The International Tax Certificate and Master Degree are designed for international tax professionals (lawyers, accountants, economists, and finance) for an in-depth study of tax risk management.
Degree candidates are exposed to (i) international tax laws, regulations, and policies in the international tax risk management field, (ii) technology and tax data management, and (iii) weekly practice case studies using Zoom and team groups. Individuals who complete the program will be able to synthesize scenarios, practice, and legal regulation in the international tax risk management field, providing analysis or judgments for consideration to organizational leadership with a nuanced perspective.
Courses are offered by asynchronous distance learning to provide a flexible schedule for working professionals. Interactive coursework includes case study assignments and regular interaction with classmates & the faculty through twice-weekly zoom meetings (recorded), pre-recorded videos, audio casts, discussion boards, and group breakout sessions. For more information, contact Admissions: law.tamu.edu/distance-education/international-tax.
Texas A&M’s operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is one of only 60 accredited universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 universities that hold the triple U.S. federal grant of Land, Sea, and Space! Texas A&M law schoolranked in the top 30and hasa placement rate above 98%, ranked #1 in the nation for “gold standard” jobs for 2022 – the third consecutive year the law school has ranked in the top 10 nationally for gold-standard employment outcomes. The law school’s new campus is the anchor of the Texas A&M AggieLand North $1.2 billion dollar investment.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
Robert Bloink and Prof. William Byrnes’ (Texas A&M Law) weekly Tax Facts Intelligence strategy newsletter for financial advisors is available via the Tax Facts app or search.TaxFactsOnline.com
Robert Bloink and William Byrnes’ 12 Tax Facts Intelligence articles of July 2023 analyzing tax strategies and wealth building techniques. Available with the 4 volume Tax Fact book series, and additional retirement planning analysis at http://www.alm.com/taxfacts
Each week, Professor William Byrnes of Texas A&M and industry insider Robert Bloink analyze four retirement, wealth, tax, and alternative strategies or IRS notices for financial advisors and their clients.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week we address client considerations for cryptocurrency holdings when building their estate and gift tax planning strategies. some cities are considering mandatory employer-sponsored commuter benefit programs to help employees cope with rising costs and sky-high gas prices. Read on for more.
IRS Decreased the ACA Affordability Threshold, Increased Employer Penalties for 2022. Employers should be reminded that the IRS announced new 2022 inflation adjustments back in May. For 2022, the ACA affordability threshold was decreased by 0.22% to 9.61%–meaning that many employers will be required to pay more for employee coverage in 2022 because employer-sponsored coverage will only be deemed affordable if the employee’s required contribution for self-only coverage does not exceed 9.61% of the employee’s household income. At the same time, the IRS also increased the penalties that can be assessed if the employer fails to offer affordable coverage to at least 95% of its full-time employees (and dependents) and at least one employee receives a premium tax credit. The penalties under IRC Section 4980H(a) were increased from $225 per month to $229.17 per month in 2022. The penalties under IRC Section 4980H(b) were increased from $338.33 per month to $343.33 per month in 2022. For more information on the affordability threshold, visit Tax Facts Online. Read More
Should Your Client Offer Health Coverage Benefits to Independent Contractors? In today’s labor market, many employers are scrambling to offer benefits that will attract talented workers. Some may be considering allowing independent contractors who perform work for the company to enroll in employer-sponsored health coverage. Those business clients should be advised that doing so would likely create a multiple employer welfare arrangement (MEWA). MEWAs provide employee welfare benefits to employees of two or more employers if those employers are not part of the same controlled group. Often, insurance companies will not permit the employer to create a MEWA and provide coverage at all, meaning that the insurer could refuse to cover insurance claims and the employer could possibly find itself on the hook for self-funding those claims. It’s also possible that the employer could become subject to M-1 filing requirements–and failure to comply could result in significant penalties. The bottom line? Any client should speak with experienced legal counsel before deciding to allow independent contractors to participate in any employer-sponsored health insurance coverage. For more information on welfare benefit plans, visit Tax Facts Online. Read More
Sixth Circuit Hands Win to Plan Sponsors in Fiduciary Breach Lawsuit. In the first published appeals court decision that applies the Supreme Court’s Hughes v. Northwestern University, the Sixth Circuit held this past summer that ERISA does not give the courts any type of broad license to second-guess the investment decisions of retirement plans. In this case, the plaintiffs were participants who claimed the plan breached their fiduciary duties by offering actively managed investment options, rather than lower-cost index options that performed better. They also claimed the plan fiduciaries allowed the plan to pay excessive recordkeeping and management fees. Under the Sixth Circuit’s logic, while the actively managed funds may be more expensive, that alone wouldn’t be enough to make them an imprudent investment decision. In fact, the court reasoned that denying participants the option to invest in actively managed funds may be imprudent. With respect to the pleading standard in these cases, the court found that it’s not enough for participants to point to funds that performed better. Instead, plaintiffs are required to prove that the investment was imprudent from the moment it was selected. With respect to the excessive fee claim, the court held that plaintiffs are required to establish context showing that the services provided by the plan are substantially equivalent to the plaintiffs’ lower-cost comparables. For more information on the obligations of plan fiduciaries, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week we address client considerations for cryptocurrency holdings when building their estate and gift tax planning strategies. some cities are considering mandatory employer-sponsored commuter benefit programs to help employees cope with rising costs and sky-high gas prices. Read on for more.
Are Mandatory Commuter Benefits Coming to U.S. Cities? The Philadelphia Council and Mayor this summer signed a provision that requires certain employers to begin providing commuter benefits to employees. Philadelphia employers with 50 or more covered employees will be required to offer a pre-tax payroll deduction for certain mass transit expenses, qualified bicycle expenses or employer-covered benefits for fare instruments beginning December 31, 2022. A “covered employee” is one that has worked, on average, 30 hours per week in the city for the same employer over the prior 12 month period. The benefits provided will be equal to the amounts permitted by federal law for transit benefits. In 2022, the maximum exclusion for transportation in a commuter highway vehicle or for transit passes is $280 per month. In 2018 through 2025, bicyclists cannot exclude qualified bicycle commuting reimbursements under federal law. Employers, however, are entitled to deduct their reimbursements as business expenses for those years. While the commuter benefit requirement is city-specific, it’s likely that many more cities may consider implementing their own programs in light of gas price increases–and that employers themselves may consider their own programs in order to attract and retain employees in a tough labor market. For more information on the federal rules governing transit benefit reimbursements and deductions, visit Tax Facts Online. Read More
Section 127 Expansion Allows Employers to Offer Tax-Free Student Loan Benefits. Under IRC Section 127, employers can provide up to $5,250 in tax-free payments to employees for qualified educational expenses under a written educational assistance plan. The 2020 CARES Act expanded the rule to allow student loan repayment assistance as a qualified educational expense. Employees receive the assistance tax-free and employers can deduct the payments as a business expense. To qualify, the employer must have a written educational assistance plan that doesn’t offer any other taxable benefits or compensation to the employee (whether case or non-cash). The plan must not be discriminatory and employees must receive reasonable notice about the available plan benefits. The expansion is currently temporary, and is set to expire after December 31, 2025 unless extended by Congress. For more information on the educational assistance plan requirements, visit Tax Facts Online. Read More
Are Your Clients Considering Gift and Estate Tax Consequences for Cryptocurrency Holdings? Like any other piece of property, cryptocurrency can be subject to gift and estate taxes whether transferred as a lifetime gift or a gift at death. Cryptocurrency assets are treated as property for all federal tax purposes. In 2022, taxpayers can transfer up to $12.06 million worth of property per person without worrying about the federal estate tax. However, the exemption is scheduled to revert to around $5 million after 2025. That means many clients may wish to take advantage of a lifetime gifting strategy. Cryptocurrency assets gifted during life are removed from the donor’s estate–and the IRS has already clarified that there will be no clawback provision if an individual donor takes advantage of the expanded estate tax exemption during life. Clients with significant cryptocurrency holdings may also wish to consider trust planning techniques, such as a spousal lifetime access trust (SLAT) which can remove the cryptocurrency from their estate for the benefit of a spouse and other heirs. Cryptocurrency assets that are inherited receive a step up in basis like any other property transfer, which can reduce or even eliminate capital gains on cryptocurrency sales after the original owner’s death. For more information on the tax treatment of cryptocurrency, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we have details on the Washington state official guidance that’s been released on the state-level plan for taxing non-fungible tokens (NFTs).
Washington State Announces Plan to Tax NFTs. Washington state recently released guidance on how non-fungible tokens (NFTs) will be taxed under the state’s sales tax rules. This guidance is the first to emerge at the state level and, while it only applies in Washington, it’s expected that other states may follow suit. The Washington state guidance provides information on how the Washington state department of revenue would source the sales. Under the guidance, if the buyer received the digital product at a seller’s business location, the sale would be sourced to that location. If not, the sale would be sourced to where the buyer receives the NFT. If neither of these two rules apply, the location of the customer’s address that’s given in the seller’s records. If these three rules don’t apply, the sale would be sourced to the location of the customer that can be derived from the sale process itself (including the buyer’s credit card billing address). Finally, if none of this information is available, the location of the sale is the address from which the digital code was first available for transmission by the seller, or from which a digital automated service was provided. Any location that solely provides the digital transfer of the product is disregarded. The guidance does not directly address situations where the seller does not know the buyer’s location, but seems to imply that the location of the seller’s server would be the deemed location if the seller does not take steps to identify the buyer’s location. For more information on virtual currency taxation, visit Tax Facts Online. Read More
IRS Announces 2023 Contribution Threshold for Premium Tax Credit Eligibility Purposes. The ARPA expanded the premium tax credit rules to provide a more generous ACA benefit for 2021 and 2022. Typically, the premium tax credit is available to taxpayers with household income between 100 percent and 400 percent of the federal poverty line. ARPA generally eliminated the upper income limit and increased the amount of the premium tax credit (the percentage of household income that individuals are required to contribute to their health insurance coverage decreased to 9.61% in 2022). For 2023, even more taxpayers may qualify for the tax credit because the IRS recently announced that the affordability threshold will decrease significantly, to 9.12% for 2023. This decrease means that many employers will be required to pay more for employee coverage in 2023 because employer-sponsored coverage will only be deemed affordable if the employee’s required contribution for self-only coverage does not exceed 9.12% of the employee’s household income. For more information on the premium tax credit income requirements, visit Tax Facts Online. Read More
HSAs vs. FSAs: Can They Cover the Same Costs? HSAs and FSAs can cover many of the same types of qualified medical expenses, as defined in IRC Section 213(d). However, HSAs can cover some additional expenses that FSAs are not permitted to cover. For example, HSAs can reimburse account owners for qualified long-term care expenses on a tax-free basis (FSAs cannot). However, HSAs can only reimburse for health expenses of the account owner’s child if that child qualifies as a dependent. FSAs, on the other hand, can reimburse for those expenses if the child is under the age of 27 as of the end of the tax year (regardless of whether the child qualifies as a dependent). HSAs can also make distributions even if the account owner uses the money for non-medical expenses (although penalty taxes will apply), while FSAs are only permitted to make distributions to cover qualified expenses. For more information on the FSA rules, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
As most readers know, the Inflation Reduction Act passed the Senate last weekend. While most of the sweeping tax changes proposed in recent years were cut from the plan, the legislation did contain some important tax provisions that could impact clients if the bill is eventually signed into law in its current form. We also have information on the new IRS extended deadlines for retirement plan sponsors to adopt amendments required under the SECURE Act, CAREs Act and Miners Act of 2019 and how plans should proceed if they missed the July 31 restatement deadline.
Inflation Reduction Act: Tax Aspects. The Inflation Reduction Act eliminated many of the proposed tax hikes contained in last year’s Build Back Better Act. However, it did contain a provision that would add a new 15% corporate minimum tax to ensure that corporations with at least $1 billion in profits would be subject to a minimum 15% income tax rate. The 15% rate would be applied to the company’s “book income” profits, rather than adjusted gross income as reported to the IRS, in an effort to prevent corporations from using loopholes to escape taxation. The law also contains a provision that would extend the expanded ACA premium tax credits through 2025. Over ten years, the IRS would receive $80 billion in funding to step up enforcement efforts. At the last minute, a provision that would have closed the so-called carried interest loophole was eliminated and a 1% excise tax on certain stock buybacks was introduced. For more information on how corporations are currently taxed, visit Tax Facts Online. Read More
IRS Grants Three-Year SECURE Act, CARES Act Extension. The IRS recently announced that it was extending the deadline for plans to adopt amendments under the SECURE Act and CAREs Act through 2025 (for most calendar year plans, the deadline would have been December 31, 2022 absent the extension). The extension applies to qualified 401(k)s, 403(b) plans and IRAs. Amendments that are made prior to the extended deadline will not cause the plan to violate the anti-cutback rule (for example, if the plan was amended to permit automatic deferrals under a qualified automatic contribution arrangement to increase pursuant to the SECURE Act). Additionally, plans that are amended in 2025 to reflect the post-SECURE Act 10-year distribution failure would not have an operational failure. To take advantage of the extension, the plan should adopt the amendment by December 31, 2025 and make the amendment retroactive to the date of legislation. In the meantime, the plan should operate as though the amendment was in effect. The IRS has also indicated that SECURE Act guidance on long-term part-time employees, post-death distributions and other issues should be included with the 2023 required amendments list. For more information on the SECURE Act changes, visit Tax Facts Online. Read More
Did Your Retirement Plan Miss the Pre-approved Defined Contribution Plan Restatement Deadline? Most pre-approved defined contribution plans must be restated every six years (the most recent restatement deadline was July 31, 2022). Plans that missed the deadline cannot rely on the pre-approved plan document’s favorable opinion letter and will be treated as individually designed plans. When a plan is individually designed, there’s no guaranteed document to ensure compliance with the law (which is why most plans rely on the pre-approved plan document in the first place). Those plan sponsors must now analyze their plan document to ensure it complies with all requirements that apply to individually designed plans. Any errors can be corrected using the Employee Plans Compliance Resolution System (EPCRS). Once the plan is brought into compliance via EPCRS, the plan can choose to adopt a new and updated pre-approved plan document so that it can once again rely on the IRS opinion letter. For more information on the qualified plan requirements, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
The Inflation Reduction Act was signed by President Biden in August. This week, we remind our subscribers of some of the most valuable energy-related tax credits that will be available to individual taxpayers once the new law becomes fully effective, plus a summary of the extended loss limitation provisions that apply under the Act. Also, a reminder that the deadline for Medicare creditable coverage notices is right around the corner.
Inflation Reduction Act Extends and Expands Two Valuable Energy Tax Credits for Individuals. Much of the Inflation Reduction Act doesn’t directly impact tax liability for individual taxpayers. However, the law does contain two valuable energy tax credits for individuals. The law renamed the nonbusiness energy property tax credit the “Energy Efficient Home Improvement Credit” under IRC Section 25C. The law extends the credit through 2032. While the old rules for claiming the credit continue to apply in 2022, beginning with the 2023 tax year, the credit will be expanded to equal to 30% of the costs of eligible home improvements made during the year. It will also be expanded to cover the cost of additional energy-efficient property. Similarly, the residential energy efficient property credit has been renamed the Residential Clean Energy Credit. That credit was set to expire in 2024 and was extended through 2034. Under the Inflation Reduction Act, the credit amount increases to 30% from 2022 to 2032. It then decreases to 26% for 2033 and 22% for 2034. The credit is set to expire after 2034. For more information on claiming these tax credits, visit Tax Facts Online. Read More
Inflation Reduction Act Extends Limitation on Excess Business Losses. Under the 2017 tax reform legislation, excess business losses of a non-corporate taxpayer are not allowed for the taxable year. These losses are carried forward and treated as part of the taxpayer’s net operating loss carryforward in subsequent tax years. NOL carryovers generally are allowed for a tax year up to the lesser of the carryover amount or 80 percent of taxable income determined without regard to the deduction for NOLs. An “excess business loss” is the excess of aggregate deductions of the taxpayer attributable to trades or businesses of the taxpayer (determined without regard to the limitation of the provision), over the sum of aggregate gross income or gain of the taxpayer plus a threshold amount. The annual threshold amount is $250,000 (or twice the otherwise applicable threshold amount for married taxpayers filing a joint return). The Inflation Reduction Act of 2022 extends the limitation on excess business losses through 2028. For more information on the excess loss limitation provisions, visit Tax Facts Online. Read More
Don’t Forget: The Notice Deadline for Creditable Coverage Each Year. Employers who provide prescription drug coverage are required to notify all Medicare-eligible employees about creditable or non-creditable status by October 15. With the onslaught of COBRA subsidy notices in recent months, this deadline was lost in the shuffle by many employers who now need to seek IRS compliance remediation . Individuals who do not enroll in Medicare Part D when first available, but who enroll later, pay higher premiums permanently unless they have creditable prescription drug coverage. These increased premiums apply if the individual goes at least 63 consecutive days without creditable coverage. Employers are required to provide notice each year to help employees understand whether employer-provided coverage is creditable. This year, notices were due by October 15, 2022. Determining whether coverage is creditable involves examining whether the employer’s coverage is at least as good (measured actuarially) as standard Medicare Part D prescription drug coverage. Employers can provide the notice electronically and there is no need to conduct a separate mailing, although the employer should take steps to ensure the notice is easy to find. Creditable coverage notice must also be given if creditable status changes or upon the individual’s request. For more information on the creditable coverage requirement, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we have valuable information for parents who are sending their kids to school. An ESA can be a valuable tax-preferred tool to help with the costs–and with education costs front and center, now may be the perfect time to discuss the option. In other news, we have updates on how the Inflation Reduction Act’s premium subsidy extension could impact employer-sponsored health coverage–and a note on the retirement-related bills making their way through Congress.
Can Your ESA Help Ease the Strain of Back-to-School Expenses? As the kids head back to school, many parents may be struggling with back-to-school expenses in today’s inflationary environment. One potential solution is an education savings account (ESA). ESAs are relatively easy to establish and don’t require an employer to sponsor the plan. Contributions are made to the account for the benefit of a child under age 18. Parents and guardians can contribute up to $2,000 per year, per beneficiary (no earned income or compensation limits apply). ESA contributions are not tax deductible, but if the funds are withdrawn to pay qualified education expenses, the earnings on the ESA funds are taken tax-free. Qualified expenses include books and supplies, college tuition and even the student’s computer and internet expenses. The costs associated with primary or secondary school also qualify, in addition to college-related expenses. For more information on the ESA rules, visit Tax Facts Online. Read More
Focus on SECURE Act 2.0: What’s in the Various Retirement Bills in Congress Today? SECURE Act 2.0 would once again raise the required beginning date, to age 73 in 2023, 74 by 2029 and to age 75 by 2032. The law would also change the rules governing catch-up contributions so that taxpayers aged 50 and older would be permitted to contribute an extra $10,000 per year if they have reached age 62, 63 or 64 (currently, qualifying taxpayers can make catch-up contributions of $6,500 per year to 401(k)s and $1,000 per year to IRAs). SIMPLE plan participants would receive an additional $5,000 catch-up option. The additional catch-up, however, would be made on an after-tax basis. One proposal would significantly increase the 401(k) contribution limits for all savers. Currently, taxpayers who are under age 50 can contribute $20,500 in pre-tax dollars to 401(k)s and $6,000 to IRAs. The proposal would increase those contribution limits by $4,000, so that IRA savers could contribute up to $10,000 per year and 401(k) plan participants could save up to $24,500 per year. For more information on the 401(k) contribution rules, visit Tax Facts Online. Read More
Will ICHRAs Start Trending Post-Inflation Reduction Act? The decreased affordability threshold and expanded ACA subsidies under the Inflation Reduction Act may put an increased financial strain on employers who must offer health coverage to employees. The individual coverage HRA strategy can present a possible solution to employers who either must offer coverage or are interested in offering health benefits to attract and retain employees. The ICHRA rules allow employers to reimburse premiums for individual health insurance coverage through ICHRAs if the several specific conditions are satisfied. First, all individuals enrolled in the ICHRA must actually enroll in individual coverage. If an individual ceases to be enrolled in individual coverage, the ICHRA must stop reimbursing their medical expenses (on a prospective basis only). Individuals who are still within the grace period with respect to paying their premiums for individual coverage are considered enrolled in individual coverage. For more information on the rules governing ICHRAs, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we have valuable information for clients wondering how the 401(k) rollover rules intersect with the required minimum distribution (RMD) rules and an update on a work-from-home related lawsuit against Amazon. We also have more details on the enhanced and extended tax credits for clean vehicles contained in the Inflation Reduction Act. Wondering whether your clients qualify? Read on for more details.
