The IRS issues proposed regulations that would require
taxation of “split-dollar” life insurance policies ( www.treas.gov/press/releases/po3230.htm
). Many businesses use such products as a form of supplemental
compensation for their employees. Under these regulations, a
split-dollar policy bought for this purpose would be taxed one of two
ways depending on who owns it. If the employee is the owner, the IRS
would view as a loan any premiums the company pays on his or her
behalf and tax the employee on the difference between market-rate
interest and the policy’s actual interest rate. But if the company
owns the policy, the IRS would regard the employer’s payment of
premiums as an “economic benefit” to the employee that includes the
value of the life insurance protection plus any other benefits he or
she receives under the policy. The proposed changes also affect
split-dollar policies in which corporations and shareholders or donors
and donees participate. They apply only to policies taking effect
after the IRS issues final regulations. In the interim, taxpayers can
base their returns on the proposed rules. If the final regulation’s
wording is more advantageous, they can file an amended return.
Comments are due October 7.
The AICPA tax division is seeking
member input via a quick online survey ( www.cpa2biz.com/ResourceCenters/tax
) on U.S. income tax treaties and will use the responses for
its comments to the Treasury Department regarding treaty
negotiations. Specifically, the division’s international tax
technical-resource panel is interested in encouraging the
Treasury to negotiate income tax treaties with countries where
none currently exists. The survey asks respondents to rank the following countries in priority order (1 (most important) to 8 (least important)) for developing such agreements: | ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() The tax division also requests that those taking the survey list any U.S. income tax treaties already in force that they would like to see renegotiated and the reasons why. Responses are due October 1. |
A new IRS compliance program requires taxpayers to
explain discrepancies between income and losses that partnerships, S
corporations or trusts reported on schedule K-1, Shareholder’s
Share of Income, Credits, Deductions, etc., and the information
individuals supplied on form 1040 and other schedules ( www.irs.gov/pub/irs-news/ir-02-83.pdf
). IRS examiners screen returns to ensure taxpayers properly
reported, for example, passive loss limitations and income or losses
on schedule E of form 1040. But when the service cannot account for
differences in the information provided, it requests an explanation
from the taxpayer. In the first half of 2002, the IRS issued 65,000
notices requesting clarification on some of the 18 million K-1s that
reported $1.2 trillion in 2001 income to partners, stockholders and
beneficiaries. The service says a letter or phone call from a taxpayer
or his or her tax adviser can resolve many such inquiries.
The latest IRS life expectancy tables require smaller
annual distributions from tax-deferred retirement plans and have been
issued as Supplement to Publication 590, Individual
Retirement Arrangements (IRAs) (www.irs.gov/pub/irs-pdf/p590supp.pdf).
For 2002, the service says, taxpayers can use either the new tables or
those in the April edition ( www.irs.gov/pub/irs-pdf/p590.pdf
) of publication 590.
A revised version ( www.irs.gov/pub/irs-pdf/p1828.pdf
) of IRS publication 1828, Tax Guide for Churches and
Religious Organizations, explains special tax laws and
procedures applying to such entities. It covers topics such as the
unrelated business income tax, recordkeeping requirements,
substantiation and disclosure rules applicable to charitable
organizations and avoiding activities that could jeopardize tax-exempt
status.
For single-click access to further coverage of the news stories listed here, visit the Journal of Accountancy Web site at www.aicpa.org/pubs/jofa/joahome.htm . |