President Biden has proposed major changes to the Federal tax laws, some of which are sought to be effective earlier in 2021 (i.e., we are already operating under these changes, if they later become adopted), as compared to the effective date the new tax law changes may be passed by Congress or a later effective date (such as beginning January 1, 2022). The Biden administration proposals must first be approved by Congress. As Congress is now considering these tax law change proposals, the following is a summary of some of the most important:
- Increase the corporate income tax rate from 21 ...
On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”). The ARPA mandated several important changes for both employers and employees. One of these is potentially significant for both: full subsidies for employer-paid COBRA premiums. The ARPA requires employers to provide temporary, fully subsidized COBRA continuation coverage premiums for certain individuals for up to six months. Employers will be able to recover the subsidized premiums by claiming a tax credit.
The benefits provided to employers and employees are available to COBRA ...
President Biden has signed the PPP Extension Act of 2021. The new law extends the Paycheck Protection Program (PPP) application filing deadline from March 31, 2021 to May 31, 2021. The new law gives qualifying businesses and individuals more time to apply for a PPP loan.
While this new law does not increase the amount of funding available for PPP loans, Congress did authorize $7.25 billion in additional PPP funding under the recent American Rescue Plan Act.
On March 11, 2021, President Biden signed into the law the American Rescue Plan Act (“ARPA”) containing $1.9 trillion in financial stimulus. Though not highly publicized, the ARPA provides important relief related to plan funding for both single employer and multiemployer pension plans. This article will focus solely on the single employer pension plan provisions of the ARPA.
Pension plans are required to maintain certain funding levels. Funding levels are determined by a series of complex calculations usually performed by actuaries hired by plan sponsors. These ...
Prior to the passage of The American Rescue Plan Act of 2021 on March 11, 2021 (the “Rescue Act”) the employee retention credit, as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Relief Act”), was set to expire for wages paid after June 30, 2021. The Rescue Act extends the employee retention credit to qualifying wages paid through December 31, 2021. Consequently, qualifying employers may be eligible to claim an additional $14,000 of credits per employee in 2021.
A summary of the employee retention credit as amended by the Relief Act is available here.
The second PPP loan program is due to expire March 31, 2021. Many eligible businesses have still not applied. President Biden announced changes to the program on February 22, 2021 making it easier to qualify for a PPP loan now, and particularly for sole proprietors, independent contractors, and self-employed individuals.
The PPP loan program still has funds available. Congress could also extend the March 31, 2021 termination date for loan applications. However, Congressional extension is not certain, and qualifying individuals and businesses should consider applying for a PPP ...
The Employee Retention Credit, as originally enacted on March 27, 2020 by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. The Taxpayer Certainty and Disaster Tax Relief Act (Relief Act), enacted on December 27, 2020 amended and extended the Employee Retention Credit. On March 1, 2021, the IRS released Notice 2021-20 to provide guidance on the original Employee Retention Credit, as ...
The US Department of Justice announced the first civil settlement involving allegations of fraud against a PPP borrower.
SlideBelts Inc. received a PPP loan under the CARES Act. SlideBelts is an internet retail company and debtor in bankruptcy. SlideBelts and its president/CEO agreed to resolve the allegations in connection with the PPP loan by paying the government damages and penalties of $100,000. SlideBelts had already repaid the $350,000 PPP loan it had received.
The announced civil settlement resolves claims that the conduct of SlideBelts and its president/CEO violated ...
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 President signed new stimulus legislation into law on December 27, 2020. The new law, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260 (“Economic Aid Act”), authorizes new and additional PPP loans and modifies the CARES Act for this purpose. The Economic Aid Act authorizes funds of $284.5 billion for PPP loans, and which includes $35 billion for first-time borrowers. The United States Small Business Administration (SBA) and the United States Treasury also issued new guidance interpreting the new law.
The new SBA/Treasury guidance ...
Congress passed the Consolidated Appropriations Act, 2021 (the Act) on December 21, 2020. The Act, which is 5,593 pages, contains a number of stimulus measures designed to address the economic impact of the coronavirus crisis. While the bill has not become law as of the date of this blog, it is expected to be signed by the President quickly and then become law. Key provisions of the Act include:
- Under the CARES Act, expenses paid with Paycheck Protection Program (PPP) proceeds could not be deducted if the PPP loan was forgiven. The Act now permits taxpayers to deduct expenses paid with PPP ...
The SBA has now released broader information on borrowers who received loans under the Payroll Protection Program. The SBA’s release of this information was ordered by United States District Judge James E. Boasberg in a case filed against the SBA, WP Company LLC d/b/a The Washington Post, et al., v. U.S. Small Business Administration, Civil Action No. 20-1240 (JEB) and a related case, Center for Public Integrity v. U.S. Small Business Administration, Civil Action No. 20-1614 (JEB).
The SBA had previously released information for borrowers that received PPP loans of $150,000 or ...