Inflation Reduction Act Expands and Boosts Appeal of Electric Vehicle Tax Credits. The Inflation Reduction Act expands the electric vehicle tax credit for electric vehicles placed into service after December 31, 2022 for ten years, through 2032. Taxpayers who buy qualifying vehicles will qualify for a tax credit of up to $7,500 for new vehicles. For used electric vehicles, the maximum credit will equal $4,000 or 30% of the vehicle’s cost, whichever is less. Used electric vehicles only qualify if they’re purchased for personal use, rather than for resale. The newly expanded electric vehicle tax credits are intended to provide benefits for lower- and middle-income clients. As such, they come with income restrictions and limitations. The credit is unavailable for single taxpayers who earn more than $150,000 per year, joint filers who earn more than $300,000 per year and heads-of-households who earn $225,000 per year or more. Certain luxury electric vehicles are also excluded and restrictions on where the vehicle is manufactured will also apply. For more information on the expanded tax credit for clean vehicles, visit Tax Facts Online. Read More
California Judge Won’t Dismiss Amazon Employee’s Work-From-Home Reimbursement Lawsuit. A federal district court judge in California denied a motion to dismiss a proposed class action lawsuit against Amazon. The lawsuit focuses on whether Amazon was required to reimburse the employees for expenses related to work-from-home requirements. The employee in this case alleged that state employment laws required Amazon to reimburse employees for work-related expenses incurred because of pandemic-related work-from-home requirements after the California governor issued lockdown orders. The expenses at issue here include electricity, Internet and space-related expenses totaling somewhere between $50 and $100 per month. California law requires employers to reimburse employees for any home office expenses incurred while they’re working from home. For more information on remote worker issues brought to light during the COVID-19 pandemic, visit Tax Facts Online. Read More
Rollerovers & RMDs: Need to Know for Clients Working Past the Traditional Retirement Age. At some point, every client is required to begin taking distributions from traditional retirement accounts. However, not all of those clients have stopped working. Some of those clients may wish to roll their 401(k) funds into an IRA if they don’t need those funds to cover living expenses while they’re still working. Clients need to understand that RMDs are not eligible for rollover. The client must take their RMD before completing the rollover–and the first distribution from the plan counts toward the RMD if the client is subject to RMD requirements (the client can’t roll funds into an IRA and take their RMD later in the year). Further, 401(k) RMDs can’t be taken from the client’s IRA–they must be taken from the 401(k) itself. After the client takes their RMD for the year, they can roll remaining plan funds over into an IRA–at which point, those funds become subject to the rules governing IRAs (not the 401(k) rules, so the “still working” exception won’t apply). For more information on the RMD failure penalties, visit Tax Facts Online. Read Mor
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we have some planning pointers for employers who are planning to continue allowing employees to work remotely on a more permanent basis, as well as an update on the new independent contractor standard that the DOL is working on. On another note, we have coverage about what those post-SECURE Act lifetime illustrations on your next 401(k) statement really mean. Read on for more.
Are Your Small Business Clients Required to Reimburse Remote Employees for Work-Related Costs? Recent lawsuits have brought one remote-era working environment issue to the forefront: whether employers must reimburse remote workers for internet, cell phones and even utilities. Some state laws (including California law) require employers to reimburse all employees for any work-related expenses. Now that many employees are working remotely and plan to continue working remotely, some have sued their employers to be reimbursed for a portion of their utility costs. Employers who plan to continue to allow remote work should check their state laws to ensure they are in compliance. In all cases, the employer should adopt a clear policy on which expenses will and will not be reimbursed. The employer should also consider a clear statement on when only a portion of certain expenses will be reimbursed (for example, expenses that have both business and personal elements, such as internet and a cell phone). For more information on the tax impact of reimbursing employees’ expenses, visit Tax Facts Online. Read More
DOL Announces Intent to Reform the Current Independent Contractor Test. Under current law, a Trump-era test for determining independent contractor status applies. That rule was designed to make it easier for employers to classify workers as independent contractors, rather than traditional employees, by focusing on whether workers are economically dependent upon an employer—or in business for themselves. The current test prioritizes (1) the worker’s degree of control over the work performed, and (2) the worker’s opportunity for profit or loss. Biden’s DOL initially found that prioritizing these factors undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship. Several business groups filed a lawsuit in federal court to challenge the Biden administration’s acts. The court vacated the Biden administration’s rule and reinstated the Trump-era rule on procedural grounds. Now, the DOL has informally stated that it intends to again attempt to reform the test in the coming months. For more information on the current rule, visit Tax Facts Online. Read More.
Understanding the Changes to Your Next 401(k) Statement. Starting at the end of June, 401(k) participants will begin to see the SECURE Act’s lifetime income illustrations on their statements. That illustration shows the amount of monthly income the participant would make based on their current account balance. Those illustrations shouldn’t cause your clients to panic. Those illustrations reflect only the current account balance, without considering the earnings that the account funds will accumulate over time. They also don’t account for Social Security or any other type of savings vehicle the client may have. Clients should also be advised that the illustrations aren’t required to factor in the client’s age, meaning that younger participants could see illustrations that are much lower than what they would realistically receive far into the future. For more information on the lifetime income illustrations, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we have a few pieces of discrete guidance for small business clients who offer dependent care assistance program benefits to employees. The IRS also announced a new pilot compliance program designed to reduce the burden of a qualified plan audit for employers who offer retirement plan options. And, in a piece of good news for small business clients, the IRS has responded to rising gas prices by increasing the standard business mileage rate for the second half of 2022. Read on for more.
IRS Released Revised Standard Mileage Rates for Second Half of 2022. The IRS released updated optional standard mileage rates that are used to calculate the deductible costs of using a car for business, charitable, medical or moving purposes. For the second half of 2022, the optional standard mileage rate for using a car for business purposes will be 62.5 cents per mile driven for business purposes (up from 58.5 cents per mile in the first half of the year). The rate for miles driven for moving or medical purposes in the second half of 2022 will be 22 cents per mile (up from 18 cents in the first half). The charitable rate remains unchanged at 14 cents per mile. However, the suspension of all miscellaneous itemized deductions and the deduction for moving expenses for the 2018-2025 tax years means that most taxpayers who previously deducted these expenses will no longer be entitled to do so. Those individuals who were previously entitled to take the business mileage expense deduction as an above-the-line deduction, however, many continue to do so. For more information on deducting business-related travel expenses, visit Tax Facts Online. Read More
IRS Announces a New Program for Retirement Plan Audits. The IRS has released details about a new pilot pre-examination compliance program for plan audits. Under the program, the IRS will send the plan a letter advising that it has been selected for an examination. The plan sponsor is then given 90 days to review the plan for compliance issues. If the sponsor uncovers any issues, it can correct the problem within the 90-day review period if the issue is one that can be corrected under self-correction procedures or can request that the IRS enter a favorable closing agreement. Plan sponsors should be advised that IRS letters are already being mailed. To respond, the sponsor should show that the plan is compliant with any issues raised in the letter, or that the plan was non-compliant but has (or will) correct the problem. The sponsor must also show whether any additional issues have been detected during the compliance review (and steps that are being taken to correct those issues). The IRS will then review that information and, if it agrees, issue a closing letter without additional contact. If the IRS disagrees, it will contact the sponsor and determine whether further audit/action is necessary. For more information on the defined contribution plan qualification rules, visit Tax Facts Online. Read More
Can DCAPs Reimburse Employees for “Hold-the-Spot” Fees? As more offices are reopening in our current “post-COVID” environment, many parents are once again dealing with the potential need for out-of-home childcare. Many childcare providers have begun charging a fee to hold a child’s spot during periods where the child can remain at home. A question then arises as to whether a dependent care assistance program (DCAP) can be used to cover those costs. Informal IRS guidance has provided that these hold-the-spot fees can be considered indirect expenses that are necessary for obtaining childcare (and, thus, can be reimbursed on a tax-preferred basis). However, additional guidance also provides that the fee cannot qualify as an indirect expense unless the childcare in question is ultimately received. So, absent formal guidance, employers may wish to proceed with caution when determining whether a hold-the-spot fee is a qualifying expense. For more information on DCAPs, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
Today’s market conditions have created challenges for individuals and business owners across the board. Rising interest rates may soon create a headache for defined benefit plan sponsors that offer lump sum distributions–some of which could potentially increase options offered to current plan participants. We also have a different perspective for employers interested in offering crypto investment options for employees–and a reminder for clients who have taken advantage of the six-month tax filing extension. Read on for more.
Can 401(k) Crypto Investment Options Add Value for Employers? There are been much controversy surrounding the availability of cryptocurrency investments in 401(k)s, especially in light of the DOL’s hard-line approach to crypto options and a precipitous drop in the market value since March 2022. However, many employers are also looking at the other side of the equation and evaluating ways that their business and retirement plan might benefit from allowing crypto investments. Cryptocurrency investment options could help employers attract and retain talented employees who want a wider range of modern investment options. In fact, studies show that three out of five people support cryptocurrency investment options for 401(k)s–and about 50% of millennials already own some type of cryptocurrency. Many also expect that allowing cryptocurrency in retirement plans could encourage more younger taxpayers to contribute to the plan–which could boost the overall health of the retirement plan and help the employer satisfy the IRS’ strict nondiscrimination testing requirements. On the other hand, cryptocurrency is at best an alternative high risk investment, and at worst, a repeat of the 1636 Dutch tulip bubble (that popped in 1637). For more information on the tax treatment of cryptocurrency generally, visit Tax Facts Online. Read More
Rising Interest Rates May Create Problems for DB Plan Sponsors. Many defined benefit plans offer a lump sum payment option to participants. The value of those lump sum payments fluctuates with interest rates. With lower interest rates, the participant will receive a larger lump sum payment. With higher rates, the value of the payment decreases. Plans are required to update the interest rate on a monthly, quarterly or annual basis. Now that interest rates are rising (and are expected to continue rising), many participants may elect to take a lump sum now, before interest rates rise further (and may elect to leave employment sooner than expected to take advantage of today’s rates). That may increase the plan’s liquidity needs and also decrease the plan’s funding status. A significant decrease in funding status could subject the plan to IRC Section 436’s prohibition or limitations on paying lump sums at all. It’s important for plan sponsors to start planning now–and for advisors to expect these plans to start offering additional non-lump sum options, including in-service distributions for clients who satisfy certain age and service requirements. For more information on the lump sum distribution option, visit Tax Facts Online. Read More
IRS Reminded Taxpayers With October Filing Extensions that Hurricane Ian Victims Have More Time. Taxpayers with a six-month tax filing extension had until October 17, 2022 to file their 2021 tax returns. But Hurricane Ian victims (throughout Florida) have until February 15, 2023, to file various federal individual and business tax returns and make tax payments, According to the IRS’ announcement, taxpayers who are waiting for their 2020 returns to process because of IRS backups in its workload, can enter “$0” for their 2020 AGI on their 2021 return in order to file sooner. The IRS also encourages taxpayers to file electronically in order to ensure their return is processed quickly and to use direct deposit to receive their refunds as soon as possible. For more information on the federal tax filing requirements, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
The IRS released guidance that could allow some taxpayers to qualify for a larger earned income tax credit by filing an amended 2021 return. It’s also time for many small business clients to start their 401(k) restatement process. Finally, in the midst of the so-called “Great Resignation,” it’s important to make sure clients understand the 401(k) vesting rules to avoid leaving money on the table when they change jobs. Read on for more.
IRS Revises FAQ for Claiming the Earned Income Tax Credit. The rules for claiming the earned income tax credit were expanded and liberalized in the wake of the COVID-19 pandemic. The IRS has recently updated its guidance on claiming the credit to provide that taxpayers who are eligible for the credit can choose to calculate the earned income tax credit using their 2019 earned income if it was higher than their 2021 earned income, even if they did not have any earned income in 2021. Taxpayers who did not file a return or claim the earned income tax credit for 2020 or 2021 can file an amended return to take advantage of the relief. However, the IRS was clear to note that these taxpayers cannot use their 2020 income to calculate their 2021 earned income tax credit. For more information on the personal tax credits, visit Tax Facts Online. Read More
Current DC Plan Restatement Cycle Ended July 31. Clients who sponsor pre-approved 401(k) plans must have completed a plan restatement every six years (that’s true even if the client hasn’t actually made any changes to the 401(k) plan itself). The previous restatement cycle ends July 31, 2022 for plans that have not been restated since August 2020. It’s important for small business clients to make sure their plan document actually reflects how their particular 401(k) plan operates (for example, if the restated plan document neglects to exclude employee bonuses from consideration for a match, the employer could be subject to significant penalties if they actually do exclude employee bonuses when calculating the employee match). The client should review the restatement carefully with qualified advisors and make sure their documents were signed before the July 31 deadline. If not, the client will need to hire a tax adviser to undergo compliance remediation. For more information on the defined contribution plan qualification rules, visit Tax Facts Online.Read More
Understanding the 401(k) Vesting Rules in the Midst of the Great Resignation. It’s more important than ever for clients to understand how vesting can impact their retirement account balances. The applicable vesting schedule establishes when the client who contributes to the 401(k) will be fully entitled to the full 401(k) balance. Cliff vesting is designed to encourage employees to remain with an employer for the long-term, rather than hopping quickly between jobs. The IRC permits employer-sponsored plans to provide that employer contributions to the employee’s account will not fully become available until after a certain period of time has passed (employee contributions must vest immediately). Under a graded vesting schedule, the employer match will begin to vest in increments beginning in the employee’s second year of service with the employer—employer matching contributions will gain an additional 20 percent in vesting each year thereafter until they are 100 percent vested after six years. Under a three-year cliff vesting schedule, the employer match is fully vested after three years of service. The vesting schedule used by the plan must be clearly spelled out in the plan documents, and can be important for clients making decisions about new employment opportunities. For more information on the vesting rules, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
Many business clients may have begun wondering whether the IRS “family glitch” fix creates any new obligations at the employer level–or merely provides potential new benefits for an employee’s family members. We have some thoughts on the matter. Also this week, we have more information on the implications of offering an employee signing bonus and ways clients can keep their retirement savings on track even in the midst of the great resignation. Read on for more.
IRS Announces Fix to ACA “Family Glitch.” The IRS proposed regulations of May 2022 fix the so-called “family glitch” under the Affordable Care Act. Under current law, a family’s ACA marketplace subsidy eligibility is based on the employee’s cost for employee-only coverage (not the cost of the employee’s family coverage). So, if the employee’s contribution for self-only coverage is deemed affordable, the entire family is ineligible for marketplace subsidies (and the employer cannot be assessed an employer mandate penalty). The new proposal would allow an employee’s family members to enroll in marketplace coverage and potentially become eligible for government subsidies if the cost for the family is deemed to be unaffordable. However, there is not any new mandate for employers, so the employer’s obligations would continue to be based on whether the employee’s self-only coverage is deemed affordable. However, it is possible that employers could become subject to additional reporting requirements in order to determine whether the health plan is affordable at the family level. For more information on the employer mandate, visit Tax Facts Online. Read More
Offering an Employee Signing Bonus? Don’t Forget to Consider DOL Overtime Rules. Many employers have resorted to offering signing or retention bonuses in order to attract and retain employees in light of today’s labor shortage. Those business clients should be reminded about the DOL’s overtime calculation rules under the Fair Labor Standards Act (FLSA). Under FLSA rules, all compensation paid to employees must be included when calculating the employees’ regular rate of compensation for purposes of determining the correct overtime premium in weeks where the employee works overtime. While there may be cases where the employer merely offers the bonus in exchange for accepting an employment offer, many employers are structuring these bonuses with strings attached–so that, for example, the employee may be required to work for a certain amount of time before becoming eligible for the bonus. In these cases, it’s likely that the DOL could require the bonus to be considered when determining the employee’s proper overtime rate. For more information on the DOL overtime rules, visit Tax Facts Online. Read More.
Funding a Spousal IRA Can Preserve Retirement Security in the Midst of the “Great Resignation.” Workers have left their jobs in record numbers in recent months. Those clients should be advised on the rules governing spousal IRA contributions as a way to keep retirement savings on track going forward. Generally, taxpayers are required to have taxable compensation for the year to open or contribute to an IRA. However, taxpayers who are married and file joint returns with a spouse are entitled to make a contribution based on a working spouse’s taxable compensation. The non-working taxpayer simply opens an IRA or Roth IRA in their own name and contributes to that account based on the spouse’s compensation. To qualify, the client must have been married to the working spouse as of December 31 of the year of contribution. If the clients are divorced as of December 31, they become unable to make contributions based on a spouse’s earned income even if they were married for the majority of the year in question. For more information on the rules governing IRA contributions, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
Clients today are wondering whether there are any smart moves that can be made to take advantage of the current market downturn. Depending on the client’s situation, there are many reasons why a client might want to consider a Roth conversion in today’s market. Also, we have details on the proposed SECURE Act 2.0’s new rules for part-time employees in 401(k) plans and the most recent IRS extension of the waiver of the so-called “physical presence requirement” for retirement-related actions requiring spousal consent. Read on for more.
Considering Roth Conversions in a Down Stock Market. The primary reason to consider moving traditional IRA funds into a Roth IRA in a market downturn involves tax savings when compared to strong market conditions. When a client converts to a Roth, taxes are due on the value of the amount converted (at current ordinary income tax rates) in the year of conversion. If the value of the client’s IRA has declined (which is what most clients are seeing right now), the client can convert the IRA assets at that lower value—generating a correspondingly lower tax liability. If and when the market rebounds, the gain on the converted Roth assets will be tax-free to the client.Under current law, conversions may be even more attractive to certain clients because income tax rates were reduced by the 2017 tax reform legislation. Those lower tax rates are temporary and set to expire after 2025. In fact, many clients might have been considering a Roth conversion in order to take advantage of the lower rates anyway. For more information on Roth conversions, visit Tax Facts Online. Read More
SECURE Act 2.0 Accelerates Timeline for Part-Time Employee Eligibility for 401(k)s. Under prior law, employers were permitted to exclude workers who performed fewer than 1,000 hours of service per year from participation in the employer-sponsored 401(k) (this rule still stands, as modified by the SECURE Act’s additional eligibility requirement). Under the SECURE Act, employees who perform at least 500 hours of service for at least three consecutive years (and are at least 21 years old) also must be allowed to participate in the employer-sponsored 401(k). In a surprise move, a proposed version of the SECURE Act 2.0 would accelerate the timeline, so that employers would be required to start allowing part-time employees to participate after only two years with at least 500 hours of service for the employer. For more information on the eligibility and participation requirements for 401(k) plans, visit Tax Facts Online. Read More
IRS Extends Relief from Physical Presence Requirement for Spousal Consents until December 31, 2022. Notice 2022-27 extends the physical presence waiver for certain retirement elections through December 31, 2022. This relief waives the requirement that certain retirement plan elections must generally be witnessed in person by either a plan representative or notary public. The relief was initially granted in response to the COVID-19 lockdown. Typically, elections that require consent of a participant’s spouse must be witnessed in the “physical presence” of an authorized witness. The relief allowed this “witnessing” to be accomplished via a live audiovisual medium. The IRS has also requested comments on whether this option should be made permanent even as the nation begins to return to normal following the COVID-19 pandemic. For more information on situations where the physical presence requirements apply, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we answer some common questions about Roth retirement accounts–and also discuss a pending Second Circuit case that is expected to address issues surrounding the relatively rare question of whether the government can garnish a client’s 401(k) under existing anti-alienation rules. Finally, we have a summary of how the Treasury Department’s Greenbook proposals impact cryptocurrency traders starting in 2023. Read on for more.
