The District Court for the Western District of Michigan affirmed a bankruptcy court’s holding that severance payments by a bankrupt company to its laid-off employees were not subject to FICA tax. The court held that because IRC § 3402(o) subjects a supplemental unemployment benefit (SUB) payment to income tax withholding
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Tax
Widow Not Barred From Innocent Spouse Claim
The Tax Court determined that a widow was not prohibited from raising the issue of relief from joint and several liability for three tax years that had been previously litigated. The court concluded that the exception to res judicata applied, but it did not address whether the taxpayer qualified to
IRS Provides Guidance, Steps Up Exams of Sec. 199 Issues
Code § 199 provides a deduction equal to a specified percentage (9% for 2010 and subsequent years) of the lesser of qualifying production activity income (QPAI) or taxable income. In brief, QPAI equals eligible receipts, or domestic production gross receipts (DPGR), less allocable cost of goods sold and other deductions.
Sixth Circuit Finds False Imprisonment Settlement Payments Taxable
The Sixth Circuit affirmed a Tax Court decision that settlement proceeds received for false imprisonment were not excludable under IRC § 104(a)(2) as amounts received due to physical injury. Brenda Stadnyk was falsely imprisoned as the result of an auto dealership’s criminal complaint against her. She had stopped payment on
FASB’s Position on Uncertainty Makes No Sense
With regard to your article “An Update on Accounting for Uncertainty in Income Taxes” (Dec. 09, page 45), I wish to question what was wrong with the accounting rule makers. The position FASB is taking with regard to private companies makes no sense at all. The article states that the
Don’t Neglect to Elect
A wide range of federal tax elections gives individual taxpayers options for how they report certain income or expense items. Some of the more common elections for individuals concern retirement plans, medical expenses and interest expense. Each election has specific rules as to who can make the election, when and
Request for Replacement Estate Tax Check Denied
The U.S. Court of Federal Claims held it did not have jurisdiction to issue a replacement check to a U.S. executor after a foreign executor named to the same estate cashed a refund check from the IRS. The issue arose after a U.S. citizen died in 2006 while living in
CPAs Work for Clients, Not IRS
I suspect my note will be only one of many you will receive about the article “Tax From the Top” (April 10, page 16). Someone needs to advise the IRS that we, CPAs, are not partners with the IRS. We are advocates for our clients; we are professional, ethical and
Tax Return Preparation Mistakes
Errors and omissions in preparing tax returns can occur easily. You might accidentally enter a number incorrectly, misinterpret a law, or misconstrue the client’s facts. Later, before an IRS audit, you might discover the mistake, raising gut-wrenching questions: Do you call the mistake to your client’s attention? Do you advise
House Passes Tax Extenders Bill
On Friday, the House of Representatives passed the American Jobs and Closing Tax Loopholes Act (HR 4213) by a vote of 215–204. The bill now goes to the Senate, which will not take it up for consideration until after it returns from its Memorial Day recess on June 7. The
Supreme Court Declines to Hear Textron Work Product Privilege Case
The U.S. Supreme Court on Monday declined to review the case of Textron Inc. v. United States, Sup. Ct. docket no. 09-750 (5/24/10). The decision not hear the case lets stand the First Circuit Court of Appeals’ decision that a corporation’s tax accrual workpapers were not protected from an IRS
IRS Posts Revised Form 941 and Instructions for Claiming New Hire Payroll Tax Exemption
On May 18, the IRS posted a new version of Form 941, Employer’s QUARTERLY Federal Tax Return, and its instructions for claiming the special payroll tax exemption that applies to new workers hired in 2010. The Hiring Incentives to Restore Employment Act (HIRE Act) created a payroll tax exemption for
IRS Guidance on Small Business Health Care Tax Credit
The IRS issued a notice Monday providing guidance to small businesses that are eligible to claim a tax credit for employee health insurance coverage (Notice 2010-44). The Patient Protection and Affordable Care Act (PL 111-148) enacted new IRC § 45R, which allows certain eligible small businesses to claim a tax
Automatic Revocation of Tax-Exempt Status to Start Monday
Monday, May 17, is the deadline for calendar-year tax-exempt organizations to file a Form 990 for 2009. It also marks the third filing deadline under the mandatory filing requirement instituted by the Pension Protection Act of 2006 (PL 109-280). Under the terms of that mandatory filing requirement, tax-exempt organizations that
Final Interim Regulations Issued on Adult Dependent Health Coverage
On Monday, the IRS, along with the Department of Labor and Department of Health and Human Services, issued interim final regulations for group health plans and health insurers relating to dependent coverage for children under the age of 26 (TD 9482). The regulations complement guidance issued by the IRS on
Tax Court Holds Invalid Temporary Regulations on Overstatement of Partnership Basis
On Thursday, the Tax Court held that temporary regulations issued by the IRS last year that defined an overstatement of partnership basis as an omission from gross income are invalid (Intermountain Ins. Serv. of Vail, LLC, 134 TC no. 11). In an earlier round of litigation, the Tax Court had
AICPA Testifies About Tax Return Preparer ID Plan
Patricia Thompson, CPA/PFS, vice chair of the AICPA’s Tax Executive Committee, spoke Thursday at an IRS hearing on the IRS’ plan to require all paid tax return preparers to obtain and use a preparer tax identification number (PTIN). She said the IRS’ PTIN proposal, along with its proposal to make
IRS Releases Average Premiums for Determining Small Business Health Care Credit
The IRS on Monday issued average small group market premiums for use in determining the new small business health care credit under IRC § 45R (Rev. Rul. 2010-13). The Patient Protection and Affordable Care Act, P.L. 111-148, provides tax credits for small businesses, beginning in years after 2009, designed to
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UNCERTAIN TAX POSITIONS SCHEDULE TO DEBUT FOR 2010; COMMENT PERIOD STILL OPEN The IRS extended until June 1 the comment period for its proposal to require large businesses to disclose uncertain tax positions and announced that it intends to make the requirement effective for tax years beginning in 2010. The
Prevent Payroll Errors
Payroll mistakes can be costly. Laws taking effect this year, including the Paycheck Fairness Act and Working Families Flexibility Act, and initiatives such as the IRS’ National Research Program and OSHA’s recordkeeping National Emphasis Program, can result in fines and penalties for errors or noncompliance. The following tips can help
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