The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) last week provided transition relief for plan administrators of 403(b) plans who make a good faith effort to comply with applicable annual reporting requirements for the 2009 plan year. The guidance in the EBSA’s Field Assistance Bulletin (FAB) no. 2009-02
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TOPICS / TAX
Employee benefits
Correcting FICA Errors
Correcting an employment tax error that is discovered in the year in which the error occurs is generally a simple process. However, employers often discover such errors after the close of the calendar year in which they paid the wages to an employee. The process for correcting those errors is
IRS Proposes New Cell-Phone Fringe Benefit Substantiation Rules
Employer-provided cell phones have gone from an exclusive perk to common equipment in the 20 years since Congress made them subject to strict substantiation requirements for business use. Monday, the IRS proposed simplifying those rules. Generally, employees must include in income the fair market value of fringe benefits provided by
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SIXTH CIRCUIT UPHOLDS LIFE TABLES FOR LOTTERY LUMP SUMThe Sixth Circuit Court of Appeals ruled in Negron v. U.S. (No. 07-4460 (6th Cir. 1/28/09)) that the IRS annuity tables of IRC § 7520 provide a realistic and reasonable estate valuation of a state lottery prize paid as a lump sum
Deduction Denied for ESOP Stock Redemption
The Eighth Circuit Court of Appeals denied food giant General Mills’ deductions for “cash distribution redemptive dividends” it paid participants in the company’s employee stock ownership plans (ESOPs). In so doing, the Eighth Circuit reversed a district court decision and ignored the Ninth Circuit’s ruling six years ago in Boise
Small Retirement Plans Face Funding Dilemma
Many traditional defined benefit pension plans are underfunded due to market declines. As a result, barring congressional action, they could face future excise taxes ranging from 10% to 100% of the underfunded amounts as mandated by the Pension Protection Act of 2006 (PPA). Funding liabilities are especially difficult for smaller
IRS Announces Revisions to Form 941
The IRS announced that in mid-March it will start sending employers new Forms 941, Employer’s Quarterly Federal Tax Return. Employers will use the revised form to claim the new COBRA premium assistance payments credit, which was introduced by the recent stimulus act, the American Recovery and Reinvestment Act of 2009,
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IRS ANNOUNCES LIEN RELIEFIn December, the Service said it would expedite processing of requests to subordinate a tax lien to another lien or discharge it in some cases where a home is being sold for less than the amount secured by a mortgage. See Announcement IR-2008-141. The IRS typically takes
Reporting Regs Issued for Employer-Owned Life Insurance
The IRS has issued final regulations on information reporting required for employer-owned life insurance policies. The Pension Protection Act of 2006 added IRC §§ 101(j) and 6039I concerning employer-owned life insurance contracts. An employer-owned life insurance contract is one owned by a person engaged in a trade or business employing
IRS Issues Final Regs on Automatic Contribution Arrangements
The Service on Tuesday issued final regulations on automatic contribution arrangements for 401(k) and other eligible plans. The regulations (TD 9447) adopt with modifications the 2007 proposed regulations (REG-133300-07) providing guidance on implementing provisions of the Pension Protection Act of 2006 and the Worker, Retiree, and Employer Recovery Act of
Reminder: Support Your Auto Expenses
Auto expenses are a very common deduction for business owners and employees who must travel. Often the taxpayer does not know the exact amounts necessary to calculate the proper deduction and the tax preparer must estimate the mileage, business percentage, and ultimate auto deduction with the client’s help. Tax preparers
Taxes in Troubled Times
The IRS has acknowledged there’s plenty of pain to go around in the current economic downturn. Financially strapped taxpayers can take advantage of several relief initiatives and provisions that could lessen their tax bite. Those with investments posting a loss may be able to “harvest” it or at least reposition
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COMMENTS SOUGHT ON REVISED SSTSThe AICPA released for comment an exposure draft of proposed revisions to Statements on Standards for Tax Services (SSTS). The revisions are intended to address changes in federal and state tax laws and new requirements for providing certain types of tax opinions. SSTS no. 1, Tax
FICA Required on 403(b) Salary Reductions
The Seventh Circuit affirmed a district court’s ruling that FICA must be withheld on contributions made by salary reduction to a section 403(b) retirement plan. The circuit also affirmed the trial court’s upholding of a penalty for failing to deposit the taxes. The University of Chicago made contributions to purchase nontransferable
Subsequent Deferrals Under Section 409A
Nonqualified deferred compensation plans must now comply with a vast set of new rules. The transition relief expired on Jan. 1, and the final regulations under IRC § 409A are now in effect. These rules include the subsequent deferral election rules, which could bring unpleasant surprises for employers and employees.
IRS Releases Revised Per Diem Rates and Rules
In October, the IRS provided an optional method by which employees and self-employed individuals may compute the amounts deemed paid or incurred for business meals and incidental expenses for which they are not reimbursed. Revenue Procedure 2008-59, which was effective Oct. 1, 2008, also updated rules for substantiating employees’ ordinary
IRS Updates Maximum Values for Employee Automobile Use
The IRS has updated for 2009 the maximum allowable value of an employer-provided vehicle for which the cents-per-mile and fleet-average rules may be used in determining the value of an employee’s personal use of the vehicle as a taxable fringe benefit. Revenue Procedure 2009-12, issued by the Service on Wednesday,
Recoverability of Equity-Based Compensation Deferred Tax Assets
As the stock market slides, more stock options and related deferred compensation instruments are “underwater,” and the related deferred tax assets may no longer be recoverable. The balance sheets and tax footnotes of many entities highlight the magnitude of these equity-based compensation deferred tax assets. When and how they are
Medical Residents Not Subject to FICA
Although circuits have split on the issue previously, two recent decisions concluded that medical residents are not subject to FICA, based on the student exception of IRC § 3121(b)(10). The provision states that the term “employment” “shall not include…service(s) performed in the employ of…a school, college, or university…if such service
VEBA’s Excess Set-Aside is UBI
The Court of Federal Claims ruled that a tax-exempt voluntary employees’ beneficiary association (VEBA) recognized income subject to the unrelated business income tax (UBIT) because it exceeded the amount the VEBA could set aside to pay benefits. The UBIT was enacted to prevent tax-exempt organizations from competing with taxable entities
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Tax season quick guide
Get ready for tax season with the JofA’s annual filing season quick guide, an easy-to-use compilation of dollar thresholds, tax tables, standard amounts, credits, and deductions. Download and print for quick reference this tax season.
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