Can the Government Garnish a 401(k) to Pay Restitution? The Second Circuit is currently considering whether the bankruptcy protection afforded to 401(k) assets extends to cases involving restitution awarded in criminal cases. In United States v. Greebel, a $10 million restitution award was granted to the defendant’s victims in a criminal case. The government sought to garnish the defendant’s 401(k) to cover the judgment. Under the Mandatory Victims Restitution Act, the district court found that the retirement accounts at issue did not fall within an exception that allows all property of the defendant to be accessed to cover restitution in a criminal case (and that the generally applicable 25% cap does not apply under the CCPA). The defendant appealed, arguing that he does not currently have access to the funds in the accounts under the terms of the plans. However, another issue that may be resolved is whether retirement accounts can be garnished by the private victim (not the government) to cover restitution in a civil case. This is an issue that could arise if the government did not enforce the restitution order and the victim was left to pursue action in civil court. It also opens the issue of whether the accounts could be accessed to pay restitution awarded in a civil case. For more information on the anti-alienation rules, visit Tax Facts Online. Read more
Treasury Greenbook Offers Insight into Biden Administration’s Crypto Plan. The Treasury Department’s General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals (known as the “greenbook”) offers insight into some of the administration’s plans for cryptocurrency regulation. The proposals include plans to expand the Section 1058 nonrecognition treatment for loans of securities to loans of actively traded digital assets with similar terms starting in 2023. The plan would also allow dealers and traders in actively traded digital assets to use the mark-to-market method for reporting gain or loss. On the other hand, certain FATCA and foreign asset reporting would also be expanded to include cryptocurrency. Accounts that hold assets maintained by foreign digital asset exchanges or service providers would be subject to reporting. The thresholds for foreign asset reporting would be based on the aggregate value of the digital assets and any foreign assets that are covered by existing foreign asset reporting rules. For more information on the tax treatment of bitcoin and other cryptocurrency, visit Tax Facts Online. Read more
Unpacking the Difference Between a Roth 401(k) and Roth IRAs. While Roth IRAs have been a standard retirement investment option for years, millions of Americans have only recently gained access to Roth 401(k) savings options through their employers. Those clients may be wondering whether there’s any difference between their employer-sponsored Roth plan and a standard Roth IRA. The answer is, of course, yes. Roth 401(k)s allow an employee to stash away up to $20,500 in after-tax dollars in 2022 ($27,000 for clients aged 50 and older). Roth IRAs, however, are limited to $6,000 ($7,000 with catch-up contributions). Roth 401(k)s aren’t subject to any income restrictions, so even high earning clients can contribute directly. On the other hand, Roth 401(k)s are subject to required minimum distribution rules once the client reaches age 72–although the client does have the option of rolling the funds into a Roth IRA, which aren’t subject to any lifetime RMD rules. For more information on Roth accounts, visit Tax Facts Online. Read more
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we’d like to draw retirement plan sponsors’ attention to the importance of self-audits in light of the significant increase in IRS funding under the Inflation Reduction Act–and provide some insight on how student borrowers can prepare for Biden’s loan forgiveness program. Also this week, we have some clarity on the often-confusing topic of how various types of Roth dollars are treated for tax and penalty purposes. Read on for more.
Have Your Clients Checked Their Retirement Plans for Compliance? Self-compliance checks for retirement plan sponsors have become even more important now that the Inflation Reduction Act has earmarked an extra $80 billion in IRS funding dollars. Many failures can be corrected under the EPCRS before the IRS gets involved in a more extensive audit. Qualified plan sponsors should ensure that they have adopted all amendments required under recent legislation, including the SECURE Act and 2020 CAREs Act. Sponsors should also ensure that their plans are being properly operated in accordance with these new amendments and rules (so, if the plan adopted expanded loan provisions, the plan should check to ensure that it’s being operated in accordance with those amendments–noting that the deadlines for some amendments has been delayed). Plans should also ensure that all elective deferrals are being deposited on time and that all documents are filed on time (including Forms 5500). They should also check to ensure their plans are being operated in accordance with the RMD rules. For more information on the qualification requirements for retirement plans, visit Tax Facts Online. Read More
How Can Clients Prepare Today for Biden’s Student Loan Forgiveness Plan? The Department of Education announced that an application to apply for student loan forgiveness under President Biden’s new plan is active. To prepare, clients should first check their student loans to see if they have received a Pell grant (which can increase the amount of forgiveness and the client’s online account at studentaid.gov should have information about Pell grant receipt). They should also check their tax returns to see if they qualify for forgiveness in the first place. Only taxpayers with income below the $125,000/$250,000 thresholds will qualify. Taxpayers can qualify if their income was below the limit in 2020 or 2021. The relevant number is the taxpayer’s adjusted gross income for the year. All student borrowers should evaluate whether they qualify for repayment assistance or an income-based repayment plan, as Biden has also announced that the extension of the student loan repayment pause through year-end will be the final extension. For more information on the tax treatment of student loans, visit Tax Facts Online. Read More
Do Your Clients Understand the Roth Distribution Ordering Rules? Roth accounts provide a valuable option to give clients a stream of tax-free income during retirement. When a client takes a Roth distribution, the distribution is first made up of direct contributions. Once contributions are depleted, amounts that have been converted from a traditional account are withdrawn. Once those funds are depleted, the amounts withdrawn are treated as earnings. These rules are important, because converted Roth funds are only penalty-free after five years have passed or if the owner has reached age 59 1/2. Earnings are only tax and penalty-free if the owner is both 59 1/2 and if five years have passed. Contributions, on the other hand, are withdrawable tax and penalty-free regardless of how much time has passed. For more information on Roth IRAs, visit Tax Facts Online. Read Moree
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
The CPI-W data for 2022 led to the very large Social Security COLA increase for 2023 – the highest in 40 years. This week, we have guidance that can help clients understand how these increases might impact their overall tax liability. We also have a discussion of a surprise EARN Act provision on retirement catch-up contributions–and a summary of the IRS’ new updated guidance on claiming the work opportunity tax credit. Read on for more.
Social Security COLA is Highest in 40 Years. Based on CPI-W data, the COLA is 8.7% for 2023. That means the average benefit for 70 million Americans increases by $144.10. This 8.7 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 65 million Social Security beneficiaries in January 2023. Increased payments to more than 7 million SSI beneficiaries will begin on December 30, 2022. (Note: some people receive both Social Security and SSI benefits).
Unfortunately, the increase in the value of a taxpayer’s Social Security check has adverse tax consequences because it increases the taxpayer’s income above the thresholds for determining whether the benefits are taxable. Under current law, when an individual earns over $25,000 per year ($32,000 for a married individual), one-half of his or her Social Security benefit plus any earned income will be taxable. Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200 from $147,000. For more information on the tax treatment of Social Security benefits, visit Tax Facts Online. Read More
Senate’s EARN Act Contains New Twist for Catch-Up Contribution Changes. Recent retirement-related legislation has proposed changing the rules governing catch-up contributions so that taxpayers aged 50 and older would be permitted to contribute an extra $10,000 per year if they have reached age 62, 63 or 64 (currently, qualifying taxpayers can make catch-up contributions of $6,500 per year to 401(k)s and $1,000 per year to IRAs). SIMPLE plan participants would receive an additional $5,000 catch-up option. The additional catch-up, however, would be made on an after-tax basis (so it would be treated as a Roth contribution and could be withdrawn tax-free in the future). The EARN Act contains a new twist which would allow taxpayers with income under $100,000 to treat catch-up contributions as either pre-tax or after-tax contributions. The changes would apply in tax years beginning after 2023. While the EARN Act must now be reconciled with the House version, it now seems possible that taxpayers may have an additional option when it comes to retirement savings. For more information on the rules governing catch-up contributions, visit Tax Facts Online. Read More
IRS Updates Information on the Work Opportunity Tax Credit (WOTC). The IRS has updated its guidance on the WOTC, which is a tax credit that is available to employers who hire certain categories of workers. Employers are required to comply with certain pre-screening and certification procedures to claim the credit. The pre-screen pre-screening requirement is satisfied when the employer and the job applicant complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, on or before the day a job offer is made. After pre-screening is complete, the employer must request certification by submitting Form 8850 to the appropriate state workforce agency no later than 28 days after the employee begins work. Qualifying employees include food stamp (SNAP) recipients, Supplemental Security Income (SSI) recipients, long-term family assistance recipients and qualified long-term unemployment recipients, among other groups. In today’s labor market, the WOTC may be more valuable than ever. For more information about this and other business-related tax credits, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
This week, we have a reminder for taxpayers who have yet to make use of their employer-sponsored benefits for the 2022 tax year. The IRS has also provided some clarification on which international tax returns qualify for penalty relief under Notice 2022-36–and reminds taxpayers that Paycheck Protection Program (PPP) loans that were improperly forgiven should be included in taxable income. We repeat some of the information that we provided our subscribers below.
IRS Reminds Taxpayers of Updated Contribution Limits for FSAs, Transportation Benefits in 2022. Time is running out for taxpayers to make use of FSAs and transportation benefits. In 2022, taxpayers are entitled to contribute a maximum of $2,850 to their health FSAs (up from $2,750 in 2021). The health FSA carryover amount also increased to $570 (so that taxpayers can carry over $570 in unused funds into 2023, up from $550 in 2021). For dependent care FSAs, the annual contribution limit will be $5,000 per married couple in 2022 (the limit was temporarily increased to $10,200 for 2021). The limit on tax-preferred transit/parking benefits also increased from $270 to $280 per month in 2022. Employers who offer these types of benefits should update their plan documents and communicate the increased limits to employees. For more information on the types of tax-preferred transportation benefits that employers can offer employees, visit Tax Facts Online. Read More
IRS Clarifies Who Qualifies for Late Penalty Relief. The IRS has provided penalty relief for certain international return penalties and certain information return penalties for the 2019 and 2020 tax years if those returns are filed before September 30, 2022. While Notice 2022-36 was not clear as to which taxpayers qualify for relief, the IRS has revised its Internal Revenue Manual to provide clarification. The IRM provides that only the following returns are eligible for this penalty relief: (1) Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, (2) Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, (3) Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts and (4) Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner. For more information on the international filing requirements and potential penalties, visit Tax Facts Online. Read More
IRS Reminds Taxpayers: Paycheck Protection Program Loans May Be Taxable. The IRS has issued a reminder for taxpayers with paycheck protection (PPP) loans that have been improperly forgiven, whether because of omissions or misrepresentations. Those loans must be included in income and are taxable. The IRS also encourages taxpayers with inappropriately received forgiveness of their PPP loans to take action in order to come into compliance. For example, some taxpayers may be able to file amended returns that include forgiven loan proceed amounts in income. After the fact, the IRS discovered that some recipients who received loan forgiveness did not meet at least one condition for eligibility. Therefore, these loan recipients received forgiveness of their PPP loan through misrepresentation or omission (either because they did not qualify to receive a PPP loan or misused the loan proceeds). For more information on the PPP loan program and rules governing forgiveness, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
In the past two years, cryptocurrency reporting questions on Forms 1040 have created much confusion for taxpayers who haven’t been sure whether their crypto transactions must be reported. The most recent draft 1040 for 2022 provides some clarity for taxpayers. We also have a summary of recent IRS snapshot guidance on retirement plan investments in third-party loans. Below we repeat some of our reports and analysis that we provided our subscribers.
IRS Releases Draft Form 1040 Clarifying Cryptocurrency Question. The IRS has recently released a draft Form 1040 providing some clarification on its question on cryptocurrency. The question may not be much different than in earlier years, but may provide new guidance by referring taxpayers to the instructions. In 2021, the question read: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?” For 2022, the question could be changed to include other types of digital assets, such as NFTs. The new question will read: “At any time during 2022, did you: (a) receive (as a reward, award, or compensation); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)? (See instructions.)”. While the draft instructions have not yet been released, many hope that those instructions will clarify the meaning of the term “digital asset” and the meaning of virtual currency generally. For more information on the tax treatment of virtual currency, visit Tax Facts Online. Read More
IRS Releases Snapshot With Guidance on Third-Party Loans and Qualified Plans. The IRS issued a snapshot addressing certain audit and compliance issues about qualified plan investments in third-party loans. Qualified retirement plans are not explicitly prohibited from investing in third-party loans. The IRS snapshot reminds taxpayers that the plan may not lend money to disqualified persons or make loans that benefit those disqualified persons. Further, plan assets may only be used for the exclusive benefit of participants and beneficiaries. Auditors will examine investments in third-party loans to confirm that the primary purpose of a loan is to benefit participants. Defined contribution plans are also required to value plan assets at least once per year to determine their fair market value. Auditors are instructed to carefully review Forms 5500 for asset loan values that don’t vary much from year to year–which may indicate that loan payments have not been made or that their fair value isn’t properly being determined and reported. Overvaluing a loan can also cause a defined benefit plan to overstate their funded status, which can lead to failures to satisfy minimum funding requirements. For more information on the prohibited transaction rules, visit Tax Facts Online. Read More
February 23, 2023 is the Last Day to Correct Excess 2021 IRA Contributions for Hurricane Ida Impacted Taxpayers. Taxpayers who make contributions that exceed the annual IRA contribution limit are subject to a penalty tax of 6% of the excess for each year the excess contribution remains in the account. Taxpayers who inadvertently made excess contributions to their IRAs have until the tax filing deadline (including extensions) to correct the excess distribution. For 2021, that meant taxpayers must take action to remove the excess contributions from their accounts by October 17, 2022. The IRS has announced that taxpayers who were impacted by Hurricane Ian will have an extension so that they have until February 15, 2023 to file 2022 individual and business returns. For more information on the rules governing excess IRA distributions, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
The IRS announced in October that taxpayers who were impacted by the federally-declared disaster Hurricane Ian would be offered extended filing and payment deadlines. The IRS has also expanded the CARES Act extensions to cover additional plan amendments and offered relief for victims of Hurricane Ian. We repeat some of the information that we provided our subscribers below.
IRS Provides Relief for Victims of Hurricane Ian. The IRS has provided relief for victims of Hurricane Ian by extending many different tax filing and payment deadlines that fall after September 23, 2022. Victims will have until until February 15, 2023, to file various individual and business tax returns and make tax payments. The extension applies to the six-month relief applies to individuals who had a valid extension for filing their 2021 taxes, but not to their payment obligation (tax payments for the 2021 tax year were due by the regulation April deadline). The February 15, 2023, deadline does apply to the quarterly estimated tax payments, normally due on January 17, 2023 and to the quarterly payroll and excise tax returns normally due on October 31, 2022, and January 31, 2023. Taxpayers in a federally declared disaster area also have the option of claiming disaster-related casualty losses on their federal tax return for either the year in which the event occurred or the prior year (which could offer relief earlier). Taxpayers claiming the disaster loss on their return should put the “FL Hurricane Ian” in bold letters at the top of the form and include the FEMA disaster declaration number, DR-4673-FL- on all returns. For more information on claiming the casualty loss deduction, visit Tax Facts Online. Read more
IRS Releases Additional CARES Act Extensions. The IRS recently granted extensions for plans to make amendments required (or made optional) under the SECURE Act and the CARES Act. As a follow up to Notice 2022-33, the IRS released Notice 2022-45 to extend amendment deadlines for the rest of the CARES Act provisions. Non-governmental qualified plans, 403(b) plans and IRAS will now have until December 31, 2025 to amend plans to adopt provisions related to coronavirus-related distributions and loans (i.e., increased loan limits and suspension of repayment obligations). Governmental qualified plans and 403(b) plans have until 90 days after the close of the third regular legislative session (that begins after December 31, 2023) where authority to amend the plan lies. Anti-cutback relief is also extended for CARES Act amendments before the deadline as long as the plan is operated as though the amendment applied retroactively to the original effective date. For more information on the relief provided under the CARES Act, visit Tax Facts Online. Read more
IRS Clarifies SECURE Act RMD Penalty Application for 2021 and 2022. The IRS’s SECURE Act regulations created confusion for taxpayers who inherited retirement accounts post-SECURE Act and were required to empty the account under the new 10-year rule. Under the proposed regulations, the IRS decided that if the account was inherited from someone who was already taking RMDs, the beneficiary was required to take an annual RMD during years one-nine after the account owner’s death. Many taxpayers expected the IRS to decide otherwise, so failed to take RMDs for 2021 and 2022. Under the Notice 2022-53, the IRS offered relief and said that the otherwise applicable 50% penalty for missed RMDs would not apply to those beneficiaries for 2021 and 2022. The relief applies only to beneficiaries who inherited accounts and were subject to the 10-year rule in 2021 and 2022. For more information on the post-SECURE Act rules on inherited retirement accounts, visit Tax Facts Online. Read more
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education
We have a few significant updates for 2023 this week. To keep up with rising costs, the Social Security cost-of-living adjustment, or COLA, will rise by a historic 8.7% for 2023–and the earnings base will rise along with it. Additionally, the IRS has finalized regulations that would fix the so-called ACA “family glitch” to help more taxpayers qualify for the premium tax credit starting in 2023. On the other hand, many valuable benefits for health FSAs have now expired, so taxpayers must revert to the old rules going into 2023.
A note about our branding: You may have noticed that Tax Facts is no longer using the National Underwriter brand and is now using the ThinkAdvisor brand. At ALM Global, LLC, we are working to align our expansive tax and finance portfolio to make pertinent coverage more accessible. We have joined Tax Facts with ThinkAdvisor, a global information, data, intelligence and content division with reporters and editors all over the world. Although we have a new look, all of the valuable Tax Facts content is still here for you.
Social Security Administration Announces Record High COLA Adjustments for 2023. The Social Security Administration (SSA) announced that the 2023 Social Security cost-of-living adjustment (COLA) is 8.7%–which is the largest COLA increase that has been seen for decades (by contrast, the 2022 Social Security COLA was 5.9%). Working taxpayers will also have to pay Social Security taxes on a higher percentage of their income for 2023. The Social Security wage base–the amount of wages subject to Social Security taxes–is set to increase from $147,000 to $160,200 in 2023 (meaning that wages in excess of $160,200 will be exempt from Social Security taxes). Social Security and SSI recipients should expect to receive information about their new benefit amount by mail beginning in early December. For more information on how Social Security taxes apply, visit Tax Facts Online. Read More
IRS Finalizes Rule to Fix the ACA “Family Glitch.” The IRS has finalized proposed regulations that are designed to change the ACA rules governing premium tax credit eligibility. The final regulations provide that the affordability of employer-sponsored coverage for the employee’s family would be based on the amount the employee would be required to pay to cover both the employee and eligible family members, rather than the individual employee alone. Typically, employees are only eligible for a premium tax credit if their employer fails to provide “affordable” health coverage. “Affordability” is based on whether the employee contributions for self-only coverage exceeds a percentage of the employee’s household income (as indexed for inflation). Under the prior rules, if self-only coverage was affordable for the employee, coverage was also deemed affordable for a spouse and dependents (so that the spouse and dependents would not qualify for the premium tax credit). Under the new rule, family members are disqualified only if the cost of family coverage is less than the annual threshold. “Family coverage” means any employer plan that covers related individuals other than the employee (including self-plus-one plans). The regulations also create a separate minimum value rule for family members, so that they do not lose premium tax credit eligibility if the employer plan does not provide minimum value to the family members (regardless of cost). The regulations are effective for tax years beginning after December 31, 2022. For more information on the premium tax credit, visit Tax Facts Online. Read More
Reminder: Covid-Related Health FSA Provisions Expire in 2023. Although the COVID-19 public health emergency has now been extended through January 13, 2023, many COVID-related tax benefits have not been extended past 2022. As taxpayers plan to enter 2023, it’s important to remember that most of the relief related to health flexible spending accounts (FSAs) has expired. That means taxpayers will once again be subject to the “use it or lose it” rule and limited to a $570 carryover into 2023 (if the plan allows it). Many plans also were amended to eliminate the requirement that the participant participate in the FSA in the following year to take advantage of the carryover provisions. Generally, the applicable rules going into 2023 with respect to grace periods and carryovers from health FSAs will depend on the terms of the plan document as it existed prior to COVID-19. For more information on the expanded health FSA rules that applied during the pandemic and the standard rules governing FSAs, visit Tax Facts Online. Read more
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. of international tax, transfer pricing, wealth management, or risk management is accepting applications from financial professionals and from lawyers with at least five years of industry experience. Even though our graduate program has grown to over 800 enrollment, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
The DOL has recently announced yet another change to the worker classification standard that will apply in determining whether a worker is properly classified as an employee or independent contractor. That shift could have a wide-ranging impact on employers who have increased their reliance on independent contractors following the “great resignation.” In other news, clients should be reminded to check their withholding to account for any changes–and new guidance shows that increased IRS funding is likely to impact non-U.S. citizens and residents. Read on for more.
