Archive for the ‘IRS Guidance’ Category

IRS to Issue Guidance on In-Plan Conversions

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.

IRS to Resolve PTIN Issues

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.

403b Compliance Isn’t Universal

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.

IRS Serves Up Guidance on Tips

July 24, 2012

If you’re in the restaurant business (or any other where employees receive tips), or offer tax assistance to people who are, you’ll want to review new guidance from the IRS explaining the rules for applying employment tax to tip income.

IRA Enforcement Initiative

June 23, 2012

Let’s be honest: reports of the Treasury Inspector General for Tax Administration do not make for fascinating reading. And you are hearing this from someone who feasts on items like the new regulations dealing with portability of deceased spousal unused exclusion amount for estate and gift tax purposes. So hats off to Kelly Greene for an excellent article in the Wall Street Journal discussing how one of those reports appears likely to spur new enforcement efforts from the IRS in relation to IRAs. Among the issues:

  • Failure to take required minimum distributions after age 70½
  • Failure to complete a rollover within 60 days
  • Failure to comply with rules for inherited IRAs

In light of an expected increase in enforcement, this is a good time for taxpayers and their advisors to determine whether they have problems in this area and what corrective measures are appropriate.

IRS Tightens ITINs

June 23, 2012

Effective immediately, more stringent documentation requirements will apply to persons applying for an individual taxpayer identification number — with certain exceptions, such as spouses and dependents of U.S. military personnel. An ITIN is used for tax filings by an individual who is not eligible for a Social Security number. The new rules come after problems that have arisen in connection with ITINs, including their use in identity theft to obtain tax refunds. Affected individuals will need to supply original documents or certified copies rather than notarized copies.

Resource: IRS Q&As on ITIN rules

Estate Exclusion Portability Regs Confirm Critical Deadline

June 22, 2012
By Kaye A. Thomas

Pay attention, because missing this deadline could cost $1 million or more. And for some people, the deadline is today.

The Treasury has issued temporary and proposed regulations relating to portability of a deceased spousal unused exclusion amount. Under these rules it may be critically important to file an estate tax return for an individual who dies with a surviving spouse, even if the decedent has no valuable assets and an estate tax return is not otherwise required. Filing an estate tax return is the only way to transfer the decedent’s unused estate tax exclusion amount to the surviving spouse. People handling estates in this category may not realize there is any need to file an estate tax return, yet failing to do so could permanently deprive the surviving spouse of an increase in the estate tax exclusion amount that might otherwise produce savings of $1 million or more in estate and gift taxes. (more…)

Good News and Bad for Tax Debtors

June 6, 2012
By Kaye A. Thomas

The IRS has released good news for individuals who have tax debts they can’t pay. Whether you’ll actually be able to take advantage of that news is another matter. And whether you can obtain good professional help with the problem is yet another matter.


Proposed Section 83 Regs

May 30, 2012

Section 83 of the Internal Revenue Code is important to anyone who deals with stock options or other forms of equity compensation: it tells us when the recipient must report income and how to measure its value. The IRS has proposed changes to the regulations that would take effect January 1, 2013. In essence, though, the proposal merely reflects positions the IRS previously staked out in Rev. Rul. 2005-48, so the regulation would confirm the existing view of the IRS rather than make a genuine change in the law.

Minor update: Our book Consider Your Options discusses the effect of various restrictions, and states that a lockup period does not prevent shares from being treated as vested “although there is no direct authority on the issue.” The proposed regulations address this point. The conclusion in our book is accurate, but it is no longer correct to say there is no direct authority.

Confession is Good for the — Taxpayer?

May 23, 2012
By Kaye A. Thomas

How much relief can you expect from the IRS when you inform them that you claimed a deduction to which you weren’t entitled? What if you informed them only after learning your return was about to be audited? You might expect the IRS to go into Terminator mode in a case like this, but here’s someone who received a different response. (more…)

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