While there are many new tax policy implementations that may be imminent with the new Biden administration, there are two changes in particular that estate planning attorneys are watching closely. These include (1) a reduction in the estate tax exemption and (2) an elimination of the basis step-up for inherited property. Unfortunately, there is still no way to predict exactly what will happen or when those changes will take effect, but the current climate does provide individuals with a unique opportunity to take advantage of some wealth transfer planning strategies, such as ...
The IRS issued Notice 2020-23 on April 9, 2020 and announced that the deadline for making estimated tax payments for the second quarter 2020, due June 15, 2020, has been extended to July 15, 2020. This notice supplements prior IRS guidance extending the deadline for making estimated tax payment for the first quarter of 2020 to July 15, 2020. Now, all 2020 estimated tax payments due on or before June 15th are due on July 15, 2020. Interest and penalties do not apply to these estimated tax payment extensions.
The Treasury Department and the Internal Revenue Service (collectively referred to hereafter as “IRS”) on September 23, 2019 published the final regulations on hardship distributions, finalizing the regulations proposed in November 2018. The plans primarily affected are 401(k) and 403(b) plans. The final regulations reflect changes in the Internal Revenue Code dating back to the Pension Protection Act of 2006 through the Bipartisan Budget Act of 2018. The preamble states that the regulations are substantially similar to the proposed regulations and, notably ...
President Trump signed the “Taxpayer First Act”, H.R. 3151, into law on July 1, 2019. The Taxpayer First Act may be one of the most significant “taxpayer rights” laws since the adoption of the Internal Revenue Service Restructuring and Reform Act of 1998. The key feature of the new law is its requirement that, within the next 12 months, the IRS submit to Congress a “written comprehensive customer service strategy”, and within 24 months “make available the updated guidance and training materials [under the strategy] … [which will be] easily understood … and provide ...
The Internal Revenue Service (IRS) issued Revenue Procedure 2019-19 on April 19, 2019, updating the Employee Plans Compliance Resolution System (EPCRS) to expand the types of plan errors that can be corrected under EPCRS. EPCRS is available to correct plan document errors, plan operational errors, demographic errors and employer eligibility errors for qualified plans, 403(b) plans, SEPs and Simple IRAs. All of these errors put the plan at risk of tax disqualification. By utilizing EPCRS, a plan sponsor is able to put errors in the past and move forward from them knowing the ...
Employers face a constant struggle to attract and retain quality employees. This is especially true in a strong economy where jobs are plentiful and the demand for well-qualified workers is high. Historically, employer contributions to 401(k) plans have been viewed as an effective and efficient recruitment and retention tool. Unfortunately, many employers are finding this inadequate in today’s market because some employees, especially younger employees, prioritize other financial needs ahead of saving for retirement. For many young employees, student loan debt is a ...
On March 27, 2019, the Senate Finance Committee launched an investigation into the abuse of syndicated conservation easement transactions. The transactions being investigated involve promoters selling interests in tracts of land to taxpayers looking for large tax deductions. The taxpayers get allegedly inflated appraisals of those tracts of land and grant conservation easements on that land. The resulting charitable deductions are then split among the taxpayers.
Fourteen separate letters were sent to individuals who appear to be associated with the promotion of syndicated ...
The Tax Cuts and Jobs Act of 2017 (“TCJA”) added new Section 461(l) to the Internal Revenue Code (the “Code”). This new Code section limits the ability of noncorporate taxpayers, including individuals and “pass-thru” business entities (e.g., partnerships and S corporations), to deduct business losses against nonbusiness income. This new rule works together with the passive activity loss limitation rules of Code Section 469.
In particular, Section 461(l) denies noncorporate taxpayers a deduction for “excess business losses.” An “excess business loss” ...
Under the 2017 Tax Cuts and Jobs Act, Congress enacted a new Section 199A 20% profit deduction for owners of pass-through businesses, and which include Subchapter S corporations, LLCs, sole proprietorships, and even certain trusts. Section 199A is intended to provide a deduction to owners of these pass-through business entities who do not otherwise benefit from the new 21% flat tax Congress has given to corporations under the new tax law. While Section 199A is intended to benefit these generally smaller types of business entities and their owners, the new tax law is riddled with ...
On April 23, 2018, the U.S. Department of Labor (the "DOL") released Field Assistance Bulletin No. 2018-01 ("FAB 2018-01") which provides guidance regarding (1) the exercise of shareholder rights and written statements of investment policy (addressed in Interpretation Bulletin 2016-01); and (2) economically targeted investments ("ETIs"; addressed in Interpretation Bulletin 2015-01). I have previously discussed certain issues arising with respect to the exercise of shareholder rights. See my article "DOL Updates Guidance on Proxy Voting by Plan Fiduciaries", January 19 ...
On May 4, 2016, the IRS announced that it would begin accepting applications for the voluntary certification of professional employer organizations ("PEOs") beginning July 1, 2016. PEOs are also commonly referred to as employee leasing companies. While the requirements of the certification program may be of interest to the PEO, the designation of a PEO as a certified professional employer organization ("CPEO") should be of major interest to the employers utilizing the CPEO. This blog will review the beneficial tax treatment resulting from a PEO's certification as a CPEO.
Under ...
Beginning in 2018, certain employers will be liable for a new 40% federal excise tax on the value of excess benefits provided through their health plans. Health plans providing high cost benefits are referred as "Cadillac" plans, and the new federal excise tax on high cost plans has come to be known as the "Cadillac tax".
Under the Cadillac tax, if the aggregate cost of "applicable employer-sponsored coverage" provided to an employee exceeds a statutory dollar limit (revised annually), the excess is subject to a 40% excise tax.
In a prior post, I reviewed who is liable for and who must ...
In a recent private letter ruling, PLR 201405005, the IRS validated a succession plan implemented by a Subchapter S corporation to transition share ownership from retiring co-owners to certain key employees. An S corporation is a small business corporation which has made an election to be taxed under Subchapter S of the Internal Revenue Code and which, among other things, may not have more than one class of stock.
Specifically, the IRS concluded that profit on a redemption of the owners' shares by the company for notes will:
1. be taxed to them as capital gain reportable on the ...