A note about our branding: You may have noticed that Tax Facts is no longer using the National Underwriter brand and is now using the ThinkAdvisor brand. At ALM Global, LLC, we are working to align our expansive tax and finance portfolio to make pertinent coverage more accessible. We have joined Tax Facts with ThinkAdvisor, a global information, data, intelligence and content division with reporters and editors all over the world. Although we have a new look, all of the valuable Tax Facts content is still here for you.
DOL Publishes New Rule on Worker Classification. The Biden Department of Labor (DOL) has proposed a new standard for determining whether a worker is an employee or an independent contractor under the Fair Labor Standards Act. The “new” rule would restore the multi-factor, totality-of-the-circumstances approach to determining whether a worker is an employee or an independent contractor. Those factors would once again be evaluated without assigning any particular weight to any specific factor. The focus in determining independent contractor status under this rule focuses on the economic realities of the work relationship, including investment, opportunity for profit or risk of loss and whether the work is integral to the employer’s business. The proposed rule also rescinds the 2021 standard that was developed under the Trump administration entirely. For more information on how workers are classified for employment law purposes, visit Tax Facts Online. Read More
IRS Reminder: Adjust Tax Withholding Now to Avoid Penalties During the 2022 Tax Filing Season. The IRS has released a reminder for taxpayers to check their withholding for 2022. Making adjustments now can prevent taxpayers from learning they have a larger than expected balance due during the April tax filing season. Clients should be reminded that they may need to adjust their withholding based on major life events, like marriage, divorce, a home purchase or the birth of a new child. The IRS website offers a tax withholding estimator that can help taxpayers determine whether they are having too much or too little withheld from their paychecks. Items that may impact a taxpayer’s taxes for 2022 include COVID-19 tax relief (including relief related to health insurance plans), disaster provisions designed to help taxpayers recover from wildfires, hurricanes and other unexpected events and a taxpayer’s moving into the gig economy during the so-called “great resignation.” For more information on estimated tax payments, visit Tax Facts Online. Read More
IRS Expected to Direct Increase Funding to Increase Compliance Among Non-U.S. Citizens. As most advisors now know, Congress will be allocating nearly $80 billion in additional funding to the IRS over the next ten years. One big questions that most have had is where the IRS intends to use those funds to increase enforcement efforts. At a recent American Bar Association Tax Section conference, one IRS official noted that a chunk of those funds will be used to increase tax compliance among non-U.S. citizens and foreign nationals who live and work in the United States. For advisors whose client rosters include non-U.S. citizens, now is the time to focus on compliance efforts. That may include participating in voluntary disclosure program. Advisors should also consider discussing the potential immigration consequences that falling out of compliance with U.S. tax obligations may create. For more information on the tax treatment of non-citizens, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The Texas A&M Master and LL.M. of international tax, transfer pricing, wealth management, or risk management is accepting applications from financial professionals and from lawyers with at least five years of industry experience. Even though our graduate program has grown to over 800 enrollment, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
The end of 2022 is approaching at a rapid pace. Clients who are considering various planning strategies should be advised to act now to ensure that there will be enough time to execute the strategy before year-end. That includes for Roth conversions. The IRS has also issued warnings about schemes promising artificially high employee tax credit refunds–and is reminding service providers to look for new Forms 1099-Ks if their sales exceed $600 in 2022. Read on for more details..
Reminder: Taxpayers Considering Roth Conversions Should Act Now. As a reminder, the deadline for converting traditional IRA funds into a Roth is December 31, 2022 (not, as many people believe, the tax filing deadline in April 2023). Taxpayers who execute conversions in 2022 will pay taxes on the conversion at their 2022 rates, which are relatively low and could rise in the future. However, taxpayers should also consider the impact of a conversion on their Medicare premiums, Social Security benefits and other deductions and credits that phase out based on income. Taxpayers should also be reminded that, under the 2017 tax reforms, the right to recharacterize (or reverse) the conversion no longer exists–so once the client executes the Roth conversion, they’re stuck with that conversion even if it looks like a mistake in hindsight. For more information on the considerations that are important in evaluating whether a Roth conversion is a smart move, visit Tax Facts Online. Read more
IRS Warns Businesses About Schemes Promising Inflated ERC Returns. The IRS is warning business owners about scams perpetrated by third parties claiming that employers are eligible for large employment tax refunds generated by improperly claiming or overstating the employee retention credit (ERC). According to the IRS, these third parties typically charge a large fee or may require a percentage of the tax refund generated by the amended return. While it’s possible that some business owners do legitimately qualify for a refund, many do not. Similarly, the business owner must remember that if the business files an amended return, they must also reduce the wage deductions they took on their tax return based on the amount of the ERC that is claimed on the amended return. In most cases, the third party offers to prepare an amended return that either improperly determines that the business is eligible for the ERC or overstates the amount of the credit available. Business owners should closely examine the qualification requirements and their individual circumstances before filing an amended return to claim the ERC. Employers must either satisfy the governmental order test or the gross receipts test to claim the credit. For more information on the ERC, visit Tax Facts Online. Read more
IRS Reminder for Service Providers: Watch for 1099-Ks for Sales over $600 in early 2023. The IRS has released a reminder for service providers and others with over $600 in sales during the 2022 tax year. Those taxpayers may receive Forms 1099-K early in 2023 for the first time if their 2022 sales exceed the $600 mark.The IRS also reminds taxpayers that there is actually no change to the tax treatment of this income. The only change is to the reporting rules for Form 1099-K. As always, all income remains taxable, including from part-time work, side jobs or the sale of goods. Taxpayers must report all income on their tax return unless it is excluded by law even if they don’t receive a Form 1099-K or any other tax documents. The new reporting is designed to help taxpayers keep track of their income. The IRS suggests that taxpayers with side jobs may wish to consider making estimated tax payments throughout the year to cover their tax liability. For more information on the types of income that are taxable, visit Tax Facts Online. Read more
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment is 850 Master/LL.M. students with a maximum of 30 per course section. The university enrollment is 70,000 degree seekers.
The International Tax Certificate and Master Degree is designed for international tax professionals (including lawyers, accountants, economists, and financial leaders) to deliver specialized legal training for an in-depth understanding of the international tax risk management field’s changing complex legal aspects.
This graduate-level International Tax certificate or Master degree will prepare new and experienced international tax professionals to effectively address complex legal and policy challenges with respect to global tax risk. Specifically, participants will be exposed to (i) important U.S. and international laws, regulations and policies in the international tax risk management field, and (ii) technology, data, and practice, as well as applications of law and regulation through case studies through a weekly based structure. Individuals who complete the program will be able to synthesize scenarios, practice, and legal regulation in the international tax risk management field, providing analysis or judgments for consideration to organizational leadership with a nuanced perspective.
Courses are offered by asynchronous distance learning to provide a flexible schedule for working professionals. Interactive coursework includes case study assignments and regular interaction opportunities with classmates & the faculty through twice-weekly zoom meetings (recorded), pre-recorded videos, audio casts, discussion boards, and group breakout sessions. For more information, please go to law.tamu.edu/distance-education/international-tax.
Example courses:
LAW 625 Spring Term A Transfer Pricing l – Methods, Econometrics, and Tangibles
LAW 626 Spring Term B Transfer Pricing II – Services and Intangibles
LAW 627 International Tax Risk Management I – Data, Analytics, and Technology
LAW 647 Fall Term A International Taxation and Treaties – residency issues
LAW 649 Fall Term B International Taxation and Treaties – source issues
LAW 719 Fall Tax Inhouse Counsel & Risk Management
LAW 720 Fall International Tax Risk Management II – Data, Analytics, and Technology
Law Spring U.S. International Tax Risk Management – Data and Analytics
Law Summer U.S. International Tax Risk Management – Law and Regulation
Law Summer FATCA, CRS, and AEoI Risk Management – Summer
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.) The law school’s new campus is part of the Texas A&M AggieLand North billion dollar investment.
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
The April 18th tax filing deadline has passed and it’s already time to plan for this tax year of 2022. You’ll want to make sure you are prepared with the most up-to-date tax knowledge as you. We want you to have access to the 2022 Tax Facts books and the weekly intelligence newsletter – the reference solution that helps answer critical tax questions with the latest tax developments. Save 15% off any 2022 Tax Facts print or eBook by using Code TFN15 now through the end of the month.
In tax news, we have a mixed bag of updates for both individual and small business clients this week. The IRS released proposed regulations offering clarity on what clients who are interested in the MEP option can expect in situations where the “one bad apple” rule might have applied pre-SECURE Act. The EEOC has clarified whether and when COVID-19 itself can qualify as a disability for ADA purposes. Business clients should also be advised of the return to the Trump-era test for determining independent contractor status.
EEOC Offers Clarity on When COVID-19 Qualifies as a Disability The EEOC has recently introduced clarifying guidance on when COVID-19 will qualify as a disability for federal anti-discrimination law purposes. In some cases, COVID-19 will qualify as a disability under the Americans with Disabilities Act (ADA)–often, based on side effects associated with the virus, rather than the infection itself. If an employee is diagnosed with COVID-19, experiences symptoms and recovers from those symptoms in a few weeks, the employee would not be considered disabled for ADA purposes (so would not be entitled to reasonable accommodation). The EEOC also reminds employers that employees aren’t automatically entitled to reasonable accommodation even if they do experience symptoms of “Long COVID” or other COVID-related health issues. The employee is only entitled to accommodation if the disability requires the accommodation and it is not an undue hardship for the employer. For more information on the tax credit that is available for employee medical leave, visit Tax Facts Online. Read More
Court Reinstates Trump-Era Independent Contractor Test. The Trump-era rule was designed to make it easier for employers to classify workers as independent contractors, rather than traditional employees, by focusing on whether workers are economically dependent upon an employer—or in business for themselves. The Trump-era test prioritizes two key factors, including (1) the worker’s degree of control over the work performed, and (2) the worker’s opportunity for profit or loss. Under the Biden administration, the DOL stated that prioritizing these factors for determining employment status under the FLSA undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship. The Trump DOL rule would result in many workers’ losing FLSA protections, including minimum wage and overtime benefits. Several business groups filed a lawsuit in federal court to challenge the Biden administration’s acts. The court vacated the Biden administration’s acts and reinstated the Trump-era rule, determining that the DOL’s delay of the effective date for the Trump-era rule violated the Administrative Procedure Act by providing only a 19-day period for notice and comments (rather than the 30-day minimum). The court also found that the DOL limited the content of the responses to whether the effective date should be delayed (so unduly limited the scope of the comments received, making the decision to rescind the Trump-era rule “arbitrary and capricious”). The court determined that the Trump rule became effective March 8, 2021. For more information, visit Tax Facts Online. Read More
IRS Clarifies Exception to the “One Bad Apple” Rule for MEPs. The IRS proposed a new rule implementing the SECURE Act exception to the one bad apple rule—also known as the unified plan rule. Under the proposed rule, the MEP must describe the procedures the plan will follow if one participant fails to satisfy the qualification rules. Those procedures must outline the notices that will be sent and when those notices will be sent. The MEP must also disclose the actions that it will take if the non-qualifying participant fails to take action or initiate a spinoff to separate the MEP within 60 days after the date the final notice is sent. The proposed rules provide that the plan may be required to provide up to three notices to a participating employer that does not respond to the initial notice. The final notice must be provided to the DOL and all impacted participants. The non-qualifying employer has two options upon receipt of a notice: (1) take remedial action or (2) initiate a spinoff within 60 days of the final notice. If the employer does neither, the MEP administrator must stop accepting contributions from the non-compliant employer and participants. The MEP must also provide notice to the impacted participants and give them an election with respect to the treatment of their accounts. Participants could elect to remain in the plan or transfer their funds to another retirement plan. The IRS notes that it intends to publish guidance that contains model language for MEP plan administrators. For more information, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
The Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
Although many tax changes have not made it through the Democrat’s discussions for a spring or summer final bill to show voters before November’s election, two that seem to have traction are the proposals to impose a minimum tax on corporations with $1 billion in profits and another to impose a minimum tax on wealthy individuals (basically, require mark to market of assets each year, like a wealth tax). Now that tax season is over, time to turn our attention to inflation-adjusted 2022 limits such as health FSAs and qualified transit benefits.
2022 Contribution Limits for FSAs, Transportation Benefits. In 2022, taxpayers will be entitled to contribute a maximum of $2,850 to their health FSAs (up from $2,750 in 2021). The health FSA carryover amount also increased to $570 (up from $550 in 2021). For dependent care FSAs, the annual contribution limit will be $5,000 per married couple in 2022 (the limit was temporarily increased to $10,200 for 2021). The limit on tax-preferred transit/parking benefits also increased from $270 to $280 per month in 2022. Employers who offer these types of benefits should update their plan documents and communicate the increased limits to employees. For more information on the types of tax-preferred transportation benefits that employers can offer employees, visit Tax Facts Online. Read More
IRS Updates FAQ on Unemployment Compensation Exclusion and 2020 Tax Credit Eligibility The IRS recently updated its FAQ for the 2020 unemployment compensation exclusion. As background, many taxpayers file their 2020 income tax returns before the IRS announced that $10,200 in unemployment compensation would be excluded from 2020 taxable income. Because the IRS automatically made the changes to exclude $10,200 in unemployment compensation from taxpayers’ 2020 income, many clients may be eligible for the additional child tax credit or the earned income credit. The IRS announced that it is sending CP08 and CP09 notices to individuals who did not claim the credit on their return but may now be eligible for it. The notices will be sent in November and December of 2021. Receiving the notice is not a confirmation that the taxpayer is eligible for these tax credits—and taxpayers are not required to file an amended return to claim the tax credits if they simply reply to the CP08 notice or CP09 notice. The IRS will calculate the amount available and treat it as an overpayment. For more information on the available tax credits, visit Tax Facts Online. Read More
Understanding the New Corporate Profits Minimum Tax Proposal
The proposal to revive the corporate alternative minimum tax, that the Tax Cuts & Jobs Act repealed, is now oriented for corporations with at least $1 billion in profits (as reported to shareholders). These corporations would need to pay at least a 15 percent minimum tax on those profits. If enacted, the tax would be effective in tax years beginning after 2022. The tax would apply to corporate taxpayers (but not to S corporations, RICs or REITs) that satisfy certain annual minimum income requirements over a three-year period. Income of controlled foreign corporations and non-consolidated entities would also be included—and any deductions for U.S. or foreign income taxes would be removed in calculating income. It’s estimated that this tax would apply to about 200 corporations and raise hundreds of billions of dollars in revenue. Like many taxes that start as a thin edge of the wedge, this one may expand to include more taxpayers and at a higher rate, over time. For more information on the current corporate income tax structure, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
The Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
The IRS deadline for 2021 tax returns is today–and, for this year, the IRS is reminding taxpayers about recent changes that will make this year’s filing season a bit different than past years. Similarly, the DOL has recently introduced changes to Form 5500 that will impact MEPs, PEPs and other small business retirement plans for 2022. We also have coverage this week on how business owners should proceed now that the Supreme Court has weighed in on OSHA’s “vaccinate-or-test” mandate.
IRS: Tax Tips for a Smooth 2022 Tax Filing Today The IRS’ last day to accept 2021 1040s as filed by the deadline is today – electronically, or by postmark. Because of the Emancipation Day holiday in Washington, D.C., the 2022 tax filing deadline moved this year from April 15 Friday to today April 18 (April 19 for taxpayers who live in Maine or Massachusetts). The IRS encourages taxpayers to file electronically today to ensure fast processing–and notes that the average refund will be received within 21 days if the taxpayer files electronically, signs up for direct deposit and has no issues with their return. Taxpayers may need the information from the IRS’ Letter 6419 that provides information about advance child tax credit payments, and the IRS’ Letter 6475 that provides information about the third economic impact payment – these were received by taxpayers in January and February. Taxpayers who received these funds will need these letters to complete their tax returns today – otherwise, request the automatic extension today (if must be requested today, it cannot be requested afterward). Taxpayers who received advance child tax credits can also obtain information about those payments using the online portal at irs.gov. Taxpayers who received the child tax credit or earned income tax credit should also remember that the IRS cannot issue their refund before mid-February. For more information on federal tax filing information, visit Tax Facts Online. Read More
U.S. Supreme Court Reinstates Stay of Enforcement on OSHA ETS Near the end of 2021, the Sixth Circuit ruled to dissolve an existing stay of OSHA’s emergency temporary standard (ETS) that would have required employers with at least 100 employees to require employees to receive the COVID-19 vaccine or submit to weekly testing. In response, the Supreme Court considered the issue and opted to reinstate the enforcement stay—so that OSHA cannot enforce its ETS until further notice. The Court reasoned that the ETS was overly broad and failed to consider the risks associated with different industries. The ETS will now be sent back to the Sixth Circuit for a decision—and, if the Sixth Circuit rules in favor of enforcing the ETS, the Supreme Court may again be asked to review that decision. For now, employers should begin to comply with state laws on the issue. If the state requires vaccination-or-testing, employers should comply with that law. Employers can now also safely comply with state laws that prohibit employers from imposing vaccine mandates–but should stay tuned for the Sixth Circuit’s next ruling. For more information on the tax credit for employers who offer paid time off for employee vaccination, visit Tax Facts Online. Read More
DOL Introduces Form 5500 Changes for PEPs The SECURE Act created a new kind of multiple employer plan (MEP), called a pooled employer plan (PEP) for employers that didn’t qualify to participate in a MEP under pre-existing rules. PEPs allow unrelated employers to pool together to offer retirement benefits to employees. PEPs are required to report their aggregate account balances for every employer-participant starting with the 2021 plan year and must also report certain information about the plan provider. MEPs are also now subject to new reporting requirements, which they will file in an attachment to Form 5500 for the 2021 plan year. The MEP must report year-end account balances for each employer-participant, but the DOL has clarified that this requirement doesn’t apply to MEPs that function as defined benefit plans. The revised Form 5500 provides information on these reporting requirements, and is also updated for post-SECURE Act retirement plans that were adopted retroactively. For more information on MEPs, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
The Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
The NLRB is considering changing the way independent contractor status is determined, which can impact a host of employment-related issues. And by Monday, April 18th – help your clients avoid confusion (and penalties) this tax season by brushing up on the reporting rules for foreign assets and accounts and by making last minute IRA contributions still deductible for the 2021 tax year.
FBAR vs. Form 8938: Do Clients Need to File Both? FBAR and Form 8938 are two of the foreign tax filing forms that clients most commonly have to deal with. The two forms are similar in that both require taxpayers with certain foreign assets and accounts to report information about those accounts to the IRS. While Form 8938 was introduced later, it doesn’t actually replace the FBAR. In some situations, a client may have to file both forms. Form 8938 is actually a part of the client’s federal income tax return, while FBAR is a form that is filed electronically, directly with FinCEN. Form 8938 is a much more wide-ranging form, meaning that many clients that don’t have FBAR filing obligations may nonetheless be required to file Form 8938 (foreign assets beyond mere financial accounts are included in the Form 8938 reporting obligations). Taxpayers should be careful to ensure they meet the individual filing deadlines. Because Form 8938 is part of the client’s tax return, any automatic extension that applies to that tax return will also apply. The same isn’t true of the FBAR filing, which is subject to its own set of deadlines and extension rules. For more information on FBAR filing requirements, visit Tax Facts Online. Read More
Deadline for 2021 IRA Contributions is Fast Approaching. Clients should be reminded that, though it’s hard to believe, the April 18 tax filing deadline for 2021 tax returns is right around the corner. That also means that April 18, 2022 is the deadline for making 2021 IRA contributions. The April 18 deadline is not extended even if the client takes advantage of the six-month tax filing extension and files a return by October 15, 2022. It’s important that clients who are making 2021 contributions in 2022 clearly state that the contribution should be counted for 2021–or risk their IRA custodian reporting the contribution as a 2022 contribution, which can create a tax headache down the road. If the contribution is a nondeductible contribution, the client must also file Form 8606 with their 2021 tax return (and should be advised to keep track of their tax basis in the account for purposes of determining tax liability on future distributions). Note also that the deadline for establishing and funding a SEP IRA is the business’ tax filing deadline (which may or may not be the same as the individual deadline). For more information on the IRA contribution rules, visit Tax Facts Online. Read More
NLRB Considers Implementing New Standard for Determining Independent Contractor Status The National Labor Relations Board (NLRB) recently announced that it will be considering a change to the standard it uses to determine whether a worker is an employee or an independent contractor. Typically, independent contractors are exempt from protections under most federal employment laws. For example, independent contractors can’t form or join a union. The NLRB is considering whether to continue applying the approach developed under the Trump administration in 2020, which generally makes it easier for employers to classify workers as independent contractors. Many expect that, under the Biden administration, the NLRB will adopt an approach that restricts an employer’s ability to classify workers as independent contractors further. It’s also expected that the NLRB will determine whether misclassifying a worker as an independent contractor, rather than an employee, can be sufficient to violate the National Labor Relations Act (NLRA). For more information on the standards used to classify workers as employees or independent contractors, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
The Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
For clients who missed 2021 RMDs, it’s not too late to fix the mistake and potentially avoid stiff penalty taxes. We also have information on the newly revised forms that plan participants may receive to document retirement distributions beginning in 2022–and a summary of a new case that limits the rights of non-plan participants to sue under ERISA.
