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State law applied in lieu of Bob Richards rule

In In re United Western Bancorp, Inc., No. 17-1281 (10th Cir. 5/26/20), the Tenth Circuit, on remand from the U.S. Supreme Court, applied Colorado law to conclude that the FDIC, as receiver for United Western Bank, was the owner of a federal tax refund arising from the bank's tax losses. The IRS originally issued the refund to the bank's holding company, United Western Bancorp Inc. (UWBI), which had filed for bankruptcy, but the bankruptcy trustee for UWBI and the FDIC both claimed ownership. On appeal, the Tenth Circuit, applying the rule established in In re Bob Richards Chrysler-Plymouth Corp., 473 F.2d 262 (9th Cir. 1973), had held that the refund belonged to the bank. The Supreme Court vacated that decision as it struck down the Bob Richards rule (Rodriguez v. Federal Deposit Ins. Corp., No. 18-1269 (U.S. 2/25/20); see "Tax Matters: Supreme Court Overturns Consolidated Group Tax Refund Allocation Rule," JofA, April 24, 2020, ).

Amended returns to join the electronic age

The IRS announced that soon, for the first time, taxpayers will be able to electronically file Form 1040-X, Amended U.S. Individual Income Tax Return. Although Form 1040, Individual Income Tax Return, and a large and growing number of other forms and returns can — and in some cases must — be e-filed, individual taxpayers have been able to file amended returns only on paper. Form 1040-X, of which the IRS receives about 3 million annually, poses "unique challenges" for e-filing, the Service stated. The rollout will occur sometime during the summer, initially, just for tax year 2019 Forms 1040 and the still relatively new Form 1040-SR, U.S. Tax Return for Seniors.

Midyear cafeteria plan changes allowed

In Notice 2020-29, the IRS provided that, for greater flexibility in response to the COVID-19 pandemic, during calendar 2020, employers may permit employees who are eligible to make salary-reduction contributions under a Sec. 125 "cafeteria" benefit plan to prospectively make a new election or revoke an existing election with respect to employer-sponsored health coverage, a health flexible spending arrangement (FSA), or a dependent care assistance program, or to increase or decrease election amounts for an FSA or a dependent care program. Employers may also allow their employees to apply unused amounts remaining in a health FSA or dependent care assistance program at the end of a plan year or grace period ending anytime in 2020 to qualifying expenses incurred on any date through Dec. 31, 2020.

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These year-end tax planning strategies address recent tax law changes enacted to help taxpayers deal with the pandemic, such as tax credits for sick leave and family leave and new rules for retirement plan distributions, as well as techniques for putting your clients in the best possible tax position.

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