Tax news and information - Journal of Accountancy

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February 1, 2012

Individuals who are eligible for medical services at IHS facilities may still participate in HSAs

The IRS on Wednesday explained that people who are eligible to receive medical services at Indian Health Service (IHS) facilities are not automatically disqualified from making tax-free contributions to health savings accounts (HSAs) (Notice 2012-14). Under Sec. 223(c)(1), an eligible individual for HSA purposes is, for any month, an individual

February 1, 2012

Help clients choose the right charities

Many nonprofits operate with tight resources, and some are struggling to survive in the slow economy. Here are ways to determine if the charities your clients support are effectively governed, accountable and fiscally responsible. —By Betsy Brill (betsy@stratphilanthropy.com), MBA, founder and president, and Susan Winer (susan@stratphilanthropy.com), senior vice president–Business, both

February 1, 2012

Grantor retained interests clarified

The IRS issued final regulations providing guidance on the portion of property (held in trust or otherwise) includible in a grantor’s gross estate if the grantor has retained the use of the property or the right to an annuity, unitrust, graduated retained interest or other payment from the property for

February 1, 2012

Congress repeals 3% withholding, enacts worker credit for veterans

On Nov. 21, President Barack Obama signed into law an act (P.L. 112-56) that repeals a 3% government contractor withholding requirement. The act removes Sec. 3402(t), which required withholding of 3% of payments by the federal or state governments or their instrumentalities or subdivisions (including multistate agencies) to any person

February 1, 2012

Interest-netting relief allowed to consolidated group member

The Court of Federal Claims ruled that a member of a consolidated group is “the same taxpayer” for purposes of interest-netting relief both before and after becoming a member of the consolidated group. The IRS assessed a tax deficiency of $9,953,525 against Magma Power Co. with respect to its tax

February 1, 2012

Preparer fingerprinting delayed

The IRS will delay and reconsider its fingerprinting requirement for tax return preparers, IRS Commissioner Doug Shulman told the AICPA National Tax Conference in November. “We have decided to hold off fingerprinting while we consider issues that have been raised and have further discussions with interested parties,” Shulman said during

February 1, 2012

All in the family

CPAs do their best to keep up to date with tax developments. However, much of their job involves dealing with family dynamics, requiring skills related more to understanding and communication than technical expertise. Three principles should guide practice management when families are involved: – Understand the perspective of each family

February 1, 2012

Restricted stock awards and taxes: What employees and employers should know

The use of restricted stock awards to compensate employees is growing in popularity in place of the much-maligned stock option. One of the reasons for the shift to restricted stock is the reduced charge against income provided by restricted stock awards as compared to stock option grants. Restricted stock is

February 1, 2012

Disallowed deduction equals change in accounting method

The Fifth Circuit Court of Appeals upheld a Tax Court decision that a change in accounting method occurred when the IRS disallowed an accrual-basis taxpayer’s deduction for inventory purchased on account from a related-party cash-basis taxpayer. Therefore, the taxpayer was required to include amounts erroneously deducted in closed tax years

February 1, 2012

First-time homebuyer credit allowed for equitable owner

The Tax Court held that a taxpayer could claim a first-time homebuyer credit for a house he didn’t occupy or hold legal title to during the tax year. The taxpayer bore the benefits and burdens of ownership under state law, making him its equitable owner, and his intention to live

February 1, 2012

When a client leaves or loses a job

Given the continued weakness in the economy and an unemployment rate still above historic norms, now is a good time to review the financial planning issues clients face when they leave a job or are laid off. A CPA’s timely and proactive advice can have a lasting effect. Here are

February 1, 2012

The reach of Circular 230

While discussions about Circular 230 usually focus on the standards it imposes relating to tax returns and opinions, the breadth and scope of Circular 230 also affects day-to-day business operations of tax practitioners relating to fees, client solicitations, marketing and advertising, and the management of client files and records. A

February 1, 2012

Starkman receives Institute’s highest award for tax

Jay Starkman received the 2011 Arthur J. Dixon Memorial Award, the highest award given by the accounting profession in the area of taxation. The annual award, given by the AICPA’s Tax Division, honors Arthur J. Dixon, a CPA known for his outstanding record of service to the tax profession and

January 31, 2012

Tax Court rules on homebuyer credit when former residence is being sold

The Tax Court held that a married couple’s old house, which they continued to use while trying to sell it, qualified as a principal residence, and therefore they did not meet the timing requirement to qualify for an $8,000 first-time homebuyer credit when they purchased a new house (Foster, 138

January 27, 2012

Streamlined installment agreement program modified

The IRS Small Business/Self-Employed Division modified the maximum unpaid balance of assessment taxpayers must meet to qualify for its streamlined installment agreement program and extended the time for payment (SBSE 05-0112-013). The aggregate unpaid balance of assessment threshold has doubled, from $25,000 to $50,000. The timeframe for full payment has

January 24, 2012

Tax filing season resources—Tax year 2011

This is the one-stop shop for all the updates you need to know for this year’s tax filing season. Find resources from the Journal of Accountancy, plus tax return checklists and tax savings tips from the AICPA, categorized by tax topic. INDIVIDUAL TAX Tax season startsJan. 16, 2012Tuesday, Jan. 17,

January 24, 2012

New Form 990 has a few significant changes for 2011

The IRS posted the final 2011 Form 990, Return of Organization Exempt From Income Tax, and instructions on its website. Form 990 has become more and more complex as the role of nonprofit organizations has evolved in the United States. The latest version of the form contains a few significant

January 23, 2012

IRS: Tax preparers who want to prepare 2011 returns must renew PTINs

The IRS is sending information letters to tax return preparers who have not yet renewed their preparer tax identification numbers (PTINs) for the 2012 filing season. (The IRS system was, at this writing, not able to issue new PTINs.) The IRS started sending the letters last week and will continue

January 20, 2012

Statutory definition of specified notional principal contract extended through 2012

The IRS issued temporary and identical proposed regulations on dividend equivalents for purposes of Sec. 871(m) (T.D. 9572; REG-120282-10). The regulations provide guidance to nonresident aliens and foreign corporations that hold notional principal contracts providing for payments determined by reference to payments of dividends from sources within the United States.

January 20, 2012

IRS issues final regs on exclusion of damages for personal physical injury

The IRS on Friday issued final regulations relating to the exclusion from gross income for damages received on account of physical injuries or sickness (T.D. 9573). The regulations remove the requirement that damages received from a legal suit, action or settlement must be based on “tort or tort type rights”