Clients Still Have Opportunities to Correct Missed RMDs for 2021 As most clients know, the IRS requires retirement plan participants to begin taking periodic distributions from IRAs and 401(k)s once the owner reaches age 72. Missing an RMD has steep consequences. The owner will be subject to a 50% penalty and the plan could lose its qualified status.If the RMD failures are no more than three years in the past, the owner can use a self-correction program (SCP) to correct the mistake. The SCP is only available until the last day of the third plan year following the plan year when the missed RMD occurred. The RMD will have to be distributed with earnings that accrued on the missed RMD during the failure period. The participant can also use Form 5329 to request a waiver of the penalty tax. In all cases, use of the SCP should be documented and the plan should document steps taken to prevent future missed RMDs. Along with Form 5329, the participant must file a letter stating that the error was due to reasonable cause and that reasonable steps have been taken to prevent future errors. For more information on the penalty for failure to comply with the RMD rules, visit Tax Facts Online. Read more
IRS Releases Revised Form W-4P and Form W-4R for 2022 The IRS recently released a revised Form W-4P (Withholding Certificate for Periodic Pension or Annuity Payments) and a new Form W-4R (Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions) for use beginning in 2022. Now, individuals will receive different forms depending on the type of payments involved. Only individuals receiving periodic pension or annuity payments will receive the revised Form W-4P. Plan participants receiving nonperiodic payments, lump sum distributions, IRA distributions or certain rollover distributions will receive the Form W-4R going forward. In the past, those individuals would also have received Form W-4P. The forms can be used beginning in 2022. However, the IRS is not requiring plan administrators to make the change until January 1, 2023. For more information on the withholding requirements for annuity and retirement distributions, visit Tax Facts Online. Read more
Misclassified Independent Contractor Can’t File ERISA Lawsuit A California court recently ruled that a worker who claimed he was misclassified as an independent contractor could not file a lawsuit under ERISA for retirement plan benefits. The worker claimed that he was mistakenly excluded from the defendant’s retirement plans because he should have been properly classified as an employee. The court found that because the worker was not a plan participant, beneficiary or fiduciary, he lacked standing to sue under ERISA. In order to qualify as a plan participant, the plaintiff would must have a colorable claim to plan benefits. Here, the worker merely alleged that he should have been entitled to participate in the employer’s plan. As a result, the court dismissed the worker’s claims entirely without determining whether he should have been classified as an employee. For more information on the consequences of worker misclassification, visit Tax Facts Online. Read more
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
The Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
Within the more than 2,000 pages of the Consolidated Appropriations Act of 2022 is an important provision that allows HSA and HDHP participants to continue accessing remote healthcare services without jeopardizing HSA eligibility. The DOL also shone a spotlight on cryptocurrency investments this week by making it clear that plan fiduciaries would be asked to justify any decisions related to crypto investments in retirement accounts. Finally, we have a summary of the IRS’ warning to taxpayers regarding proper reporting of crypto transactions on their 2021 tax returns. Read on for more.
ConsolidatedAppropriations Act Extends HDHP Telehealth Relief. The recently enacted Consolidated Appropriations Act of 2022 (CAA 2022) extends prior CARES Act relief for high deductible health plans (HDHPs) that provide remote care services. HDHPs will be permitted to provide first-dollar telehealth services from April 2022 through December 2022 (regardless of the plan year) without jeopardizing HDHP status. The remote services do not have to be related to COVID-19 or preventative in nature in order to qualify. In other words, HDHPs can waive the deductible for telehealth services without jeopardizing a plan participant’s eligibility to make HSA contributions. Plans and participants should note that if the HDHP is a calendar year plan, the usual rules regarding the plan deductible will apply between January 2022 and March 2022. For more information on the HDHP rules, Read More
DOL Releases Warning on Cryptocurrency in 401(k)s. The Department of Labor (DOL) issued a compliance assistance release that warns retirement plan fiduciaries about allowing participants to invest in either cryptocurrencies or products that are related to cryptocurrency. The guidance comes in response to President Biden’s executive order that directed agencies to study the risks and benefits of cryptocurrency. The DOL release warned that in the eyes of the DOL, cryptocurrency poses significant risks and challenges for participants, including the risk of fraud, theft and loss. The release is clear that plan fiduciaries who allow cryptocurrency investment options should expect to be questioned about how those decisions could comply with their duties of prudence and loyalty. Plan fiduciaries should pay close attention and carefully evaluate whether allowing crypto-related products in their investment lineup is worth the risk, given the DOL’s sweeping statements and indication that it will presume that a fiduciary who offers cryptocurrency products has acted imprudently. For more information on the current DOL fiduciary standard and new prohibited transaction exemption, visit Tax Facts Online. Read More
IRS Reminds Taxpayers of Virtual Currency Reporting Obligations. The IRS released a reminder for taxpayers who have engaged in virtual currency transactions during the 2021 tax year. The 2021 Form 1040 due next Monday (April 18) contains a question at the top that asks about these virtual currency transactions. Taxpayers should check “yes” if they have engaged in any disposition, sale or exchange of a financial interest in virtual currency. That includes the receipt of virtual currency for goods and services, receipt of cryptocurrency for free (if the receipt does not qualify as a bona fide gift), receipt of cryptocurrency through mining or staking activities or hard forks. Exchanges or trades of cryptocurrency for other cryptocurrency, property goods or services must also be reported, as must sales of virtual currency. Taxpayers who held the cryptocurrency as a capital asset should use Form 8949 to determine gain or loss (which is reported on Schedule D of Form 1040). Taxpayers who received cryptocurrency as compensation should report the income as they would any other type of income. For more information on reporting obligations related to virtual currency transactions, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
The Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
The IRS has released long-anticipated proposed regulations on changes made to the required minimum distribution rules under the SECURE Act. The proposed regs contained a few surprises that will impact any client who inherits a retirement account–especially those who have inherited an account from an individual who was already taking RMDs. The regulations are detailed, and it is very possible that they will be modified in response to comments, which are due by May 25, 2022.
IRS Releases Proposed Regulations on SECURE Act RMD Changes. The IRS released proposed regulations on changes to the required minimum distribution (RMD) rules effective beginning in 2020. In a surprise move, the regulations require most designated beneficiaries to take annual RMDs within the ten-year distribution period if the original account owner died after the required beginning date (the SECURE Act is silent with respect to whether annual distributions are required). However, the IRS has yet to release guidance for clients who inherited accounts after the SECURE Act’s effective date and before the regulations were issued. In other words, they don’t address whether a client may be required to take a retroactive RMD for 2021. The proposed regulations themselves are effective January 1, 2022 (the existing regulations must be applied for 2021). For more information on the RMD rules that apply after an account owner’s death, visit Tax Facts Online. Read More
IRS Proposed RMD Regs Clarify Eligible Designated Beneficiary Definitions. The proposed regulations also clarify a few points with respect to the new definition of “eligible designated beneficiary”. An eligible designated beneficiary is entitled to continue using the life expectancy distribution method even post-SECURE Act. Under the proposed regulations, the “age of majority” for eligible designated beneficiaries who are minor children is age 21 (many expected that an age 18 limit would apply). Defined benefit plans that use the definition of “age of majority” under the existing regulations can continue to do so (meaning that those plans can treat a child as being under the age of majority if that child has not completed a course of education and is under age 26). Spousal beneficiaries will also be required to elect to treat the deceased spouse’s IRA as their own by the later of (1) December 31 of the year following the year of the owner’s death or (2) age 72. Additionally, the regulations propose a rule that would treat an account owner as having no eligible designated beneficiary if the owner has multiple designated beneficiaries and one of those beneficiaries is not an eligible designated beneficiary. In situations involving multiple designated beneficiaries, the life expectancy of the oldest beneficiary will be used (under prior regulations, the shortest life expectancy was used). For more information on the RMD rules, visit Tax Facts Online. Read More.
Post-SECURE Act Guidance on Trusts as Inherited Account Beneficiaries. Under the general rule for employees dying on or after January 1, 2020, beneficiaries of a trust may be treated as having been designated as beneficiaries of the employee under a qualified plan for purposes of determining the period over which RMDs must be made. Beneficiaries of a see-through trust can continue to be treated as designated beneficiaries under regulations proposed in 2022. The regulations continue to apply the requirement that the trust beneficiaries be identifiable. Beneficiaries of a valid see-through trust will be taken into account if they could receive amounts in the trust representing the participant’s interest in the retirement plan that are not contingent upon, or delayed until, the death of another trust beneficiary who predeceases the plan participant. Those beneficiaries with only remote interests will be disregarded. For more information on the rules governing see-through trust beneficiaries, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
Robert and I have an exciting announcement for our Tax Facts subscribers. In February, our publisher ALM will be launching Tax Facts Premium, a new add-on productthat provides valuable tools and content, including:
calculators (tax, retirement income, investment, personal finance, business, and more)
practice aids (buy sell agreements, as well as documents related to business life insurance, estate planning, retirement planning, and employee benefits)
softskills (practical guidance on how to build and maintain clients)
archives (archived content including featured articles and the intelligence weekly).
Also, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the typical enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
This week, we have some important IRS and court updates regarding interpreting the definitions of two key terms that apply in the retirement plan context–“retirement” and “compensation.” The IRS has also released the limitations that apply under IRC Section 280F for taxpayers with certain luxury passenger auto leases and depreciable passenger automobiles. Read on for more.
Second Circuit Weighs in on “Retirement” Definition for Defined Benefit Plan Purposes. The Second Circuit recently affirmed a lower court ruling dealing with the definition of “retirement” in a situation involving a multi-employer defined benefit pension plan. In Metzgar v. U.A. Plumbers & Steamfitters Local No. 22 Pension Fund, the plan set the normal retirement age at 65 but also contained a special early retirement option for employees after their 55th birthdays. The special option was available if the employee’s combined age and years of service was at least 85. For many years, the plan interpreted the rule to not require an employee to stop working to receive plan benefits (the employee only had to stop working in a “disqualifying position”). So, participants could receive benefits and work in management-related positions at the same time. Later, the plan changed the rules to require employees to stop working to receive benefits. The court agreed that the reinterpretation was required to protect the plan’s tax-exempt status, and that the plan did not violate the plan participants’ rights by requiring the employee to stop working in order to continue receiving plan benefits. For more information on the rules governing multi-employer retirement plans, visit Tax Facts Online. Read More
IRS Releases 2022 Depreciation Limits for Certain Passenger Automobiles. Revenue Procedure 2022-17 provides the depreciation limits for certain passenger automobiles first placed into service during 2022, and also provides the amounts that must be included in income for taxpayers who lease certain automobiles beginning in 2022. For passenger automobiles purchased after September 28, 2017 and first placed in service in 2022, and to which the extra Section 168 depreciation deduction does apply, the first year limitation is $19,200, decreasing to $18,000 in year two and falling to $10,800 in year three. For all subsequent years, the limit is $6,460. If no bonus depreciation applies, the limits are $11,200 in year one, $18,000 in year two, $10,800 in year three and $6,460 in all subsequent years. For taxpayers with a lease term that begins in 2022, the dollar amounts that must be used to determine income inclusion begin at $56,000 and can be found in Table 3 of Rev. Proc. 2022-17. For more information on the depreciation rules and limits that apply to passenger automobiles, visit Tax Facts on Insurance and Employee Benefits Online. Read More
Is Your Lump Sum Payout of Unused Vacation Time “Compensation” for Retirement Plan Purposes? It’s been a strange couple of years in the workplace. Many American workers have been unwilling or unable to use their vacation time and are now looking at a situation where their employers may be compensating them in the form of a lump sum payout based on company policies. That can leave clients wondering whether that payout counts as “compensation” for purposes of determining the retirement plan contribution limits. Lump sum payments of unused vacation are treated as supplemental wages that are subject to Social Security and Medicare taxes. That means that a lump sum payout of unused vacation should also be included as “compensation” for retirement plan purposes unless the specific retirement plan actually provides otherwise. So, unless the payout is specifically excluded by the plan, taxpayers should be entitled to include that compensation when determining their permissible retirement plan contributions for the year. For more information on the definition of “compensation” and relevance for Section 415 contribution purposes, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The School of Law enrollment for the Spring 2022 semester is 700+ degree-seeking Master/LL.M. students, and 450+ J.D.s. The university enrollment is 68,000+ degree seekers.
Robert and I have an exciting announcement for our Tax Facts subscribers. In February, our publisher ALM will be launching Tax Facts Premium, a new add-on productthat provides valuable tools and content, including:
calculators (tax, retirement income, investment, personal finance, business, and more)
practice aids (buy sell agreements, as well as documents related to business life insurance, estate planning, retirement planning, and employee benefits)
softskills (practical guidance on how to build and maintain clients)
archives (archived content including featured articles and the intelligence weekly).
Also, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the typical enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education
IRA owners are only entitled to limited protection in bankruptcy. However, the dollar limit is set to increase once again starting Friday. We also have information on the new RMD rules that could have a negative impact on successor beneficiaries –as well as newly proposed DOL rules that could make it much more difficult to obtain a prohibited transaction exemption if finalized. Read on for more.
IRA Bankruptcy Exemption Set to Increase April 1. Federal law limits the amount of IRA funds that are protected from creditors when the IRA owner files for bankruptcy (unlike 401(k) funds, which are fully protected from creditors in bankruptcy). Under current law, up to $1,362,800 in IRA funds are protected from creditors in bankruptcy. The limit is set to increase to $1,512,350 beginning April 1, 2022. The dollar amount is adjusted for inflation only every three years, so the new limit will apply through March 31, 2025. However, it’s important for clients to remember that the laws in their state may also be relevant. Some states grant creditor protection for all IRA funds. Others even protect IRAs from being accessed to satisfy a legal judgment. For more information on the rules that apply to IRAs and inherited IRAs in bankruptcy, visit Tax Facts Online. Read More
New RMD Regs Create Confusion for Successor Beneficiaries. The new proposed RMD regulations could create confusion and problems for successor beneficiaries, who are beneficiaries of an original IRA beneficiary. Successor beneficiaries are typically subject to the ten-year payout rule post-SECURE Act. If the original beneficiary was subject to the ten-year rule (so was not an eligible designated beneficiary), the successor must continue payments within the same ten-year window. If the previous beneficiary was an EDB and was using the life expectancy method, the successor beneficiary obtains a new ten-year window. A beneficiary using the ten-year window must take annual RMDs if the original beneficiary died after his or her required beginning date (otherwise, no annual RMDs are required). So, the successor beneficiary must first determine whether the original account owner died before his or her required beginning date to determine whether annual RMDs will be required within the ten-year payout window. In many cases, that could be difficult, especially if the IRA has changed custodians so that the successor beneficiary may not know how old the original account owner was at death. For more information on the new proposed RMD regulations, visit Tax Facts Online. Read More
DOL Proposed Rule Could Limit Availability of Prohibited Transaction Exemptions. The DOL has proposed a new rule that would make the process for obtaining a prohibited transaction exemption much more difficult. If passed, the changes will apply only prospectively, 90 days after the publication of the final regs in the Federal Register. The proposed regulations would require that communications with the DOL prior to submitting a formal application for exemption will become part of the administrative record that can be requested by the public. Applicants would not be permitted to approach the DOl on an anonymous basis. The regulations would impose new terms with respect to the independent fiduciary or appraiser that may be required. The current regulations provide information about when the fiduciary or appraiser will be considered “independent”, providing that the fiduciary or appraiser is independent if less than 2% of their revenue is derived from parties to the transaction (though its possible that they could achieve independent status if the revenue is less than 5%). The new rules would make the standard stricter, and require analysis of the revenue from the prior tax year and projected revenue for the current year. If an appraiser and a fiduciary are required, the appraiser must be independent of both the fiduciary and the applicant. It’s also possible that the individual could be deemed not “independent” if they have an interest in the transaction or future transactions of a similar type. For more information on new PTE 2020-02, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
Robert and I have an exciting announcement for Tax Facts subscribers. In February, we will be launching Tax Facts Premium, a new add-on productthat provides valuable tools and content, including:
calculators (tax, retirement income, investment, personal finance, business, and more)
practice aids (buy sell agreements, as well as documents related to business life insurance, estate planning, retirement planning, and employee benefits)
softskills (practical guidance on how to build and maintain clients)
archives (archived content including featured articles and the intelligence weekly).
As we get closer to launch, we’ll provide you with more information on pricing and how to subscribe.
By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education
Supreme Court: ERISA Fiduciaries Must Monitor All Plan Investments Even if Some Investment Options Are Adequate
The U.S. Supreme Court (USSC) recently held that an ERISA fiduciary has a duty to monitor each plan investment option—and can be held liable for a failure to monitor even if some plan investment options are adequate. Hughes v. Northwestern University has garnered significant attention in recent months. Finally, the USSC issued a unanimous opinion holding that ERISA fiduciaries have an ongoing duty to monitor investments and improve imprudent investments. The opinion reversed the 7th Circuit’s holding that this responsibility was satisfied if the plan offered an adequate array of investment choices. Instead, fiduciaries can be held liable if they fail to monitor all investments and remove any imprudent investments from the plan’s menu of investment choices. In other words, identifying well-designed options doesn’t relieve the plan sponsor of liability with respect to poor options and the ERISA fiduciary has a duty to protect participant-employees from making poor investment choices. For more information on issues pertaining to fiduciary liability, visit Tax Facts Online. Read More
Have Your Clients Checked Their Beneficiary Designations Lately?
Updating a plan’s beneficiary designations might seem like a simple process–and it often is. However, it’s a process that’s often overlooked. Clients who participate in ERISA plans should be reminded that they’re required to complete their beneficiary designations in writing, using the procedures and forms established by the specific plan, in order for those designations to become effective. Often, survivors can be surprised by the beneficiary designated by the plan—and may even try to argue that the decedent’s will should govern who receives the account funds. Clients should remember that wills and state intestate laws do not govern who receives plan funds. The only consideration will be who the account owner has designated under plan procedures. It’s important to carefully evaluate the plan’s policies, however—because some plans have exceptions in place to, for example, automatically revoke a beneficiary designation upon divorce. For more information on the importance of checking beneficiary designations and updating on major life events, visit Tax Facts Online. Read More
IRS Modifies Interest Rates for Use in Determining Substantially Equal Periodic Payments
Substantially equal periodic payments (SEPPs) are exempt from the 10% early distribution penalty that applies to traditional retirement account distributions prior to age 59½. However, a SEPP must remain in place for the longer of (1) five years or (2) the date the recipient reaches age 59½. If the SEPP is ended or modified prior to that time, the 10% penalty applies (plus interest). The SEPP payment is calculated based on one of three different options. Two of those options are calculated using an interest rate that’s typically based on the federal mid-term rate in effect for the months prior to the start of the SEPP schedule (the rate cannot typically exceed 120% of the federal mid-term rate). In recent years, that rate has been extremely low. Now, the IRS has released guidance providing that payment schedules beginning in 2022 and thereafter are permitted to use an interest rate that is as high as 5%. This change provides an opportunity for plan participants to use the SEPP option and receive a higher payment (clients with existing SEPPs are not permitted to modify their interest rate). Further, clients with existing SEPPs who use the RMD distribution method (which doesn’t rely on an interest rate) can switch to the new IRS life expectancy tables without “modifying” the SEPP (in fact, they are required to switch beginning in 2023). For more information on SEPPs, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2021 legislative and regulatory updates, and the impact on 2022 client planning, as well as other weekly intelligence.
Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
Leaders at the G20 summit in Rome endorsed an overhaul of the international tax rules that would impose a 15 percent global minimum tax to companies with revenues of more than $867 million. This deal is designed to discourage companies from avoiding taxes by finding havens with low tax rates. Although the pact probably won’t be fully enacted until 2023, it is something to keep an eye on as it could have implications for the global economy. Back in the United States, we have a mixed bag of retirement-related content this week. First, the IRS took steps to help pension sponsors rehire workers who may have started receiving pension distributions due to pandemic-related retirements without risking qualified status. Second, the IRS extended its non-enforcement policy for investment advice fiduciaries who provide retirement and rollover-related relief. Third, in a surprise move, Congress dropped all retirement-related changes from the proposed spending legislation. Are your clients up to speed?
By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education
IRS Provides Relief for In-Service Pension Distributions to Help Businesses Rehire Post-COVID
The IRS has updated its FAQs to provide relief for business owners looking to rehire in the wake of the COVID-19 pandemic. Some workers chose to take an early retirement during the height of the pandemic and may have begun receiving distributions from pension plans. Under the first question, the IRS addressed a situation where a pension did not provide for in-service distributions and began paying benefits to a participant who experienced a bona fide retirement. If the plan sponsor rehires the participant because of unforeseen hiring needs, that individual’s prior retirement will still be treated as a “bona fide retirement”. According to the IRS, a rehire due to unforeseen circumstances that do not reflect any prearrangement to rehire the individual will not cause the individual’s prior retirement to no longer be considered a bona fide retirement under the plan. The IRS has also clarified that a qualified pension can allow individuals to begin in-service distributions if the individual has either attained age 59½ or the plan’s normal retirement age. However, distributions prior to age 59½can lead to imposition of a 10 percent penalty unless an exception applies. For more information on pre-retirement distributions from qualified plans, visit Tax Facts Online. Read More
DOL Updates Temporary Enforcement Policy on Prohibited Transaction Rules for Investment Advice Fiduciaries
The Department of Labor (DOL) once again updated its temporary enforcement policy for investment advice fiduciaries to allow firms and advisors more time to comply with new prohibited transaction exemption (PTE) 2020-02. The PTE was set to become fully effective as of December 20, 2021. Recognizing that allowing the temporary enforcement policy to expire next month would create practical difficulties for financial institutions, the DOL extended the policy through January 31, 2022. As a result, the DOL will not pursue prohibited transactions claims against investment advice fiduciaries who are working in good faith to comply with the impartial conduct standards under PTE 2020-02. It will also not treat these fiduciaries as violating the prohibited transaction rules during this period. The DOL will not enforce the “specific documentation” and disclosure requirements for rollovers under PTE 2020-02 through June 20, 2022. Aside from the rollover exception, all other requirements will be subject to full enforcement as of February 1, 2022. For more information on PTE 2020-02 and the new investment advice fiduciary standard, visit Tax Facts Online. Read More
Retirement Proposals Dropped From Framework Legislation
As negotiations over the framework spending legislation stalled last week, Congress took an unexpected turn and dropped all retirement proposals from the spending package. That includes proposals to require certain employers to enroll employees automatically in retirement savings programs and the increased credits for small businesses who adopt a retirement plan or auto-enrollment provision for the first time. All provisions that would close the “backdoor” to Roth IRAs for high earners were also dropped from the proposal, as were the changes that would impose contribution limits on high-income taxpayers with large IRA balances. The earlier proposal would have also changed the Saver’s Credit by turning it into a government-sponsored matching contribution. For more information on the current Roth conversion rules that allow higher income taxpayers to indirectly fund a Roth account, visit Tax Facts Online.Read More
Look in your Tax Facts Online app for our continuing analysis of 2021 legislative and regulatory updates, and the impact on 2022 client planning, as well as other weekly intelligence.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
We all know that the past 18 months have been filled with legislative changes. Laws have been enacted more quickly than ever–and, often, the IRS, DOL and other agencies have stepped in to provide interpretive guidance on a rolling basis. Last week, the IRS announced a change in its official policies when it comes to taxpayer’s ability to rely upon frequently asked questions. Also, as a reminder, employers will no longer benefit from ACA-related “transition relief” starting this year–and, as always, it’s a good time for a 4th quarter withholding checkup.
By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education
IRS Updates Frequently Asked Question (FAQ) Process
The IRS announced updates to its processes and policies for frequently asked questions (FAQs) and has provided guidance on the rules for implementing penalties for taxpayers who rely on FAQs. FAQs often provide important interpretive guidance for taxpayers attempting to understand how new legislation will be implemented. However, the FAQs are updated frequently and without warning. Going forward, FAQs will be announced in a news release and posted to IRS.gov in a fact sheet. Prior versions of the fact sheet FAQs will now be dated and maintained on IRS.gov so that taxpayers can find the version they relied upon. The IRS also released a statement clarifying that if a taxpayer relies on FAQs in good faith and that reliance is reasonable, the taxpayer has a reasonable cause defense against any accuracy-related penalties and negligence penalties if it turns out that the FAQs were not a correct interpretation of the law given the facts. However, the law itself will continue to control in the taxpayer’s case (not the FAQs). In the wake of the COVID-19 pandemic, IRS FAQs were often the only interpretive materials available. For examples of how FAQs have functioned to guide taxpayers in interpreting legislation,, visit Tax Facts Online. Read More
Give Your Withholding a Fourth-Quarter Checkup
While it seems hard to believe, the 2021 tax year is almost at an end. The IRS recently reminded taxpayers that the fourth quarter is always a good time for a withholding checkup. Taxpayers still have time to adjust their withholding to withhold additional amounts (or make an estimated tax payment) to avoid a surprise tax bill in April. For 2021, there are a number of new tax provisions that should be considered when examining withholding choices, including COVID-19 tax relief, natural disaster relief and issues created by moving to another state due to a pandemic-related work-from-home policy. As always, issues such as marriage, divorce or having a child will impact the amount employees should have withheld from their paychecks. The IRS offers a tax withholding estimator that can be helpful. Clients who had an unexpected tax bill for the 2020 tax year can use this tool to ensure they’ve paid accurately in 2021 and avoid surprises come April. For more information on tax withholding obligations, visit Tax Facts Online. Read More
Reminder: No Extension for ACA Reporting for 2021
In prior years, the IRS has permitted transition relief and extended the deadline for providing Form 1095-C to individuals from February to March. (Typically, the due date to furnish the Forms 1095-B and 1095-C to requisite individuals is extended from February 1 to March 1). This year, there is no extension, so businesses must provide individuals with Forms 1095-B or 1095-C by January 31, 2022. Form 1094-C and Form 1095-C that must be provided to the IRS are typically not subject to the extension. The employer must furnish these filings to the IRS by February 28, 2022 if the filing is on paper and March 31, 2022 if the employer is filing electronically. Under current law, employers that submit 250 or more of the same form must use electronic filing systems. However, the IRS has proposed a new rule that would require nearly all employers to file electronically (lowering the threshold to 100 forms in 2022 and ten forms starting in 2023). Employers would also be required to aggregate all forms that they have submitted. For more information, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2021 legislative and regulatory updates, and the impact on 2022 client planning, as well as other weekly intelligence.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The IRS finally cleared up the issue of when initial COBRA premium payments are due under the extended deadlines provided in various COVID-19 relief laws. The SSA also announced a historic increase in the cost of living adjustment for Social Security recipients–so what does that mean for your taxes in 2022? Finally, small business clients who are asking questions about vaccination status may want to think twice where job applicants are concerned.
By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education
Notice 2021-58 Clarifies Timeline for Making COBRA Premium Payments Under COVID-19 Relief Laws
In May 2020, the DOL and IRS extended certain COBRA timelines so that plans were required to disregard the period beginning March 1, 2020 and ending the earlier of (1) one year from the date relief became available or (2) 60 days after the end of the COVID-19 national emergency (the “outbreak period”). To date, the end of the outbreak period has not been announced. Last week, the IRS released Notice 2021-58 to provide clarity about the disregarded period and deadlines for COBRA premium payments. Namely, the Notice provides that the tolling periods are to run concurrently. The Notice also provided transition relief so that the COBRA eligible individual cannot be required to make an initial premium payment before November 1, 2021, as long as the individual made the initial premium payment within one year and 45 days after the date of the COBRA election. Generally, with respect to the initial payment, the individual has one year and 45 days after the date of the election to make the payment if the election was made within the typical 60-day deadline. For elections made after that 60-day timeframe, the individual has one year and 105 days from the date the COBRA notice was provided (to reflect the one-year suspension of the 60-day election period and the 45-day grace payment period). For more information on the COBRA payment periods, visit Tax Facts Online. Read More
Social Security Administration Announces 2022 Cost-of-Living Adjustments for Benefit Recipients
The Social Security Administration has announced the cost of living adjustments (COLA) applicable for 2022, including a 5.9 percent increase in monthly benefits paid to Social Security recipients (the COLA increase for 2021 was 1.3 percent). Social Security “COLA” adjustments are tied to the consumer price index each year. Based on the 5.9 percent increase, the SSA also announced that the annual Social Security earnings cap will be increased from $142,800 to $147,000 for 2021. This means that in 2022, each taxpayer’s first $147,000 in earnings will be subject to Social Security taxes. Social Security and SSI recipients should expect to receive information about their new benefit amount by mail beginning in early December (and can find their COLA notice online through their Social Security accounts at www.socialsecurity.gov/myaccount). For more information on the Social Security tax, visit Tax Facts Online. Read More
Asking for Vaccination Status? Remember, Different Laws Apply to Employees Versus Job Applicants
Small business employers can now be confident that they’re legally able to ask employees about vaccination status to protect worker safety. However, those same clients should remember that different rules apply during the hiring process. While the specific vaccine issue hasn’t been litigated, under existing law, potential employers are not permitted to ask a potential employee about any medical information during the hiring process under the ADA (employers shouldn’t worry about job applicants who volunteer information about their vaccination status, but they shouldn’t request the information). Even asking about vaccination status could prompt the job applicant to offer other medical information that the employer isn’t permitted to consider during the application process (for example, if it turns out the applicant isn’t vaccinated because of chemotherapy treatments). Once the individual has been offered a conditional employment opportunity, however, the employer is then permitted to ask questions about medical issues, assuming the same information is requested from all individuals receiving the job offer and the information isn’t used to discriminate. For more information on the tax credit for vaccine-related time off work, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of 2021 legislative and regulatory updates, and the impact on 2022 client planning, as well as other weekly intelligence.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
We’re still waiting for the exact parameters of any new government legislation on retirement plans. However, one thing is certain: Congress isn’t forgetting about small business owners. Multiple pieces of legislation focus on increasing access to retirement plans for employees of small businesses. If your clients are worried about the cost, don’t forget to remind them about the expanded tax credits for plan startup costs. This week, we also have reminders about the soon-to-be effective PTE 2020-02 and how to handle requests for COVID-19-related reasonable accommodation in the workplace.
By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education
Establishing a Retirement Plan? Don’t Forget Small Business Tax Breaks
Recent legislation has focused small business clients’ attention on retirement plans and their obligations to employees. Some states already sponsor “auto IRAs” for workers without access to an employer-sponsored retirement plan. The Build Back Better Act would require employers who do not sponsor a retirement plan to automatically enroll employees in either an IRA or a 401(k)-type plan beginning in 2023. The “SECURE Act 2.0” also contains provisions designed to encourage more small businesses to offer retirement plans. Small business clients who are exploring their options in advance of government action should be reminded about valuable tax incentives designed to encourage workplace retirement savings options. The SECURE Act increased the tax credit for retirement plan startup costs so that employers can receive a $250 tax credit for every non-highly compensated employee (up to a maximum of $5,000 per year). The tax credit is available for up to three years and can be applied toward the administrative costs of maintaining the plan (and to participant education). Employers can also receive a $500 tax credit per year (for up to three years) if they add an auto-enrollment feature. For new plans, both tax credits are available. For more information on these tax credits, visit Tax Facts Online. Read More
Reminder: Conditions of New DOL Fiduciary PTE Becomes Fully Effective December 21
The DOL’s new prohibited transaction exemption (PTE) 2020-02 becomes fully effective December 21. Advisors who satisfy the “five prong test” must determine whether their recommendation would create a conflict of interest (for example, most IRAs would result in a prohibited transaction because of the compensation earned). The new PTE provides an exception for certain conflicted advice if the terms of the PTE are satisfied. To date, the DOL has only required a good faith compliance effort from firms and advisors that satisfy the impartial conduct standards. Effective December 21, the rule will be fully effective, meaning that fiduciaries must acknowledge fiduciary status and provide conflicts and services disclosures–and the firm must implement written policies and procedures to ensure compliance with the impartial conduct standards. For certain types of rollover transactions, advisors will also have to provide a written statement outlining the specific reasons why the rollover transaction is in the best interest of the participant or IRA holder. The new fiduciary PTE applies in the case of rollover transactions if the advice is provided in the context of an ongoing relationship or as the beginning of a future relationship between the client and advisor. For more information on PTE 2020-02, visit Tax Facts Online. Read More
Focus on Reasonable Accommodation for Employers Implementing Return-to-Work Policies
In the midst of the ongoing COVID-19 pandemic, employers are more focused than ever on the issue of what constitutes reasonable accommodation for disabilities or religious beliefs in the workplace. As employers re-open workspaces and bring employees back to work, many are facing requests for COVID-19-related “reasonable accommodation” that they’ve never handled before. A recent 10th Circuit case (Brown v. Austin) illustrates a key point: a work-from-home or modified schedule is not a “reasonable” accommodation if the employee is unable to perform essential job functions as a result. The case illustrates the general rule that reasonable accommodation is only required if it doesn’t present an undue hardship for the employer. Employers today should ensure that the essential job functions required of each role are well-documented–remembering that it’s important to evaluate whether the accommodation would truly prevent the employee from performing those job functions. For more information on employers’ options on return to work, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
Many small business clients jumped at the opportunity to take advantage of advance payments of the COVID-19 tax credits–often relying on limited and quickly-changing guidance in calculating the value of those credits. Now, the IRS has announced that it will recapture excess payments of those tax credits as underpayments of tax. It’s anticipated that this may be particularly problematic for S corporation shareholders who claimed those credits before the IRS released guidance on majority shareholder issues. Are your clients prepared?
By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education
IRS Releases Regulations Allowing for Recapture of Erroneous COVID-19 Tax Credits
Early in 2020, the IRS created procedures to allow employers to quickly take advantage of the FFCRA and CARES Act tax credits. Now, the IRS has released temporary regulations that allow the IRS to recapture any of the tax credits credited to an employer in excess of the amount that the employer was actually entitled to receive. The regulations provide that any amount of the credits for qualified leave wages, credits for qualified health plan expenses under sections 3131(d) and 3132(d), and any amount of the employee retention credit that were erroneously paid or credited to the employer can be recaptured. Those incorrect tax credits will be treated as underpayments of taxes and may be administratively assessed and collected in the same manner as the taxes. The temporary regulations also provide that the calculation of any credits erroneously claimed must take into account any amounts that were advanced to the employer under the processes established in 2020. For more information on the employee retention tax credit, visit Tax Facts Online. Read More
Federal Court Sides With DOL on Form 5500 Statute of Limitations Issue
Recently, in Walsh v. Bowers, the Department of Labor (DOL) convinced a federal court to extend the statute of limitations for a fiduciary breach claim by relying on a Supreme Court interpretation of the “actual knowledge” standard. Typically, the ERISA statute of limitations that applies for DOL investigations is the earlier of (A) six years after (1) the date of the last action that was a part of the breach or (2) if the case involves an omission, the last date on which the fiduciary could have cured the breach or (B) three years after the earliest date that the plaintiff had actual knowledge of the breach. Typically, the DOL should have the relevant information in order to have actual knowledge of a breach when a plan files Form 5500 containing that information. However, the DOL argued that a recent Supreme Court decision interpreting the definition of “actual knowledge” to mean actual knowledge should apply. Relying on that case, the court allowed the DOL additional time because the DOL had yet to review the Form 5500 in question. For more information on the current standard for investment advice fiduciaries, visit Tax Facts Online. Read More
December 31 Deadline for Maximizing QOZ Tax Deferral Benefits
December 31, 2021 is the final day for taxpayers to invest in a qualified opportunity zone (QOZ) and maximize the federal tax deferral benefit of these investments. Taxpayers who invest capital gains according to the QOZ rules are not subject to immediate taxation on the gain. Capital gains taxes are deferred (and federal income taxes are not required to be paid) until the end of 2026, or upon the individual’s disposition of the qualified opportunity fund (QOF) interest. When the taxpayer eventually recognizes that gain, if the taxpayer has held the interest for at least five years, 10 percent of the federal income tax liability is eliminated (taxpayers who invested earlier can eliminate an additional 5 percent). If the taxpayer holds the interest for at least 10 years, the increase in value is not subject to federal income tax when the interest is sold. In order to hold the interest for the required five-year period, the taxpayer must purchase the interest no later than December 31, 2021. For more information on the opportunity zone rules, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
Based on weekly case studies created by the faculty, supported by reading/text materials, pre-recorded videos with PPTs, and audio podcast files made by the faculty – twice-weekly Zoom (optional) live sessions (recorded for those unable to attend) of 90 – 120 minutes wherein students may work with teams through the case studies generally from an assigned stakeholder perspective. Access to the extensive Texas A&M library for case study research includes by example: Lexis, Westlaw, IBFD, Kluwer-Cheetah, Thomson OneSource, BvD (Moodys), S&P CapIQ, FITCH, among several others. Apply for Texas A&M’s courses here.
Professor William Byrnes’ leverages the expertise of weekly case study experts that draw from a variety of disciplines including accounting, economics, finance, international business, management, and law. The textbook is authored by Professor William Byrnes and provided within the course [William Byrnes, Practical Guide to Transfer Pricing, 4th ed, 2022 version, published by Matthew Bender via LexisNexis and available in the law library in hardcopy].
Transfer pricing is the valuation of cross-border transactions between units of a multinational enterprise. This course introduces students to both theoretical and practical aspects of transfer pricing. This course deep dives into the legal issues (regulations and jurisprudence); accounting systems and variances among (managerial, financial, tax, and public accounting); financial data analytics through the lens of economic methods and profit level indicators; functional analysis and global value chain; contrasts with the OECD Transfer Pricing Guidelines and UN Transfer Pricing Manual. Each week, an industry-based case study is undertaken in a team-based learning approach of student groups generally consisting of three team members each. The industry case studies include, as examples, agriculture (coffee supply chain), technology services, and petroleum.
Part I and Part II of this course both address strategy, compliance, and risk management. Transfer Pricing Part I focuses on the topics of comparability, the transfer pricing methods, functional analysis, and global value chain analysis, and transfer pricing analysis for tangibles. Transfer Pricing Part II focuses on the transfer pricing methods and analysis for intangibles and for services. Topics more specifically that are addressed in this course via its textbook, video and audio lectures, weekly team-based case studies, and weekly live sessions, include the arm’s length standard, comparability analysis, risk analysis for tangibles and intangibles, transactional methods (CUP, CUT, Cost Plus, Resale Minus, Commodity), profit methods (e.g. comparable profits method, transactional net margin method, profit level indicators, key performance indicators, commensurate with income), functional analysis (supply chain, global value chain analysis, DAEMPE functions), industry economic data gathering and analysis, cost-sharing arrangements, profit splits and residuals, platform contributions, and safe harbors. Apply for Texas A&M’s courses here.
Prof. William Byrnes Course Topics and Subject Matter Expert Calendar
Week 1 January 17 Arm’s Length Standard case study by Dr. Bruno da Silva
Jan 18 Tuesday at 9am – 10:30am(2-minute student introductions, orientation to teamwork and case studies, expectations and obligations regarding participation asynchronously or synchronously, discuss the syllabus, set up first-week case study)
2nd live session for 2022 to be determined, for 2021 it was: Friday at 9am – 10:30am (presentations, peer feedback)
On Tuesday January 18th, the first day of the course, we will discuss the optional use of teams by students, the case study, the team’s roles for the case study, and how team’s should operate, or how individual students may do the work without using a team approach. Students are not required to join a team and may undertake the work/projects individually. This choice is decided weekly.