A United States District Judge in Washington ordered the SBA to release the names and other information of all Paycheck Protection Loan borrowers. In WP Company LLC d/b/a The Washington Post, et al., v. U.S. Small Business Administration, Civil Action No. 20-1240 (JEB) and a related case, Center for Public Integrity v. U.S. Small Business Administration, Civil Action No. 20-1614 (JEB), United States District Judge James E. Boesberg issued a November 5, 2020 order requiring the SBA to release the names and other information for all PPP loan borrowers by November 19, 2020.
The SBA ...
On October 30, 2020, the U.S. Department of Labor (the “DOL”) released a Final Rule to “provide clear regulatory guideposts for fiduciaries of private-sector retirement and other employee benefit plans in light of recent trends involving environmental, social and governance (ESG) investing.” The Final Rule amended the regulations (29 C.F.R. §2550.404a-1; hereinafter referred to as the “Regulations”) enunciating fiduciary investment duties under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This article will review the ...
A United States District Judge in Washington has ordered the SBA to now release the names and other information of all Paycheck Protection Loan borrowers. In WP Company LLC d/b/a The Washington Post, et al., v. U.S. Small Business Administration, Civil Action No. 20-1240 (JEB) and a related case, Center for Public Integrity v. U.S. Small Business Administration, Civil Action No. 20-1614 (JEB), United States District Judge James E. Boesberg issued a November 5, 2020 order requiring the SBA to release the names and other information for all PPP loan borrowers. Under the order, the SBA ...
On October 31, 2020, the SBA released new forms and related instructions requiring borrowers with PPP loans of $2 million or more to provide additional information related to their PPP loans. Titled “Loan Necessity Questionnaire”, the SBA released separate forms and instructions applicable to both for-profit and non-profit borrowers. The SBA explains that “the purpose of this form is to facilitate the collection of supplemental information that will be used by SBA loan reviewers to evaluate the good-faith certification that you made on your PPP Borrower Application.”
Among the many employee benefit deadlines extended due to the pandemic by joint action of the Department of Labor and the Internal Revenue Service are the deadlines for making a Cobra election and paying the Cobra premiums. For purposes of these deadlines, the COVID-19 “outbreak period” is disregarded. President Trump declared COVID-19 as a national emergency as of March 1, 2020, which is the beginning of the “outbreak period.” The national emergency will end when the President declares it ended. The end of the “outbreak period” is 60 days after the end of the national ...
Each municipality and county in South Carolina (a taxing jurisdiction) is authorized to impose a business license tax based on the gross income of a business that operates within its borders. Businesses operating in South Carolina have been faced with registration requirements, filing deadlines, and rate classes that vary by taxing jurisdiction. The South Carolina Business License Tax Standardization Act (the Act) was signed into law by the Governor on September 30, 2020, and seeks to simplify the burdens of complying with business license tax requirements. The majority of the ...
In March 2020, I posted a blog reviewing the evolution of the legal analysis applied to a retirement plan’s holding of “employer securities” under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). See “If Your Retirement Plan Holds Employer Securities, Keep an Eye on the Jander Case.” In that blog, I reviewed the “Moench presumption” and the Supreme Court’s rejection of the “Moench presumption” in Fifth Third Bancorp v. Dudenhoeffer, 134 S.C. 2459 (2014).
In Dudenhoeffer, the Supreme Court announced a three-factor standard for ...
The SECURE Act of 2019 made three statutory changes to ERISA regarding lifetime income benefit payments from defined contribution plans (e.g., 401(k), 403(b), profit sharing, and money purchase pension plans). This blog will cover one of those changes – an amendment to Section 105 of ERISA. Section 105 requires the plan administrator to issue periodic benefit statements to participants and requires the disclosure of certain information on those statements, such as the participant’s account balance, vesting, and the value of each investment in the account. The SECURE Act ...
PPP loans under the CARES Act are being audited by the SBA. All PPP loans over $2 million will be audited, and many more under $2 million will be audited as well. Applying for forgiveness of a PPP loan increases the likelihood of an audit.
An audit or “review” by SBA of a borrower and its PPP loan can result in an SBA determination that the borrower (1) was ineligible for a PPP loan; (2) was ineligible for the PPP loan amount received or used the PPP loan proceeds for unauthorized uses; (3) is ineligible for PPP loan forgiveness in the amount determined by the lender in its full or partial ...
The Consolidated Omnibus Budget Reconciliation Act (“COBRA”) became law on April 7, 1986. For most of its nearly 35-year history, litigation involving COBRA has been relatively quiet. Most COBRA claims are tag-alongs, added as an afterthought to various sorts of discrimination claims, and a few cases involving the definition of “gross misconduct” (essentially the one narrow exception where an offer of COBRA coverage is not required).
In the wake of the pandemic, this is changing. Recently, there have been a number of cases filed (most filed as class actions) involving ...
In March, Congress passed the Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) to aid businesses and individuals. One CARES Act relief provision offered the deferral of certain payroll taxes. In particular, Section 2302 provides that employers may defer the deposit and payment of the employer’s portion of the Social Security taxes arising between March 27, 2020, and December 31, 2020 (the “Employer Deferral”). Any deferred taxes are repaid over the following 2-year period. The CARES Act failed to offer similar deferrals for the employee portion of ...
