While bitcoin and other virtual currencies are becoming more popular and have garnered a lot of attention in the media, the tax rules that apply to them have been unclear, including the basic question of whether they are treated as a currency or as property. The IRS on Tuesday issued
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The Supreme Court rules severance payments are subject to FICA
In a decision involving over $1 million in FICA taxes paid, the Supreme Court on Tuesday held in an 8–0 decision that severance payments to terminated employees are taxable wages for FICA tax purposes (Quality Stores, Inc., No. 12-1408 (U.S. 3/25/14)). Justice Anthony Kennedy’s opinion overturned a decision of the
IRS clarifies: Electronic signatures permitted for Form 8879
Correcting an oversight, the IRS on Thursday updated the online version of Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns (rev. 3/20/14), to clarify that electronic signatures are permitted for Form 8879, IRS e-File Signature Authorization, as well as Form 8878, IRS e-file Signature Authorization
IRA rollover guidance issued: IRS will follow the Tax Court
To settle the question of whether the limitation on rolling over one IRA per year under Sec. 408(d)(3)(B) applies to taxpayers on an aggregate basis or on an IRA-by-IRA basis, the IRS announced it will follow the Tax Court’s recent decision in Bobrow, T.C. Memo. 2014-21, applying the rule on
IRS expands use of electronic signatures
With the updated version of IRS Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns (rev. 3/11/14), the IRS provides new methods for taxpayers to electronically sign Form 8878, IRS e-file Signature Authorization for Form 4868 and Form 2350, the e-file signature authorization form. Taxpayers can
New procedure permits automatic recognition of consolidated return filing status
The IRS announced that it will permit an affiliated group of corporations that did not file the required Form 1122, Authorization and Consent of Subsidiary Corporation to Be Included in a Consolidated Income Tax Return, for all of its subsidiaries, to be treated as if its subsidiaries had filed Form
Simplified employer health care coverage reporting announced
On Wednesday, the IRS released final regulations to implement simplified reporting requirements under the Patient Protection and Affordable Care Act, P.L. 111-148, which requires employers to report health care coverage information under Secs. 6055 and 6056 starting in 2015 (T.D. 9660 and T.D. 9661). Also Wednesday, the Department of Health
District court rules “parsonage allowance” unconstitutional
A U.S. district court in Wisconsin struck down the long-standing exclusion from gross income under Sec. 107(2) of a housing allowance paid to ministers as violating the Establishment Clause of the First Amendment. However, the court stayed its injunction of enforcement of Sec. 107(2) pending appeal of the case. The
Domestic production activities deduction disallowed
The Tax Court disallowed a corporate taxpayer’s domestic production activities deduction because, it determined, the taxpayer did not possess the burdens and benefits of ownership of the property produced. The court developed a nine-factor test of the burdens and benefits of ownership that it applied to the facts and circumstances
Take steps to meet the EITC due-diligence requirements
The IRS is scrutinizing returns that claim the earned income tax credit (EITC) and paying attention to return preparers who it suspects are filing inaccurate EITC claims. New due-diligence rules require practitioners to document more information and report it to the IRS with every return filed.
Safe harbor offered for allocating rehab credits
In the wake of an appellate decision denying allocations of Sec. 47 credits to investor partners in a historic rehabilitation project, the IRS issued guidance including a safe harbor for such allocations. The guidance, Rev. Proc. 2014-12, had been anticipated after the IRS won reversal of a Tax Court opinion
Religious exemptions from the health care individual mandate
The January 2014 Tax Practice Corner, “Calculating the Health Care Individual Mandate Penalty,” (page 54) outlined how the penalty under Sec. 5000A, enacted by the Patient Protection and Affordable Care Act of 2010 (PPACA), P.L. 111-148, is calculated. The column also listed individuals to whom the mandate does not apply,
Individual mandate hardship exemption expanded
In December, the U.S. Department of Health and Human Services expanded hardships eligible for exemption from the Sec. 5000A shared-responsibility payment to include individuals whose policies were canceled by their previous insurers and who find that other coverage options are more expensive than their canceled policies. The shared-responsibility payment, popularly
Final regs. allow Sec. 336(e) elections for S corps.
The IRS issued final regulations last May that apply when a Sec. 336(e) election is made to treat the sale, exchange, or distribution of at least 80% of the voting power and value of a target corporation’s stock as a nontaxable sale of all its underlying assets, which the regulations
Supreme Court resolves circuit split on gross-valuation-misstatement penalty
The U.S. Supreme Court held that the 40% penalty for a gross valuation misstatement applied when the partnerships at issue had been determined to be shams that lacked economic substance, and, as a result, the partners’ outside basis in the partnerships was zero (Woods, No. 12-562 (U.S. 12/3/13), rev’g 471
IRS: Terminating partnerships may not accelerate amortized startup expenditures
The IRS issued proposed regulations aimed at preventing partnerships from using technical terminations to accelerate their deductions of startup and organizational expenses (REG-126285-12). When finalized, the regulations will apply to technical terminations of partnerships that occur on or after Dec. 9, 2013. Under Sec. 708(b)(1), a partnership terminates if (1)
Guidance on repair regs. updates accounting method change procedures
The IRS issued the second part of the guidance on accounting method changes under the so-called repair regulations, which govern the treatment of expenditures incurred in acquiring, producing, or improving tangible assets (Rev. Proc. 2014-17, modifying and superseding Rev. Proc. 2012-20). The first part of the updated procedures on accounting
IRS issues final instructions for net investment income tax form
The IRS finally released its eagerly awaited final instructions for Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, on Thursday. The instructions, which are 20 pages (for a one-page form), were released in draft form in the beginning of January. Practitioners and taxpayers have waited almost a month after
2014 car, truck depreciation limits issued
On Tuesday, the IRS issued the 2014 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F (Rev. Proc. 2014-21). Prior-year versions of this annual guidance had included figures for first-year bonus depreciation, but because bonus depreciation is not in effect for 2014, the
Final substantial-risk-of-forfeiture rules are released
The IRS on Tuesday finalized regulations that clarify when a substantial risk of forfeiture exists on the transfer of stock to an employee that is treated as compensation under Sec. 83 (T.D. 9659). If a substantial risk of forfeiture exists, the employee does not have to recognize the income at
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