Week 2 Jan 25: CUP & Comparables, Eden Hofert – the Christmas Tree case (Canadian)/Compaq by Dr. Lorraine Eden
Jan 26 Tuesday at 9am – 10:00am(2-minute student introductions, orientation to teamwork and case studies, expectations and obligations regarding participation asynchronously or synchronously, discuss syllabus, set up first week case study)
Jan 29 Friday at 9am – 10:30 (presentations, peer feedback)
Prepare team approaches for the case study of the Christmas Tree scenario.
Week 3 Jan 31: Cost Plus & Resale Minus (Byrnes’ Starbucks case study) by Dr. George Salis
Feb 1 Tuesday at 9am – 10:00am
second session at 9am – 10:30 (presentations, feedback)
Watch background and overview videos of big data & econometrics as it is used in transfer pricing.
Read textbook Chapter 7 then read chapter 6.
Contrast the analysis within the Cost Plus Method and Resale Minus Method cases.
Each team has a stakeholder role in Byrnes’ case study of Starbucks cost inclusion and exclusion, agriculture supply chain, and coffee global value chain.
Week 4 Feb 7: Comparable Profits Method & TNMM by Dr. George Salis
Feb 8 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM)
second session at 9am – 10:30(presentations, peer feedback)
Read textbook chapters 8 and 9.
Watch second set of videos of big data & econometrics.
Review the CPM/TNMM examples.
Teams prepare the Case Study.
Week 5 Feb 14: functional analysis & global value chain, profit split methods by Dr. George Salis
Feb 15 Tuesday at 9am – 10:00am(discussion about Byrnes’ case study and the CPM, GVC)
second session at 9am – 10:30(presentations, peer feedback)
Read textbook chapters 11 and 12, skim chapters 97 and 98
Watch videos about FA and GVC.
Review the GVC examples (chapters from textbook regarding coffee, technology, tobacco).
Team’s prepare the Case Study.
Week 6 Feb 21 Best Method – Snowin’ and Blowin’ case study by Dr. Lorraine Eden
Feb 22 Tuesday at 9am – 10:30am
second session at 9am – 10:30 (presentations, peer feedback)
Read textbook chapters 15 and 16
Watch video.
Team’s prepare the Case Study.
Week 7 Feb 28 Capstone summation and tax risk technology presentations
April 1 Friday at 9am – 10:30 (presentations, peer feedback)
Read textbook chapters 44 and 75
Review Pillar One
Case Study presentation
Week 11 April 4 Digital –Amazon, Internet of Things (IOT) by Dr. Lorraine Eden and Dr. Niraja Srinivasan
April 5 Tuesday at 9am – 10:30am
April 8 Friday at 9am – 10:30 (presentations, peer feedback)
Read OECD Pillar 1 comment letters in the course folder
Read Lorraine Eden’s articles
Read Chapter 46
Week 12: April 11 Services by Hafiz Choudhury
April 12 Tuesday at 9am – 10:30am
April 15 Friday at 9am – 10:00 (presentations, peer feedback)
Week 13 April 18: Restructuring (and extractive industry experience) by Hafiz Choudhury
April 19 Tuesday at 9am – 10:30am
April 22 Friday at 9am – 10:30 (presentations, peer feedback)
Read textbook chapters 27, 43
In the second week, the investors find out that the state owned off take customer is not utilizing the full capacity of the FSRU
Week 14 April 25 Capstone presentations for comment letters
April 26 Tuesday at 9am – 10:30am
April 29 Friday at 9am – 10:00 (presentations, peer feedback)
Review past comment letter submissions
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
This week, we dig a little deeper into some employment issues that have emerged in recent months–including a deeper dive into vaccine surcharges, employees who aren’t actively at work and the newly-emerging tax issues for employers who give employees the option of receiving wages in cryptocurrency. Are your clients up to date?
By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education
$1.2 Trillion Infrastructure Act to be signed by Biden
The 2,702-page bi-partisan “Infrastructure Investment and Jobs Act of 2021” has been passed by the House and sent to Biden for signature into law. The Act contains approximately $550 billion of new project spending and carries over an additional $650 billion from previously funded projects for a total of over $1.2 trillion in infrastructure spending that will begin in 2021 and most end in 2026.
But the Infrastructure Act 2021 contains many energy provisions and excise taxes as well as fees that will impact all segments of the energy industry. These provisions include billions of dollars for the industry for expenditure and incentives for carbon capture; clean hydrogen R&D; nuclear; among others. By example, $500,000,000 is provided for clean hydrogen technology R&D (see page 1550 at section 40314). The excise taxes and fees include the extensions of the highway-related taxes, superfund excise taxes, and customs user fees.
The major tax reform provisions addressing estate and gift tax, capital gains, carried interests, real estate exchanges, retirement plans, and high-income earners have been reserved to the forthcoming yet-to-be-agreed/released Democratic reconciliation bill. However, the Infrastructure Investment and Jobs Act of 2021 contains some new tax provisions including:
Sec. 80501. Modification of automatic extension of certain deadlines in the case of taxpayers affected by Federally declared disasters.
Sec. 80502. Modifications of rules for postponing certain acts by reason of service in combat zone or contingency operation.
Sec. 80503. Tolling of time for filing a petition with the tax court.
Sec. 80504. Authority to postpone certain tax deadlines by reason of significant fires.
Sec. 80601. Modification of tax treatment of contributions to the capital of a corporation.
Sec. 80602. Extension of interest rate stabilization.
Sec. 80603. Information reporting for brokers and digital assets.
Sec. 80604. Termination of employee retention credit for employers subject to closure due to COVID–19.
The automatic extension for certain tax deadlines for Federally declared disasters addresses the situation of multiple declarations relating to a disaster area which are issued within a 60-day period. A separate 60-day period shall be determined with respect to each such declaration pursuant to the bill’s language.
The Infrastructure Act 2021 contains hundreds of not-obvious federal grants and contract opportunities for business. By example of one provision related to education and training of workers, section 401513 includes $10 million dollars for FY2022 for government grants of 50 percent of the cost to provide ‘career skills training’ to identify and involve in training programs target populations of individuals who would benefit from training and be actively involved in activities relating to energy efficiency and renewable energy industries; and the ability to help individuals achieve economic self-sufficiency. The program students must concurrently receive classroom instruction and on-the-job training for the purpose of obtaining an industry-related certification to install energy-efficient buildings.
The Act amends the reporting by brokers to include as of 2023 cryptocurrencies. I.R.C. Section 6045(c)(1) is amended to include within the term “broker” any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person. The Infrastructure Act 2021 amends the information required to be provided the IRS by the broker in the case of securities transactions. A ‘covered security’ is amended to include any ‘digital asset’.
(D) DIGITAL ASSET. The term ‘digital asset’ means any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary. Any broker, with respect to any transfer (which is not part of a sale or exchange executed by such broker) during a calendar year of a covered security which is a digital asset from an account maintained by such broker to an account which is not maintained by, or an address not associated with, a person that such broker knows or has reason to know is also a broker, shall make a return for such calendar year showing the information otherwise required to be furnished with respect to transfers.
The reporting requirement goes into effect on January 1, 2023.
Need to Know on Offering Benefits to Employees Who Aren’t “Actively At Work”
Many employers continued to allow employees to participate in employee benefit programs while the employee was not actually working during the COVID-19 pandemic. While many employees have now returned to work, in some areas rolling shutdowns may continue to impact the employer’s ability to retain employees on a continuous basis. It can be risky to allow employees to remain on an employer’s health insurance benefit plan while not actively at work. In many cases, fully insured plans have “actively at work” clauses that apply in determining the employee’s eligibility for benefits. Employees typically can continue to participate for up to three months after ceasing work (to comply with FMLA time limits). For employers with self-insured health plans, stop loss coverage may not apply to cover claims if the employee is not actively working. Small business clients should check their plans and establish a policy on how employees who are not actively at work will be treated for benefit purposes. For more information on self-insured plans, visit Tax Facts Online. Read More
Considering a COVID-19 Vaccine Health Surcharge? How High Can it Be?
Employers subject to the ACA employer mandate should be mindful that the health coverage must continue to be “affordable” even if the employer opts to impose a COVID-19 vaccine surcharge (there is currently no exception for vaccines). In 2021, health insurance is affordable if the employee’s contribution does not exceed 9.83 percent (9.61 percent in 2022) of household income (three safe harbors exist for purposes of determining “household income”). Further, total surcharges generally cannot exceed 30 percent of the cost of the employee’s health insurance premiums (considering the cost of self-only coverage) under a HIPAA rule on incentives for employees who participate in wellness programs. In the end, the amount of the allowable surcharge can vary by employer and employee, considering the cost of employer-sponsored health insurance, the employee’s compensation and the amount of the health insurance premiums that the employer chooses to subsidize. For more information on vaccine-related incentives, visit Tax Facts Online. Read More
Paying Employees in Cryptocurrency? Don’t Forget Employment Taxes
The IRS released a reminder last week for business clients who opt to pay employees in cryptocurrency. Employers who choose to pay wages in cryptocurrency should remember that their choice of payment method is immaterial when it comes to calculating employment taxes. Employment taxes must be paid on the fair market value of cryptocurrency paid as wages, measured using U.S. dollars on the date the employee receives the payment. The fair market value is subject to FICA, FUTA and federal income tax withholding–and must be reported on the employee’s Form W-2. Wages paid in cryptocurrency may also be reportable for state income tax purposes. Employers are liable for these wages, so it’s important that small business clients who opt to pay employees in increasingly popular virtual currency be aware of their withholding and reporting obligations. For more information on cryptocurrency paid as wages, visit Tax Facts Online. Read More
Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
Like many of my subscribers, I’ve been following the Pandora Papers and the previous ICIJ releases (Panama papers, Bermuda-Paradise papers, Lux-Leaks et al..). Read the latest Pandora series of articles of the ICIJ here.
Some of the ICIJ writeups of the stolen documents are sensationalism, some are shocking, some surprising and thus truly shocking, and some are just salacious like a John Grisham novel (but a fun read if you like Grisham novels).
While I am strongly bothered by stolen confidential (by law) documents being glorified (though the relevant law of confidentiality of one jurisdiction is rarely relevant for another jurisdiction), the challenge is that if the confidential documents include information about corruption and other crimes then the confidentiality is waived (and the document drafter is may be part of the conspiracy to commit the crime). Then the ‘informant’ of the papers becomes a ‘whistleblower’ and should be rewarded. The challenge is: who is to decide which documents tend toward whistleblower-like and which tend toward just stolen legal-protected confidential papers that while salacious are really publicly newsworthy (maybe to TMZ)?
We all support the fundamental need for the free press to publish. But is the ICIJ the best positioned to decide the question of what papers may include crimes (and what may not)? I trust the ICIJ to bring to light these stories regardless of the pressure not to (thank goodness the Pentagon Papers were published by example), but journalists are not necessarily experts in the area of writing. I hope that the ICIJ has brought on board for vetting the trove of information a panel of experts that are able to advise on these issues (and probably has done as I think that would be best practice for journalism).
What I think would be interesting is for the ICIJ to keep a running tab on the number of investigations and audits (as best it can gather such information) that each trove of documents (Panama, Lux, Paradise/Bermuda, Pandora, etc) leads to on a country by country basis, and the outcomes (as best ICIJ can gather such information). Are countries acting on such information? For the U.S., are banks meeting their FATCA compliance requirements?
Anyway, glad the ICIJ has put together such a large and robust effort, especially as it regards corruption, sometimes at threat of life in some countries, and we should support the organization.
Transfer Pricing Risk Management Zoom Team-Based Case Studies Start Jan 19, run until May
Course Topics and Calendar
Week 1 January 17 Arm’s Length Standard case study by Dr. Bruno da Silva
Jan 18 Tuesday at 9am – 10:30am(2-minute student introductions, orientation to teamwork and case studies, expectations and obligations regarding participation asynchronously or synchronously, discuss the syllabus, set up first-week case study)
Friday at 9am – 10:30am (presentations, peer feedback)
On Tuesday January 18th, the first day of the course, we will discuss the teams, the case study, the team’s roles for the case study, and how team’s should operate. Students are not required to join a team and may undertake the work/projects individually, decided on a weekly basis.
Week 2 Jan 25: CUP & Comparables, Eden Hofert – the Christmas Tree case (Canadian)/Compaq by Dr. Lorraine Eden
Jan 26 Tuesday at 9am – 10:00am(2-minute student introductions, orientation to teamwork and case studies, expectations and obligations regarding participation asynchronously or synchronously, discuss syllabus, set up first week case study)
Jan 29 Friday at 9am – 10:30 (presentations, peer feedback)
Prepare team approaches for the case study of the Christmas Tree scenario.
Week 3 Jan 31: Cost Plus & Resale Minus (Byrnes’ Starbucks case study) by Dr. George Salis
Feb 1 Tuesday at 9am – 10:00am
second session at 9am – 10:30 (presentations, feedback)
Watch background and overview videos of big data & econometrics as it is used in transfer pricing.
Read textbook Chapter 7 then read chapter 6.
Contrast the analysis within the Cost Plus Method and Resale Minus Method cases.
Each team has a stakeholder role in Byrnes’ case study of Starbucks cost inclusion and exclusion, agriculture supply chain, and coffee global value chain.
Week 4 Feb 7: Comparable Profits Method & TNMM by Dr. George Salis
Feb 8 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM)
second session at 9am – 10:30(presentations, peer feedback)
Read textbook chapters 8 and 9.
Watch second set of videos of big data & econometrics.
Review the CPM/TNMM examples.
Teams prepare the Case Study.
Week 5 Feb 14: functional analysis & global value chain, profit split methods by Dr. George Salis
Feb 15 Tuesday at 9am – 10:00am(discussion about Byrnes’ case study and the CPM, GVC)
second session at 9am – 10:30(presentations, peer feedback)
Read textbook chapters 11 and 12, skim chapters 97 and 98
Watch videos about FA and GVC.
Review the GVC examples (chapters from textbook regarding coffee, technology, tobacco).
Team’s prepare the Case Study.
Week 6 Feb 21 Best Method – Snowin’ and Blowin’ case study by Dr. Lorraine Eden
Feb 22 Tuesday at 9am – 10:30am
Feb 25 Friday at 9am – 10:30 (presentations, peer feedback)
Read textbook chapters 15 and 16
Watch video.
Team’s prepare the Case Study.
Week 7 Feb 28 Capstone summation and tax risk technology presentations
April 1 Friday at 9am – 10:30 (presentations, peer feedback)
Read textbook chapters 44 and 75
Review Pillar One
Case Study presentation
Week 11 April 4 Digital –Amazon, Internet of Things (IOT) by Dr. Lorraine Eden and Dr. Niraja Srinivasan
April 5 Tuesday at 9am – 10:30am
April 8 Friday at 9am – 10:30 (presentations, peer feedback)
Read OECD Pillar 1 comment letters in the course folder
Read Lorraine Eden’s articles
Read Chapter 46
Week 12: April 11 Services by Hafiz Choudhury
April 12 Tuesday at 9am – 10:30am
April 15 Friday at 9am – 10:00 (presentations, peer feedback)
Week 13 April 18: Restructuring (and extractive industry experience) by Hafiz Choudhury
April 19 Tuesday at 9am – 10:30am
April 22 Friday at 9am – 10:30 (presentations, peer feedback)
Read textbook chapters 27, 43
In the second week, the investors find out that the state owned off take customer is not utilizing the full capacity of the FSRU
Week 14 April 25 Capstone presentations for comment letters
April 26 Tuesday at 9am – 10:30am
April 29 Friday at 9am – 10:00 (presentations, peer feedback)
Review past comment letter submissions
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The Supreme Court upheld in June, in a unanimous decision of all nine Justices, a District Court’s injunction against the NCAA. The injunction allows the NCAA to maintain rules limiting undergraduate athletic scholarships and other compensation related to athletic performance. BUT the injunction stops as unlawful NCAA rules limiting the education-related benefits schools may make available to student-athletes.
By the way subscribers, the Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education
Colleges and universities across the country have leveraged sports to bring in revenue, attract attention, boost enrollment, and raise money from alumni. That profitable enterprise relies on “amateur” student athletes who compete under horizontal restraints that restrict how the schools may compensate them for their play. The National Collegiate Athletic Association (NCAA) issues and enforces these rules, which restrict compensation for student-athletes in various ways. These rules depress compensation for at least some student-athletes below what a competitive market would yield.
Against this backdrop, current and former student-athletes brought this antitrust lawsuit challenging the NCAA’s restrictions on compensation. Specifically, they alleged that the NCAA’s rules violate §1 of the Sherman Act, which prohibits “contract[s], combination[s], or conspirac[ies] in restraint of trade or commerce.”
The Supreme Court upheld, in a unanimous decision of all nine Justices, the District Court’s injunction against the NCAA. The injunction allows the NCAA to maintain rules limiting undergraduate athletic scholarships and other compensation related to athletic performance. BUT the injunction stops as unlawful NCAA rules limiting the education-related benefits schools may make available to student-athletes.
Regarding today’s Supreme Court decision (entire 45-page opinion is available here), first it was expected by industry analysts and court watchers after the Court’s oral arguments March 31, 2021 with a foretelling Q&A session. We are already preparing Tax Facts Intelligence and Q&A for the books/app for financial advisors to leverage the new athletics marketplace and revenue streams and best represent their clients. I know of financial advisory firms that as of Tuesday will be hanging up a ‘sports agent financial advisor shingle’ and trolling SEC high schools, especially Texas, recruiting for tomorrow’s top collegiate athletes to sign up the talent.
Why not? That is how the market already works outside the USA for soccer (what everyone else calls football) and to a lesser extent baseball (albeit not nearly as popular as soccer so we hear much less about baseball camps for Dominican rising star 12 year old players like we hear about for the 12-year-old next Brazilian Pele).
Interaction with social media followers is the currency of this new era for young athletes and can lead to a couple of hundred thousand during college for the star players, and even millions for the SEC Heisman level types. But, not having the ultimate talent and thus top sports ranking in a field does not also mean that an interactive social media following of millions cannot be created. The Russian tennis star Anna Kournikova, case in point, though she was just a little too early for the modern social media movement. Johnny Manziel, another case in point: had this decision been in place already and had he contracted a great wealth management advisor (thus great personal agent) with social media and promotional background, his life would have been very financially comfortable before his drug abuse ruined him in the pro league (talent or not aside). He certainly could have afforded a stint at the Betty Ford clinic to sober up and cleanout.
Via the advice of a great wealth manager, a personality can be leveraged into millions of dollars before the athlete graduates university, or at least hundreds of thousands.
It is clear from the unanimous ruling and the judges questioning and opinions that this is not a restrictive ruling. NCAA proponents are trying to spin that some restriction remains allowable like direct payments to players. But all it takes is one school that has money that wants to break into the big league to beat ‘Bama and LSU. Kind to think of it, I know that school… and don’t think Bama and LSU are just going to let that happen. Let real market competition begin!
An interesting question that I think will lead to much future litigation: How this ruling plays out throughout all sports regarding Title IX (such as a school spending money on men’s football, basketball, baseball, must by federal and state law also spend an equal amount on the equivalent sports for women). I am for market opportunity and thus I think it is an exciting proposition that opportunities will open up in all sports for athletes and wealth manager advisors alike (to negotiate the optimum financial rewards for the athletes).
Also, if athletic programs, such as golf or hockey, are forced to ‘come up’ with additional dollars to attract the star players to remain competitive, will the programs themselves start to think like SEC football (the most profitable league and sport) to generate additional income to meet the demands of staying or obtaining high ranking? After all, whether it be academics or sports, it is all about ranking. Deans and Provosts rise and fall based on academic rankings. Coaches based on league rankings and national championships. Sports rankings and academic rankings have connections via alumni fundraising as of course voter university name/brand awareness and recognition. Basketball in particular through March madness has supported the academic rankings of universities though academic and sports ranking are not directly connected in voting and evaluation scoring, the indirect connection is undeniable.
