Employers may reclassify independent contractors as employees and limit the resulting federal payroll taxes for their most recent tax year, plus avoid related penalties and interest for prior years, under an IRS program announced Wednesday. In Announcement 2011-64, the IRS outlined its new Voluntary Classification Settlement Program (VCSP). Unlike an
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Tax
President Signs Patent Reform Bill Banning New Tax Strategy Patents
On Friday morning, President Barack Obama signed into law the Leahy-Smith America Invents Act (HR 1249), which reforms the U.S. patent system and stops the granting of patents for tax strategies. The bill had been passed by the Senate earlier this month and by the House of Representatives in June.
Guidance Issued on Tax Treatment of Business Cell Phones
The IRS issued a notice on Wednesday providing guidance on the tax treatment of employer-provided cell phones now that they have been removed from the definition of listed property (Notice 2011-72). The notice discusses the treatment of employer-provided cell phones as an excludible fringe benefit. The IRS says it has
2010 Estate Tax Payment, Carryover Basis Election Extended
Executors of estates of most decedents who died in 2010 now can get an automatic extension until March 19, 2012, to pay any estate tax due as well as to file an estate tax return, the IRS announced Tuesday. The announcement, in Notice 2011-76 and News Release IR-2011-91, also postpones
President’s Jobs Bill Contains Many Tax Proposals
President Barack Obama submitted his American Jobs Act to Congress on Monday, and among its provisions are several tax items, including a temporary payroll tax cut, a limit on itemized deductions for certain high-income taxpayers, and a proposal to tax carried interests as ordinary income rather than capital gains. The
IRS Issues Accounting Software Examination Guidance, Meets with AICPA
The IRS Small Business/Self-Employed Division (SB/SE) has issued guidance for its field examiners on when to request backup files of taxpayers’ accounting software during an examination, what the limits are on reviewing those electronic files, and how examiners must safeguard those records (SBSE-04-0911-086). The IRS has also updated its online
Estate Tax Form, Instructions Finalized for 2010; Due Sept. 19
The IRS on Thursday posted the instructions for Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, for decedents dying in 2010. For most 2010 decedents, the due date is Sept. 19. The form itself was posted on Sept. 3, but without instructions. For decedents who died between Jan.
Congress Passes Tax Patent Reform; Sends Bill to President
On Thursday evening, the Senate passed the America Invents Act (HR 1249) by a vote of 89–9. The Senate’s version of the bill was identical to one passed by the House of Representatives in June, and it now goes to President Barack Obama for his signature. The act reforms the
Final Regs Implement Form 990 Changes
The IRS issued final regulations Wednesday (TD 9549) implementing extensive revisions made in 2008 to Form 990, Return of Organization Exempt From Income Tax. The final regulations provide new threshold amounts for reporting compensation, require that compensation be reported on a calendar-year basis and modify the rules requiring information reporting
IRS Proposes New Rules for Deducting Fiduciary Fees
The IRS issued new proposed regulations Monday (REG-128224-06) intended to reflect the U.S. Supreme Court’s 2008 holding in Michael J. Knight v. Commissioner (552 U.S. 181) on income tax deductibility by estates and nongrantor trusts of investment advisory and other fees. The IRS simultaneously withdrew July 2007 proposed regulations with
Reportable Transaction Penalty Gets Final Regulations
The IRS issued regulations Thursday (TD 9550), governing the IRC § 6707A penalty regime for failure to report reportable transactions, to reflect changes made by the Small Business Jobs Act of 2010 (PL 111-240). However, the final regulations do not give guidance on how the amount of the penalty is
IRS Expands Hurricane Irene Relief
On Friday, the IRS expanded its Hurricane Irene relief to include four counties in Vermont, after the president declared those counties federal disaster areas (VT-2011-34). The tax relief announced is similar to that already published for parts of North Carolina, New York, New Jersey and Puerto Rico. (For details of
Taxpayers Hit by Irene Get Postponement
Taxpayers in certain areas affected by Hurricane Irene have until Oct. 31 to file certain returns and make payments normally due before then, the IRS announced Thursday (IR-2011-87). The areas eligible for relief include parts of North Carolina, New Jersey, New York and Puerto Rico; the IRS expects to provide
Upward Stock Option Repricing
Companies often reduce the exercise price of employees’ outstanding stock options to the current stock price to restore the options’ incentive effect and retain talented employees. However, in some cases companies raise the exercise price to provide tax benefits for option holders under certain circumstances. If a stock option qualifies
Real Estate Transfer Taxes: Practical Considerations
Approximately two-thirds of U.S. states, as well as a number of municipalities, counties and other units of local government, impose a tax on taxpayers when they transfer real property to another party. As a practical matter, a real property transfer tax is typically triggered if a deed is recorded; however,
2011 Tax Software Survey
This year’s tax preparation software survey by The Tax Adviser and the JofA yielded more than 10,000 responses from readers, showing what tax professionals like and dislike about the tax preparation software they used this tax season. As in years past (see the 2010 survey here), price and ease of
IRS Finalizes Automatic Five-Month Extension for Partnership, Trust and Estate Returns
Final regulations set the time for automatic extensions of partnership, trust and estate income tax returns at five months (TD 9531). Under this rule, the extended returns and Schedule K-1s for partners and beneficiaries will generally be due Sept. 15. The regulations also provide for an automatic six-month extension for
Golfer Bogies Endorsement Income
Professional golfer Retief Goosen split a decision with the IRS in the Tax Court that partly redetermined the character and source of his income from product endorsements. Goosen is a native of South Africa and a nondomiciliary United Kingdom resident. He was well-known abroad before he won the 2001 U.S.
Deduction for Cat Expenses Get Second Life
The Tax Court permitted a deduction for a taxpayer’s unreimbursed volunteer expenses incurred while caring for foster cats in her home, since they were incurred “incident to the rendition of services” to a qualified organization. The court also held the recordkeeping requirements for cash contributions under $250 should apply to
No Reasonable Cause Defense for Preparer’s Omission
The Tax Court upheld an accuracy-related penalty, rejecting the husband-and-wife taxpayers’ argument that they had reasonable cause for a tax understatement caused by their return preparer’s apparently accidental omission of an item of income. The error involved omission of nearly $3.4 million in gain, which was slightly more than 10%
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