The U.S. Department of Labor (the “DOL”) recently released an information letter that concludes, if certain conditions are met, a plan fiduciary will not violate his fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) by offering a “professionally managed asset allocation fund with a private equity component as a designated investment alternative for an ERISA covered individual account plan.” This information letter (DOL Information Letter to Jon W. Breyfogle, June 3, 2020; hereinafter referred to as the ...
The Paycheck Protection Program under the CARES Act ended June 30, 2020, and with over $520 billion loaned to nearly 4.9 million self-employed individuals and businesses. The PPP was hastily passed by Congress and inconsistently-interpreted by government agencies. Over $125 billion remained available under the PPP, but because of the often complex and uncertain conditions for receiving loans under the program no one was interested in receiving these remaining funds - even where they could have been forgiven.
With the US economy still struggling, Congress has now rushed to pass an ...
This week the US Department of Justice (“DOJ”) announced a trio of criminal prosecutions for fraudulent PPP loan applications. Each involved inter-agency investigations involving the IRS Criminal Investigation Division (“IRS-CI”) and the inspector generals of banking agencies or the SBA.
On Monday, June 22, DOJ announced wire-fraud charges against a Massachusetts man who fraudulently applied for over $13 million in PPP loans, ultimately receiving over $2 million. It’s here.
On Tuesday, June 23, DOJ unsealed an indictment charging a Texas man with wire fraud, false ...
The U.S. Justice Department has opened an investigation into businesses and self-employed individuals that applied for loans under the Paycheck Protection Program. Over $500 million in loans to over 4.6 million businesses and individuals have been made under the PPP, and with over $100 million still available under the PPP to be loaned.
In connection with this investigation, Assistant Attorney General Brian Benczkowski, head of the Department of Justice’s criminal division, stated “whenever there’s a trillion dollars out on the street that quickly, the fraudsters are ...
Banks have loaned over $500 billion in PPP loans under the CARES Act, and to over 4.6 million businesses and self-employed individuals. These PPP loans are critical for these businesses and individuals – and their employees – to survive the economic devastation wrought by the COVID-10 pandemic.
PPP loans are administered by the U.S. Small Business Administration (SBA), and the SBA has issued a steady stream of administrative guidance concerning its interpretation of the Payroll Protection Program. Some of this SBA guidance is based on the agency’s interpretation of the ...
By Jennifer L. Rath, Enrolled Agent
If a taxpayer owes federal taxes, but does not have the financial ability to pay these taxes in full, the taxpayer can apply for a payment plan with the IRS to pay these taxes, and usually on a monthly basis. However, depending on the amount of taxes owed, the IRS may require the taxpayer to submit detailed financial information in order for the IRS to evaluate a suitable monthly payment. For this purpose, the IRS requires a taxpayer to prepare and submit a Collection Information Statement (CIS), typically through a Form 433, and with supporting financial ...
The Payroll Protection Program (PPP) under the CARES Act can provide eligible businesses with a forgivable loan from the government to be used to keep and pay employees, and for certain other purposes, and to help businesses, their owners, and their employees get through this difficult COVID-19 pandemic. However, the amount of a PPP loan – and the amount that potentially can be forgiven - may depend on the type of legal entity under which a business operates.
For example, partnerships/limited liability companies and self-employed individuals (including an individual operating ...
Presently, many human resource departments are scrambling to address issues raised by the passage of the Families First Coronavirus Response Act (the “FFCRA”) and the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act” collectively with the FFCRA hereinafter referred to as the “COVID-19 Legislation”). While many of the provisions of the COVID-19 Legislation are straightforward, the COVID-19 Legislation contains provisions that implicate a number of employee benefit requirements that could get overlooked. This article reviews two disclosure ...
In response to the COVID-19 pandemic, the Internal Revenue Service and the Pension Benefit Guaranty Corporation extended many deadlines for retirement plans, discussed below.
Remedial Amendment Period Extensions
In the first set of extensions, on March 27, 2020 the IRS announced an extension of the remedial amendment period for 403(b) plans from March 31, 2020 to June 30, 2020, and also extended the remedial amendment period for preapproved defined benefit plans from April 30, 2020 to July 31, 2020. These extensions provide welcome relief to employers trying to amend plans in a new ...
One of the key benefits of a Paycheck Protection Program (PPP) loan is the ability to have all or a portion of the loan forgiven. The amount of a PPP loan that will be forgiven is based initially on the qualifying costs an employer incurs during the 8 week period following loan funding (at least 75% of which must be used for payroll costs to qualify for 100% loan forgiveness). The initial forgiveness amount is then subject to reduction under a headcount test and a salary test. The headcount test and salary test reductions, however, do not apply in certain instances when headcount and salary are ...
Payroll Protection Program (PPP) loans under the CARES Act are available not only to small business but to self-employed individuals, too. Banks began accepting PPP loan applications for self-employed individuals beginning April 10th. The Small Business Administration (SBA) has now issued helpful guidance to self-employed individuals who may apply for these PPP loans. More information about the CARES Act and PPP loans can be found at www.burr.com.