This Supreme Court decision is great news for wealth managers / financial advisors who subscribe to Tax Facts because we are well-positioned to enter the new market of clientele representation created for the high school athlete seeking to share in the value that the athlete creates for a university and for the athlete through social media leveraged revenues. Understanding that “value”, generating more of it, and ‘sharing’ in the value is the bread and butter of a holistic wealth manager’s representation of athletes and entertainers.
Texas A&M already has education in this regard for our wealth management students and JDs who focus on such emerging artist/athlete/entertainer representation. We even have a law clinic for this emerging artists run by JD students supervised by my colleague that joined me at Texas A&M from our former law school in SoCal.
Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
The Biden administration, the OECD, and the European Union are moving full steam ahead with proposals that will modify the U.S. and international tax systems, significantly impacting clients’ aftertax investment returns and business income. We dig into the administration’s domestic and global tax proposals, including that a U.S. corporation may be required to pay a minimum tax amount to each foreign country where it has clients or investments. Are your clients preparing to adjust their portfolio of investments to maintain their after-tax annual investment returns?
By the way, Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education
Biden’s Tax Proposals: Two Surprises for Clients Impacting Last Year and 2021
President Biden’s tax proposals contain two major tax surprises. First, Biden’s tax plans would make any capital gains tax hike retroactive to April 28, 2020. That means clients who have engaged in tax planning strategies to avoid higher rates might wind up subject to the higher rates regardless if this provision makes its way into the final proposal. Second, not only would the stepped-up basis rules be repealed, but taxpayers who inherit property would be required to recognize gain at the time of death—even if the individual doesn’t immediately sell the inherited property. In other words, the property could be immediately subject to both the estate tax and income or capital gains tax. Life insurance proceeds that will remain tax-free under the current proposals will be more valuable than ever in order to cover the tax payments. Click here to get a more in-depth expert analysis of the latest tax proposals. Read More Look in your Tax Facts Online app for our continuing analysis of the impact on your clients from proposed and enacted tax law changes of 2021, especially in the forthcoming reconciliation bill.
Biden’s Tax Proposals: The Biden Administration released its 2021 ‘Green Book’ of legislative tax proposals for Congress to consider.[1] The proposals as published include the following most salient items for clients:
Raise the corporate income tax rate from 21 to 28 percent effective for 2022.
Impose a 15 percent minimum tax on book earnings of large corporations.
Determining global minimum tax inclusion and residual U.S. tax liability on a jurisdiction-by-jurisdiction basis would be a stronger deterrent to profit.
Disallow deductions attributable to exempt income, and limit inversions.
Repeal the deduction for foreign-derived intangible income (FDII).
Replace the base erosion anti-abuse tax (BEAT) with the stopping harmful inversions and ending low-tax developments (SHIELD) rule.
Limit foreign tax credits from sales of hybrid entities.
Restrict deductions of excessive interest of members of financial reporting groups for disproportionate borrowing in the United States.
Reform taxation of foreign fossil fuel income.
Eliminate fossil fuel tax preferences.
Extend and enhance renewable and alternative energy incentives.
Increase the top marginal income tax rate for high earners.
Reform the taxation of capital income.
Tax carried (profits) interests as ordinary income.
Repeal deferral of gain from like-kind exchanges.
Make permanent excess business loss limitation of noncorporate taxpayers.
Address taxpayer noncompliance with listed transactions (tax shelters).
Regarding the Biden administration’s proposed changes to the minimum tax applicable to U.S. shareholders of controlled foreign corproations (known as “GILTI”), the following three aspects are most impactful for clients:
The U.S. shareholder’s entire net CFC tested income will be subject to U.S. tax. The qualified business asset investment (QBAI) exemption that allows 10 percent of the adjusted basis of QBAI to be exempt from GILTI would be repealed.
The IRC section 250 deduction of 50 percent of the global minimum tax inclusion would be reduced to 25 percent, thereby generally increasing the U.S. effective tax rate under the global minimum tax to 21 percent under the proposed U.S. corporate income tax rate of 28 percent.
The “global averaging” method for calculating a U.S. shareholder’s global minimum tax would be replaced with a “jurisdiction-by-jurisdiction” calculation. Under the new standard, a U.S. shareholder’s global minimum tax inclusion and, by extension, residual U.S. tax on such inclusion, would be determined separately for each foreign jurisdiction in which its CFCs have operations. As a result, a separate foreign tax credit limitation would be required for each foreign jurisdiction. A similar jurisdiction-by-jurisdiction approach would also apply with respect to a U.S. taxpayer’s foreign branch income. These changes mean that foreign taxes paid to higher-taxed jurisdictions will no longer reduce the residual U.S. tax paid on income earned in lower-taxed foreign jurisdictions.
The Biden proposal would repeal the Base Erosion and Anti-Abuse Tax (BEAT), replacing it with a new rule disallowing deductions to domestic corporations or branches by reference to low-taxed income of entities that are members of the same financial reporting group (including a member that is the common foreign parent, in the case of a foreign-parented controlled group). Specifically, under this new Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) tax regime, a deduction (whether related or unrelated party deductions) would be disallowed to a domestic corporation or branch, in whole or in part, by reference to all gross payments that are made (or deemed made) to low-taxed members, which is any financial reporting group member whose income is subject to (or deemed subject to) an effective tax rate that is below a designated minimum tax rate. The proposal to repeal BEAT and replace it with SHIELD would be effective from 2023.
U.S. Agrees to Global Minimum Corporate Tax and a Share the U.S. (Tax) Wealth with 180 Other Countries
On June 5, 2021, the G7 Finance Ministers & Central Bank Governors released a communiqué that the Biden Administration fully supports and is seeking to expand (see U.S. Whitehouse release) with concrete actions for a deeper multilateral economic cooperation that includes the OECD’s Pillar One and Pillar Two proposals. The communiqué presented the following actions:
The G7 agreed that beneficial ownership registries are an effective tool to tackle illicit finance. In this regard, each of the G7 countries including the U.S. (see below) is implementing and strengthening registries of company beneficial ownership information to provide timely, direct and efficient access for law enforcement and competent authorities to adequate, accurate and up-to-date information, including through central registries. The G7 further noted that beneficial ownership information should be publicly available where possible.
The G7 committed to provide additional expertise and funding to support the FATF’s regional bodies (“FSRB’s”) peer assessment programs by at least US$17 million and 46 assessors over 2021-24 because global implementation of the FATF Standards for combatting money laundering, terrorist financing and proliferation financing remains uneven.
The G7 reaffirmed its collective developed country goal to mobilize US$100 billion annually for developing countries from public and private sources, in the context of meaningful mitigation actions and transparency on implementation of developing countries’ climate change adaptation and mitigation efforts.
committed to that market countries will be awarded taxing rights on at least 20 percent of profit exceeding a 10 percent margin for large multinational enterprises. In exchange, the G7 stated that it would seek removal of all Digital Services Taxes and other relevant similar measures on all companies.
Regarding Pillar Two, the G7, including the U.S. specifically, committed to a global minimum tax of at least 15 percent on a country-by-country basis. The G7 stated that an agreement would be reached at the July meeting of G20 Finance Ministers and Central Bank Governors.
OECD Countries’ Average Tax Due on Employment Income is 34.6%
In 2020, the OECD average of personal income tax and total employee and employer social security contributions (the ‘tax wedge’) on employment incomes for the single worker earning the average wage was 34.6 percent, a decrease of 0.39 percentage points from 2019 reflecting the impact of the COVID-19 crisis on both wages and labor tax systems.[1] The OECD average tax wedge for the one-earner couple with two children also substantially decreased, declining by 1.15 percentage points to 24.4 percent in 2020.
The OECD average tax wedge decreased for the single worker in 2020, due to falls in 29 out of the 37 OECD countries. The decrease was derived for the most part from lower income taxes, linked in part to lower nominal average wages in 16 countries, and in part to policy changes, including tax and benefit measures introduced in response to the COVID-19 pandemic. In Austria, a marginal tax rate within the income tax schedule was reduced; in Lithuania, the tax-exempt amount was increased; in Canada, the decline in the tax wedge resulted from a one-time special payment through the Goods and Services Tax credit that was delivered on April 9, 2020; in the United States, the decrease in the tax wedge was mainly due to the Economic Impact Payment (EIP) that was part of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). Seven OECD countries experienced an increase in the tax wedge for the single worker earning the average wage in 2020. The increases in the tax wedge were even smaller than the decreases observed and did not exceed half a percentage point in any country. In all but one country (Korea), they occurred primarily due to wage growth.
European Commission proposes to extend the EU state aid regime to third party countries (i.e. the U.S.) The European Commission has proposed expanding its state aid rules to foreign countries’ actions to address distortions of trade & investment caused by foreign subsidies.[2] The EU Commission investigated in 2020 whether those subsidies granted by non-EU governments to companies active in the EU may have a distortive effect on the Single Market.[3] Through the subsidy provisions laid down in Free Trade Agreements, the EU is seeking to achieve a level playing field between all companies that operate within the Single Market. Subsidy provisions vary from FTA to FTA and they are adjusted to the trade relationship with the third country in question. Whereas some bilateral agreements seek approximation with the EU State aid acquis with enhanced enforcement mechanisms (e.g. independent state aid authority, recovery, unilateral measures, etc.), other bilateral agreements provide for the prohibition of the most distortive type of subsidies as well as more limited enforcement mechanisms, like transparency, consultations, and a dispute settlement mechanism.
The European Commission proposed May 5, 2021, a new instrument to address the potentially distortive effects of foreign subsidies in its internal market. The new instrument aims at closing the regulatory gap in the internal market whereby subsidies granted by non-EU governments currently go largely unchecked, while subsidies granted by the Member States are subject to state aid scrutiny. EU rules on competition, public procurement, and trade defense instruments play an important role in ensuring fair conditions for companies operating in the EU market. But none of these tools applies to foreign subsidies which provide their recipients with an unfair advantage when acquiring EU companies, participating in public procurements in the EU, or engaging in other commercial activities in the EU. Such foreign subsidies can take different forms, such as zero-interest loans and other below-cost financings, unlimited State guarantees, zero-tax agreements, or direct financial grants.
Under the proposed Regulation, the Commission will have the power to investigate financial contributions granted by public authorities of a non-EU country that benefit companies engaging in an economic activity in the EU and redress their distortive effects, as relevant.
In this context, the proposed Regulation introduces three tools, two notification-based and a general market investigation tool.
A notification-based tool to investigate concentrations involving a financial contribution by a non-EU government, where the EU turnover of the company to be acquired (or of at least one of the merging parties) is €500 million or more and the foreign financial contribution is at least €50 million.
A notification-based tool to investigate bids in public procurementsinvolving a financial contribution by a non-EU government where the estimated value of the procurement is €250 million or more.
A tool to investigate all other market situations and smaller concentrations and public procurement procedures which the Commission can start on its own initiative (ex-officio) and may request ad-hoc notifications.
With respect to the two notification-based tools, the acquirer or bidder will have to notify ex-ante any financial contribution received from a non-EU government in relation to concentrations or public procurements meeting the thresholds. Pending the Commission’s review, the concentration in question cannot be completed and the investigated bidder cannot be awarded the contract. Binding deadlines are established for the Commission’s decision.
Under the proposed Regulation, where a company does not comply with the obligation to notify a subsidized concentration or a financial contribution in procurements meeting the thresholds, the Commission may impose fines and review the transaction as if it had been notified. The general market investigation tool, on the other hand, will enable the Commission to investigate other types of market situations, such as greenfield investments or concentrations and procurements below the thresholds, when it suspects that a foreign subsidy may be involved. In these instances, the Commission will be able to start investigations on its own initiative (ex-officio) and may request ad-hoc notifications. Based on the feedback received on the White Paper, the enforcement of the Regulation will lie exclusively with the Commission to ensure its uniform application across the EU.[4]
If the Commission establishes that a foreign subsidy exists and that it is distortive, it will where warranted consider the possible positive effects of the foreign subsidy and balance these effects with the negative effects brought about by the distortion. When the negative effects outweigh the positive effects, the Commission will have the power to impose redressive measures or accept commitments from the companies concerned that remedy the distortion. With respect to the redressive measures and commitments, the proposed Regulation includes a range of structural or behavioral remedies, such as the divestment of certain assets or the prohibition of certain market behavior. In case of notified transactions, the Commission will also have the power to prohibit the subsidized acquisition or the award of the public procurement contract to the subsidized bidder.
The European Parliament and the Member States will now discuss the Commission’s proposal in the context of the ordinary legislative procedure with a view of adopting a final text of the Regulation.
Estimating Offshore Wealth and International Tax Evasion.[5] A European Commission 2019 report on global offshore wealth estimated USD 7.8 trillion in 2016 (EUR 7.5 trillion) or 10.4 percent of global GDP, a considerable amount. The EU share is valued at USD 1.6 trillion (EUR 1.5 trillion), or 9.7 percent of GDP. The corresponding EU estimated revenue lost to international tax evasion is EUR 46 billion in 2016 (0.32 percent of GDP). Another important finding is that the increase in global offshore wealth is primarily driven by non-OECD countries, with an estimated contribution in dollar terms growing from US$ 1.1 trillion in 2001 to US$ 4.6 trillion in 2016. Among non-OECD economies, the surge of China is especially strong, with a 21-fold increase of offshore wealth held by Chinese residents over the period (from US$ 90 billion in 2001 to US$ 1.9 trillion in 2016).[6]
How Much is U.S. Tax Evasion? Closing the Tax Gap: Lost Revenue from Non-Compliance and the Role of Offshore Tax Evasion.[7] On May 11, 2021, the Treasury Inspector General For Tax Administration (TIGTA) stated that individual
taxpayers are responsible for $245 billion of the underreporting tax gap, the largest share. TIGTA identified 314,586 business taxpayers with $335.5 billion in Form 1099-K income that appeared to have a filing obligation but were not identified as nonfilers by the IRS. The problem is that the IRS cannot use third-party information returns, such as Form 1099-K data, to identify business nonfilers and create cases if the taxpayers’ accounts are coded as not having an open filing requirement, or no tax account exists because the business has never filed a tax return. TIGTA recommended that the IRS fund and implement a programming revision to its process that identifies these types of business taxpayers.
Tax Gap studies have found that self-employed individuals underreported their net income by 64 percent (based on the average for TYs 2008 through 2010), which is up from 57 percent in the TY 2001 estimate. The law did not require third-party settlement organizations to issue Form 1099-K, Payment Card, and Third Party Network Transactions, unless those transacting business earn at least $20,000 and engage in at least 200 transactions annually. TIGTA judgmentally selected eight P2P payment applications and found that these companies appear not to meet the current definition of a third-party settlement organization, and therefore are not required to file Form 1099-K. However, three P2P companies filed 950,965 Forms 1099-K involving $198.6 billion of payments in TY 2017, which included amounts below the reporting thresholds. The IRS did not always take compliance actions on nonfilers of tax returns and underreporters related to P2P payments even when information reporting was available. In total, 169,711 taxpayers potentially did not report up to $29 billion of payments received per Form 1099-K documents issued to them by three P2P payment application companies. Section 9674 of the American Rescue Plan Act changed the exception for de minimis payments by third-party settlement organizations, reducing the exception threshold to $600 annually so that these organizations are subject to the same reporting requirements as other businesses.
TIGTA reported in 2018 that after eight years and spending at least $380 million on IRS systems and efforts to establish international agreements across the globe, the IRS had taken virtually no compliance actions to meaningfully enforce the Foreign Account Tax Compliance Act (FATCA). Withholding agents are required to file Forms 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, to report on an individual taxpayer basis the income and withholding for each foreign person. For Tax Year 2017, the IRS received 6.3 million Forms 1042-S from 49,618 withholding agents. TIGTA reported that IRS processes did not identify 1,919 withholding agents with reporting discrepancies totaling more than $182.7 million. Its review identified 366 withholding agents that claimed $506 million more in credits for tax withheld than was reported on Forms 1042-S.
The Foreign Investment in Real Property Tax Act of 198036 (FIRPTA) imposes an income tax on foreign persons selling U.S. real property interests. Buyers are required to withhold a percentage of the anticipated taxes due on the amount realized from the sale. A foreign seller of U.S. property can claim a credit for the tax withheld by the buyer. If the seller’s tax liability is less than the amount of tax withheld, the seller gets a refund of the difference. TIGTA reported that the IRS’s reconciliation processes do not effectively identify and address FIRPTA reporting and payment noncompliance.
TIGTA identified 2,988 buyers with discrepancies of more than $688 million between the withholding reported on Forms 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, filed during Processing Year 2017, and the withholding assessed to the buyer’s tax account. Extensive data inaccuracies in the FIRPTA database, incorrect and unclear guidelines and employee errors contributed to these discrepancies. The IRS also has not established processes to use Form 1099-S, Proceeds from Real Estate Transactions, to identify buyers that do not report and pay FIRPTA withholdings. TIGTA’s analysis of Forms 1099-S for TY 2017 identified approximately $22 million in FIRPTA withholding that was not reported and paid to the IRS. Finally, employee errors resulted in 1,835 foreign individuals potentially receiving more than $60 million in FIRPTA withholding credits than they were entitled.
Expatriates are required to file Form 8854, Initial and Annual Expatriation Statement, to certify that they have followed all Federal tax laws during the five years preceding the year of expatriation.[8] However, TIGTA found that the IRS database of expatriates was incomplete for 16,798 expatriates who did not file Form 8854. In addition, TIGTA found instances of potential non-filing, underreporting of income, and/or payment compliance issues by expatriates. From a sample of 26 expatriates who did not file a Form 8854, five had potential unreported income over $6 million. From a sample of 61 expatriates who filed a Form 8854, 15 had potential unreported income over $17 million. Lastly, TIGTA also found that expatriates with high net worth appear to not be paying their exit tax.
All individuals who expatriate are published in the Federal Register quarterly, a requirement established by IRC section 6039G.[9]
American Families Plan Tax Compliance Agenda. The Biden administration proposed an increase in the IRS budget by $80 billion over the next decade, approximately 10 percent annually. The IRS would have these additional resources to invest in large fixed costs like modernizing information technology, improving data analytic approaches, and hiring and training agents dedicated to complex enforcement activities.[10] The administration reported that audit coverage for large corporations was cut in half since 2010 for companies with $20 billion or more in assets, from 98 percent in FY 2010 to around 50 percent currently. During the past 10-year period, the administration found that global high wealth examinations have taken roughly two years on average to complete and have averaged around 284 hours per return. Partnerships audits averages around 333 hours per return.
National Bureau Of Economic Research Working Paper 2021.[11] The authors of an NBER report using IRS audit data estimated that 36 percent of federal income taxes unpaid are owed by the top percent of incomes and that collecting the unpaid federal income tax from this one percent would increase federal revenues by about $175 billion annually. The authors estimate that 21 percent of the income of these earners is unreported of which 6 percentage points correspond to undetected sophisticated evasion. High-income people are then more likely to adopt positions in the “gray area” between legal avoidance and evasion, the team concluded. Under-reporting of Schedule C income comprises 50 percent of all evasion detected, the authors found.[12]
National Taxpayer Advocate Fiscal Year 2022 Report. The National Taxpayer Advocate in her Fiscal Year 2022 report to Congress[13] recognized the importance of international information return (IIR) penalties in fostering voluntary tax compliance. However, the IRS’ systemic assessment of these penalties often produces excessively large penalties disproportionate to any underlying income tax liability. The IRS assesses IIR penalties on returns it considers to be filed late, but more than 55 percent of systemically assessed IRC §§ 6038 and 6038A penalties are abated because the returns were timely because reasonable cause relief was granted, or in situations where the failure-to-file penalty on the related Form 1120 or Form 1065 filing is abated under the First Time Abatement (FTA) provisions or the return has no tax due. Taxpayers and the IRS expend significant time, energy, and money addressing penalties that the IRS should not have assessed. Thus, these systemic assessments are ineffective in promoting taxpayer compliance and do not promote equity and fairness.
Because the penalties are immediately assessed, taxpayers’ recourse is to rely on IRS discretion to grant a reasonable cause abatement of the penalties, request a Collection Due Process proceeding, or pay the assessed penalty and file suit in district court or the Court of Federal Claims seeking a refund. One means of proactively addressing this disadvantage to taxpayers is to send preassessment correspondence, giving potentially impacted taxpayers the opportunity to explain why the IRS should not assess the penalty. This approach would educate taxpayers and minimize the inefficient and burdensome practice of first assessing and then abating these penalties. