investment income, including dividends, interest and capital gains. Recent remarks by a Treasury official indicate that the final regs will fix a glitch in the taxation of traders that appeared in the proposed regs, but the official declined to specify how that fix would work. Meanwhile, the IRS has posted a draft of Form 8960, Net Investment Tax (PDF), but don’t expect to learn much by reviewing it. Nearly every line of the form includes the words, “see instructions,” but instructions are not included in the draft. Reason? IRS can’t issue instructions indicating what the regs say until the regs are issued.
May 18, 2013
No joke: all offices of the IRS throughout the country are going to shut down. But don’t get excited, it will be just for a day: May 24. And then for three other days: June 14, July 5 and August 30. IRS employees will be on unpaid furlough those days due to what the agency calls “the current budget situation, including the sequester.” Filing deadlines will not be affected, but on these days you won’t be able to reach the IRS by telephone, and the Service won’t be accepting or acknowledging electronically filed returns or conducting any compliance activities.
March 11, 2013
The IRS has denied tax-exempt status to a religious organization espousing a belief in “celestial marriage,” which includes “a plurality of wives.” The organization argued that celestial marriage is a private religious relationship and does not constitute bigamy, but the IRS pointed to contrary rulings and said, “Because you advocate and engage in activities that contravene state laws and state and federal public policy, you cannot be a valid religious trust.”
March 11, 2013
Changes are coming to two resources that are often used by tax researchers. The IRS says they will continue to produce the Internal Revenue Bulletin, a weekly collection of rulings, procedures and other guidance, but will stop mailing paper copies. No great loss there: the PDF is readily available online. The Cumulative Bulletin, a semiannual compendium of this guidance (together with some other items) won’t be produced at all. If your collection runs through 2008 (the last ones produced) it is now complete.
Elimination of the largely redundant Cumulative Bulletin will be a time-saver for legal publishers who have had to run a last minute check before publication to determine whether a citation to IRB has to be updated to CB.
March 5, 2013
The IRS has announced that forms previously on hold for reprogramming due to late changes in the tax law will now be accepted.
March 3, 2013
A few years ago, to stimulate the housing market Congress created a special credit for certain people buying homes. It was called the first-time homebuyer credit, although it wasn’t strictly limited to people who had never owned a home. The first version of the credit was really an interest-free loan made through the tax system: qualified taxpayers received the credit in the year they bought the home but had to repay it through “recapture” of the credit over a number of years. If you claimed this version of the credit and are unsure where you stand in terms of repaying it, the IRS has a new tool on its website where you can look up this information. (Taxpayers who used the revised version of this credit do not have to repay it.)
January 29, 2013
As reported here earlier, the American Taxpayer Relief Act of 2012 includes provisions making it possible to treat certain 2013 transactions qualified charitable distributions from IRAs for tax year 2012 — but you have to act by the end of January. Limited guidance from the IRS, including how these transactions affect required minimum distributions, is available here.
January 29, 2013
Speaking at a meeting of the Tax Section of the American Bar Association, a Treasury official said there is a plan to issue guidance concerning in-plan Roth conversions. As reported here earlier, the American Taxpayer Relief Act of 2012 expanded the availability of these transactions, which move assets from a traditional 401k or similar account to a designated Roth account within the same plan. The timing for this guidance has not yet been determined but the goal is to have it out by mid-year.
January 29, 2013
Update February 6, 2013: This issue has been resolved.
With the tax filing season about to open, the IRS has shut down the online system for obtaining preparer tax identification numbers (“PTINs”). As we reported earlier, the decision in the Loving case, invalidating IRS regulations concerning registered tax return preparers, does not invalidate the requirement for tax return preparers (including attorneys, CPAs and enrolled agents) to obtain PTINs and pay a user fee. Apparently the IRS hasn’t yet sorted out how to issue PTINs while the injunction barring the other regulations remains in effect. The IRS has posted this statement on its website:
The IRS is working diligently to resolve issues surrounding the issuance of Preparer Tax Identification Numbers (PTINs) for the filing season. Additional information will be provided shortly as to how to obtain PTINs.
July 31, 2012
The IRS Employee Plans Compliance Unit is conducting a survey of colleges and universities to assess their compliance with the universal availability rule for 403b plans. This rule says that with limited exceptions, all employees must be eligible to participate when such a plan is offered. Interim results of the survey indicate that many of these institutions fail to comply with the rule, excluding certain categories such as administrative employees or adjunct faculty. While certain exclusions are permitted (such as employees normally working fewer than 20 hours per week and certain student employees), employers offering these plans are not permitted to impose other restrictions on participation.
This rule is a condition for qualification of the plan, so correction of the problem will be mandatory. In some cases employers may be required as part of the correction process to make plan contributions for employees who were improperly excluded.
|That Thing Rich People Do||The fastest, easiest way to learn the principles of investing.|
|Our complete guide to Roth IRAs and Roth accounts in employer plans: choosing, creating, building and using these accounts.|
|Consider Your Options|
|A plain-language guide for people who receive stock options or other forms of equity compensation.|
|Equity Compensation Strategies|
|A text for financial advisors and other professionals who offer advice on how to handle equity compensation including stock options.|
|Capital Gains, Minimal Taxes|
|Tax rules and strategies for people who buy, own and sell stocks, mutual funds and stock options.|