Under the new SBA guidance, an individual is eligible for a PPP loan if: (i) you were in operation on February 15, 2020; (ii) you are an ...
One of the provisions included in the Coronavirus, Aid, Relief and Economic Security Act (CARES Act) allows an employer and self-employed individuals to defer the payment of the employer’s share of social security taxes (not Medicare taxes) or the corresponding portion of self-employment taxes. The option is available for payments that would otherwise be required to be made between March 27, 2020 and December 31, 2020. No special election is required and deferred amounts will be reported on a forthcoming revised Form 941 (future guidance will address how to report deferrals for ...
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.
On March 18, 2020 President Trump signed the Families First Coronavirus Response Act (Act) to provide relief to employees and small and midsize businesses. The Act is effective until December 31, 2020. The Act requires covered employers, except those with fewer than 50 employees who receive an exemption,[1] to provide the following:
- Two weeks (up to 80 hours) of paid sick time at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or ...
The IRS announced today that it has temporarily closed all Taxpayer Assistance Centers and discontinued face-to-face service throughout the country until further notice. The IRS also announced that it is continuing to process tax returns, issue refunds, and help taxpayers through this difficult time.
In response to the COVID-19 Coronavirus pandemic, Treasury Secretary Steven Mnuchin announced Tuesday that Americans will have until July 15th to pay their 2019 federal income taxes – and without late payment penalties or interest during this extended payment due date. The IRS has now followed with the issuance of specific guidance in IRS Notice 2020-17.
Under the new IRS notice, any person with a Federal income tax payment due April 15, 2020, is affected by the COVID-19 emergency and is considered an “Affected Taxpayer”.
For an Affected Taxpayer, the due date for making ...
In what is appearing to be a fairly fluid situation with the United States Treasury Department and the IRS, Treasury Secretary Steven Mnuchin announced, via Twitter, that not only tax payments but also the filing of individual tax returns will be extended from April 15 to July 15. Secretary Mnuchin specifically tweeted that “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”
This tweet from the Treasury Secretary represents a ...
A December 27, 2019 post to this blog by Jon Nason provided an overview of the many changes affecting retirement plans made by the SECURE Act, which was enacted as part of the Further Consolidated Appropriations Act of 2020 on December 20, 2019. Today’s post takes a deeper dive into one of the key changes.
Division O § 112 of the SECURE Act requires that 401(k) plans extend eligibility for making elective deferral contributions to certain long-term part-time employees. Because this change is mandatory, it is important for employers to understand how it will affect their 401(k) plan as ...
On December 20, 2019, President Trump signed the Further Consolidated Appropriations Act, 2020 (the “Appropriations Act”) that includes the “Setting Every Community Up for Retirement Enhancement Act of 2019” (the “SECURE Act”). The SECURE Act contains 27 provisions which are intended to modernize and expand the availability and effectiveness of retirement plans (including Individual Retirement Accounts or IRAs).
Unfortunately, due to the number of provisions in the SECURE Act, this Article will be limited to provisions with a significant impact on retirement ...
Since 2015, employers and health insurers have been required to report health plan coverage information to the IRS and to individuals. Why? The information is necessary in order for the IRS to administer certain portions of the Affordable Care Act (“ACA”), such as whether (1) a “pay or play” penalty is assessable for noncompliance with the coverage requirements, (2) an individual is eligible for a premium tax subsidy, and (3) the individual mandate penalty is assessable.
Recently issued Notice 2019-63 contains three gifts from the IRS in the form of limited relief to ...
Generally, a 403(b) plan is a retirement planning program whereby a public school or tax-exempt 501(c)(3) organization (including churches) makes contributions for their employees (and certain ministers) to specific types of funding arrangements (i.e., annuity contracts, custodial accounts, or retirement income accounts [which are limited to church employees and ministers]). Historically, 403(b) plans utilized annuities as their funding vehicles. Thus, 403(b) plans are often referred to as tax sheltered annuities or TSA plans.
In 2007, the Internal Revenue Service ...
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 ...
The Fixing America’s Surface Transportation (FAST) Act, signed into law December 4, 2015, created new Internal Revenue Code § 7345 which requires the IRS to notify the United States State Department when an individual is certified as owing a “seriously delinquent tax debt”. When this notification of certification is received from the IRS, the State Department is generally required to deny the individual a U.S. passport (or renewal of a U.S. passport) or may revoke any U.S. passport previously issued to that individual. The State Department has the sole authority to revoke or ...
Spouses who file a joint income tax return are both jointly and severally liable for the taxes associated with the return, both federally and at the state level. If the joint tax liability is not paid, or additional tax is assessed through an audit, the Internal Revenue Service (IRS) and state taxing authority (the South Carolina Department of Revenue in the case of South Carolina) will pursue both spouses in an effort to collect the tax. One spouse may have believed that the other spouse had paid the taxes, or that all income and deductions were properly reported, only to find out a few years ...
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 IRS issued guidance in 2014, through Notice 2014-21, on how to report income from virtual or “crypto” currency transactions. The IRS has since developed a “Virtual Currency Compliance” program focusing on U.S. taxpayers who may not be reporting, or correctly reporting, virtual currency transactions. The IRS has now announced it will be issuing notices to over 10,000 specific U.S. taxpayers warning these recipients that they have been identified as having engaged in virtual currency transactions and their U.S. tax compliance obligations. There are three (3) target ...
Insurance carriers and employer sponsors of health plans were not exactly thrilled with the passage of the Affordable Care Act in 2010. You might say, the Affordable Care Act was viewed as the “wicked witch.” Although the Affordable Care Act has managed to survive, the PCORI fee ̶̶ a limited duration fee applicable to policy and plan years ending after October 1, 2012 and before October 1, 2019 ̶ is gasping its last breath.
The Patient-Centered Outcomes Research Institute (PCORI) is a nonprofit organization created by the Affordable Care Act to support clinical effectiveness ...
Under the 2017 Tax Cuts and Jobs Act, Congress enacted the 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.
The 20% pass-through deduction is not applicable generally to certain businesses that provide services, such as doctors, lawyers ...
The Internal Revenue Service (“IRS”) will be releasing guidance on the tax treatment and reporting requirements of “virtual currencies” (i.e., cryptocurrencies) very soon, according to Internal Revenue Service Commissioner Charles (“Chuck”) Rettig.
Commissioner Rettig’s statement was prompted by a letter sent to him on April 11, 2019 by a bipartisan group from the House of Representatives. The letter urged the IRS to issue guidance on the tax consequences and basic reporting requirements for virtual currencies. In particular, the Representatives’ letter ...
Congress enacted the Opportunity Zone (“OZ”) investment incentives in late 2017 as part of the Tax Cuts and Jobs Act. Since then many investors, fund managers, and community development professionals have devoted significant time and resources to locating and underwriting investment opportunities. The legislation left many unanswered questions – largely limiting investments to obvious qualifying businesses. The first set of proposed regulations, released October 29, 2018, provided further guidance but not enough to answer many remaining questions.
The 50% Gross ...
On April 29, 2019, the United States Department of Labor (the “DOL”) released a policy statement providing transitional relief from the potential adverse consequences arising from a District Court’s vacating portions of the DOL’s regulations on the alternative test of the definition of “employer” for Association Health Plan (“AHP”) purposes.
By way of background, on June 21, 2018, the DOL published regulations which established an alternative test that described in prior DOL guidance as to who can sponsor an ERISA-covered AHP as an “employer” (the ...
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 ...
Many employers began to receive notices from the IRS in 2018 proposing the assessment of a payment against the employer for the tax years 2015 and 2016 under Section 4980H of the Internal Revenue Code. The issuance of these notices by the IRS has now increased through 2019 to-date, and where employers may have received an initial notice in 2018 for the 2015 tax year, and now a second and additional notice proposing the assessment of a payment under Section 4980H for the 2016 tax year. Additional IRS notices for 2017 are certainly to follow.
Section 4980H(a) imposes an “assessable ...
Many people are aware of the federal gift tax and the federal estate tax (sometimes referred to as the ‘death tax’). These are the transfer taxes which are imposed on transfers during life, by gift, or at death. In 2019, a U.S. Citizen may transfer assets valued of up to $11,400,000 during their lifetime or, to the extent not used during lifetime, upon their death without paying a gift or estate tax. The third federal transfer tax, the Generation-skipping Transfer Tax (“GST”), is often overlooked but may be of significant importance. The applicable exclusion amount for GST ...
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 ...
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 ...
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 ...
A bedrock of IRS administrative practice has been the voluntary disclosure. Where an individual or business has not filed tax returns or believes they may have criminal tax exposure for prior actions, IRS procedures have long-sanctioned a form of “criminal tax amnesty” if the taxpayer voluntarily comes forward before being contacted by the IRS, discloses his tax misdeeds, fully cooperates to correct the back tax issues, and then becomes compliant going forward. In exchange for this “voluntary disclosure”, while criminal tax prosecution may not be recommended, the ...
The Bipartisan Budget Act of 2015 enacted sweeping changes to the federal audit regime for entities taxed as partnerships. The new audit rules became effective for tax years beginning on or after January 1, 2018.
For tax years beginning before January 1, 2018, partnerships are audited using one of three different procedures (unless the partnership makes an affirmative election to be governed by the new partnership audit rules effective for tax years beginning before January 1, 2018). These procedures are:
a. Partnerships with 10 or fewer partners: The Internal Revenue Service ...
The Tax Court recently issued a full T.C. opinion which will impact a tremendous number of conservation easement donations. In Pine Mountain Preserve, LLLP v. Commissioner, 151 T.C. 4 (2018) the Tax Court found a reservation of rights to construct certain improvement within a floating building envelope resulted in a conservation easement failing to constitute a qualified real property interest granted in perpetuity. As a result, no deduction was allowed for the grant of the conservation easement.
Taxpayers have commonly reserved the right to construct improvements within a ...
On January 18, 2019, Treasury and the IRS issued final regulations for the new Section 199A 20% profit deduction for pass-thru businesses adopted under the 2017 Tax Cuts and Jobs Acts. The new regulations are eagerly anticipated because filing season for the first year of the new tax law, 2018 generally, is now upon us. The final regulations were issued after public comments were received in response to proposed Section 199A regulations issued last August. The IRS, in IR-2019-04 (January 18, 2019), also released a new set of additional proposed resolutions under Section 199A ...
Aside from corporate tax reductions, one of the most important aspects of the new Tax Cuts and Jobs Act beginning this year is the new 20% deduction for "pass-through" businesses - i.e. businesses that are not corporations. With the corporate tax rate being reduced to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. However, this 20% deduction, found in new Internal Revenue Code § 199A, is saddled with exclusions, phase-outs, technical issues, and uncertainties so that many ...
The new 20% deduction for "pass-through" business owners under the Tax Cuts and Jobs Act is raising many questions from owners of real estate-related businesses. Can these owners qualify for this important deduction, and under what conditions?
For most pass-through business owners (such as owners of LLCs, Subchapter S corporations, and partnerships), the deduction is the lessor of (1) the "combined qualified business income" of the taxpayer, or (2) 20% of the excess of taxable income over the sum of any net capital gain. The term "combined qualified business income" is then defined ...
A bedrock of IRS administrative practice has been the voluntary disclosure. Where an individual or business has not filed tax returns or believes they may have criminal tax exposure for prior actions, IRS procedures have long-sanctioned a form of "criminal tax amnesty" if the taxpayer voluntarily comes forward before being contacted by the IRS, discloses his tax misdeeds, fully cooperates to correct the back tax issues, and then becomes compliant going forward. In exchange for this "voluntary disclosure," while criminal tax prosecution may not be recommended, the taxpayer will ...
Aside from corporate tax reductions, one of the most important aspects of the new Tax Cuts and Jobs Act beginning this year is the new 20% deduction for "pass-through" businesses - i.e. businesses that are not corporations. With the corporate tax rate being reduced to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. However, this 20% deduction, found in new Internal Revenue Code § 199A, is saddled with exclusions, phase-outs, technical issues, and uncertainties so that many ...
Individuals who are the unfortunate subjects of federal criminal tax prosecution face prison terms, probation, fines, restrictions on travel and other punishment. Conviction of felony tax offenses results in certain Constitution rights being lost, such as the right to vote and bear arms.
As part of a conviction for federal criminal tax offenses, an individual will most likely also be sentenced to pay "restitution" to the federal government. Payment of restitution in a criminal tax case is designed to compensate the IRS for the loss caused by the defendant's wrongdoing.
In federal ...
A health wellness program is broadly defined as any program of health promotion or disease prevention. My recent article entitled "Taxonomy of Health Wellness Programs - Part I" reviewed the classification of health wellness programs (hereinafter referred to as "Wellness Programs") under the Health Insurance Portability and Accountability Act ("HIPAA"). In this article, I am going to review an alternative way of classifying Wellness Programs that is contained in the "2018 Employer Guide: FINDING FIT: IMPLEMENTING WELLNESS PROGRAMS SUCCESSFULLY" (the "Guide").
In February ...
Businesses that have employees must pay wages and salaries to their employees, and the employer must collect federal employee income taxes and the employee's share of social security (FICA) from these wages and salaries, add the employer's "matching share" of FICA, and then deposit these taxes with the IRS. The Employer must file a quarterly return with the IRS (Form 941) reporting all wages and salaries paid, all tax deposits made during the quarter, and pay any balance due with the quarterly return.
The Recession took a heavy toll on businesses throughout the country, with many ...
Congress enacted the new Section 199A 20% profit deduction for the 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 complexity and exceptions, and so ...
After months of eager anticipation, today the Department of the Treasury released regulations defining and refining certain requirements set forth in the "Opportunity Zone" law.
While the Opportunity Zone statute provided a framework for tax-deferred investments, most projects have been on hold pending the regulatory framework. The regulations released today answer many questions, while others remain unaddressed. According to today's release, more guidance will be forthcoming by the end of the year.
Some highlights of the proposed regulations include:
Substantial ...
Authored by: John M. Jolley, Sherri L. McGirt, and Jennie Cerrati
When the 2017 Tax Cuts and Jobs Act was passed, significant changes were made to the Federal Estate, Gift and Generation Skipping Tax, the most prominent of which is the increased applicable exclusion amount, which is the amount that is excluded from a decedent's gross estate for federal estate tax purposes. The applicable exclusion amount was $5.49 million for decedent's dying and gifts made in 2017. This amount is doubled for decedent's dying and gifts made after 2017 and before 2026. It is currently $11.18 million and ...
Changes have been made to the income tax withholding tables and estimated tax rates as a result of the new Tax Cuts and Jobs Act. Taxpayers should pay extra attention now to their tax withholdings and estimated tax payments in order to avoid penalties.
Taxpayers can generally avoid underwithholding/estimated tax penalties if they:
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- Pay 90% of the current year liability, or
- Pay 100% of the prior year liability.
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However, If a taxpayer’s adjusted gross income for the prior year was more than $150,000, the taxpayer must then have withholdings or estimated tax payments for the current year ...
In today's digital age, we are seeing more individuals concerned about what happens to their digital assets at their death. For example, a Broadway aficionado wanting to be certain their collection of show tunes, purchased on iTunes makes it to their grandchild. Like most areas of technology, advances in digital currency and music are outpacing the legislative change, while the Courts struggle to keep up.
An increasingly popular question posed by estate planning clients is the question of who can inherit your iTunes account? The short answer is - no-one. iTunes is a service provider ...
A health wellness program is broadly defined as any program of health promotion or disease prevention. In a recent article entitled "Health Wellness Programs - An Introduction and a Resource", I reviewed certain characteristics common to health wellness programs (hereinafter referred to as "Wellness Programs"). In this article, I am going to review the classification of Wellness Programs under the Health Insurance Portability and Accountability Act ("HIPAA").
From a legal perspective, Wellness Programs are initially divided into two classes: (1) programs that are part of (or ...
The IRS has issued Proposed Regulations now under the new Section 199A 20% profit deduction for pass-through entities. The Proposed Regulations provide important guidance on the definition of "Qualified Business Income" - which is the starting point for determining the amount of the deduction.
New Section 199A, adopted by Congress under the Tax Cuts and Jobs Act (TCJA) and effective January 1, 2018, provides a 20% deduction for pass-through businesses - i.e. businesses that are not corporations. With the corporate tax rate under the TCJA being reduced to a flat 21%, the 20 ...
On August 8th, the IRS released its much-awaited Proposed Regulations on the new Section 199A 20% profit deduction for pass-through businesses. The new deduction applies to essentially all types of businesses other than C corporations, and was created under the 2017 Tax Cuts and Jobs Act. Individuals can begin claiming the deduction on their upcoming 2018 tax returns. The Proposed Regulations issued by the IRS, and released through Announcement IR-2018-162, provide important guidance to taxpayers and tax practitioners alike on this new federal income tax deduction.
The ...
The Internal Revenue Service today issued its much-anticipated Proposed Regulations on the new Section 199A 20% deduction for owners of pass-through business entities. This important deduction was created under the 2017 Tax Cuts and Jobs Act, the most significant tax reform legislation in over 30 years.
The Proposed Regulations, embodied primarily in Proposed Treasury Regulations § 1.199A-1 through 6, were announced by the IRS in Announcement IR-2018-162, and are available through the IRS website, www.irs.gov. The IRS issued a related Announcement IR-2018-164, and which ...
As extension season awaits us in less than three months, there are many taxpayers who will discover that they have fallen victim to identity theft. The IRS has recently clarified measures to take if you happen to fall into that category, which should not be taken lightly.
The most common way of discovering that you have fallen victim to identity theft occurs upon electronically filing your tax return.
Taxpayers attempting to file a tax return that the IRS rejects because another return under the taxpayer’s Social Security number has already been filed are likely victims of identity ...
With increasing employee health costs, many employers are adopting or expanding their health wellness programs. In the retirement plan area, some employers are also adopting programs to assist their employees with managing their finances and planning for retirement (sometimes referred to as "financial wellness programs"). This article is limited to health wellness programs and such programs will herein be referred to as "wellness programs".
A wellness program is broadly defined as any program of health promotion or disease prevention. Wellness programs encompass a wide ...
Generally, an employer is required to deduct and withhold Federal Insurance Contribution Act taxes ("FICA"), Federal Unemployment Tax Act taxes ("FUTA"), and income tax withholding from its employee's wages and is separately liable for the employer's share of FICA and FUTA. However, in some cases, an employer will use a third party to perform some or all of the employer's federal employment tax withholding, reporting, and payment obligations.
Common third-party payer arrangements include: a payroll service provider ("PSP"), a reporting agent ("RA"), a professional employer ...
Where a business does not pay its federal employment and/or unemployment taxes, and continues in operation, the IRS will utilize administrative measures, including tax liens and levies, to collect the unpaid taxes. Administrative measures alone, however, may often not prevent a business from operating and also paying its back taxes. In these instances, the IRS has increasingly gone to the courts, and is now more frequently requesting injunctive relief against these businesses in order to prevent the business from operating and where it may further accrue federal ...
The IRS has the power to seize or “levy” assets, banks accounts, wages and other assets and income of an individual or business to satisfy delinquent taxes. However, the IRS will sometimes levy the wrong assets or income; that is, it will seize assets or income belonging to someone other than the person or business that owes the tax. This happens.
When the IRS wrongfully seizes or levies the assets or income of a person or business that does not owe the tax, this person/business can file a claim for wrongful levy with the IRS and also can sue the IRS civilly to prevent the levy or to have the ...
Qualified Opportunity Zones were included as part of the Tax Cuts and Jobs Act which became law in December 2017. The zones were originally introduced as the Investing in Opportunity Act sponsored by South Carolina Senator Tim Scott and are meant to encourage investment in economically distressed communities.
Opportunity Zones have generated a lot of interest and even more questions. This alert attempts to answer the most frequently asked questions we are hearing from clients.
- What is the opportunity?
The opportunity is for investors with long-term capital gains to defer paying ...
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 ...
The IRS recently announced that, beginning this month, the tax agency will be assigning certain unpaid tax accounts to private collection agencies. The IRS will retain and continue to collect most unpaid taxes. The IRS has identified certain tax accounts, however, that it will assign over to these newly-designed private collection firms for collection. The accounts to be assigned to the private collection firms involve taxpayers who have not paid their taxes for many years and who should be well-aware of their unpaid taxes.
The private collection firms will be authorized to contact ...
Section 403(b) of the Internal Revenue Code of 1986, as amended (the "Code") authorizes a type of retirement plan that can be sponsored by certain tax exempt organizations (e.g., a Code Section 501(c)(3) organization, including a church), certain educational organizations (as described in Code Section 170(b)(1)(a)(ii), including colleges), and certain state or local governmental organizations. In many cases, a 403(b) plan's assets are held in either annuity contracts or custodial accounts (with participant direction of the investments) which may limit the plan sponsor's ...
The IRS recently announced it will be shutting down its successful Offshore Voluntary Disclosure Program (OVDP) for unreported foreign bank accounts and income. The program will end September 28, 2018. Under the OVDP, first started in 2009, over 50,000 individuals have come forward to report previously unreported foreign bank accounts and income. The IRS reports it has raised over $11 billion in taxes, penalties and interest through the OVDP.
The U.S. income tax system is perhaps the most expansive in the world. U.S. citizens and permanent residents must report their worldwide ...
The IRS requires businesses to obtain a Form W-4 from each employee, and also a Form W-9 from contractors and others who may receive payments for services. If a business does not receive these forms, the business must deduct and withhold “back-up withholding” from all wage and other payments to these individuals equal to 24% of the payments (down from 28% prior to 2018). Amounts withheld from an employee/contractor’s payments as back-up withholding are reported on Forms W-2/Form 1099 by the business, and should be reported as federal income tax withheld on the ...
UPDATE: In Notice 2018-18, published March 1, 2018, the IRS announced its intention to issue regulations clarifying that S corporations will be subject to the extended carried interest holding period.
Prior to the passage of the Tax Cuts and Jobs Act (the "Act"), one of the more controversial and hotly-debated tax benefits was the so-called "carried interest," which allowed certain fund managers and venture capital firms to pay income taxes on what would typically be considered ordinary income at favored long-term capital gains rates. Both Presidential candidates took aim at the ...
An IRS tax levy is a seizure of a person’s property or rights to property. The IRS then uses the seized property to pay taxes owed. A levy allows the IRS to confiscate a person’s property, which includes cars, boats, real estate, and other “tangible” property. The IRS can also levy and take a person’s wages, bank accounts, and retirement income including Social Security benefits.
The IRS has been authorized to impose levies since 1954. Generally, the IRS must wait at least 10 days from the date it sends a notice of intent to levy before it can make a seizure. This notice must inform ...
Under the Tax Cuts and Jobs Act, Congress is now offering a new 20% deduction for "pass-through" businesses - i.e. businesses that are not corporations. With the corporate tax rate being reduced under the new law to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. If applicable, the 20% deduction can be claimed by the owners of S corporations, partnerships, sole proprietorships, and even the beneficiaries of trusts. These are business entities that do not pay income tax at the ...
At the end of 2017, President Trump signed into law a sweeping and comprehensive overhaul of the U.S. tax system. The Tax Cuts and Jobs Act includes significant changes for business owners. We invite you to attend a special seminar, led by McNair's Tax Practice Group Leader, Erik Doerring, who will discuss these changes and how they will affect you and your business. Topics will include:
- Corporate tax changes/reductions
- Individual tax changes
- The new 20% deduction for pass-through businesses
- Potential business restructuring to take advantage of the new tax cuts
Join us as we break ...
On January 22, 2018, President Trump signed into law H.R. 195 (hereinafter referred to as the "2018 Budget Deal") which ended the federal government shutdown and funds the federal government through February 8, 2018. In addition, the 2018 Budget Deal included a six-year funding extension to the Children's Health Insurance Program. The 2018 Budget Deal also contains a two year delay to the effective dates of the "Cadillac Tax", the medical device excise tax, and an annual fee on health insurance providers. This blog will review the two year delays to the above-referenced taxes and ...
Aside from corporate tax reductions, one of the most important aspects of the new Tax Cuts and Jobs Act beginning this year is the new 20% deduction for “pass-thru” businesses – i.e. businesses that are not corporations. With the corporate tax rate being reduced to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. However, this 20% deduction, found in new Internal Revenue Code § 199A, is saddled with exclusions, phase-outs, technical issues, and uncertainties so that many ...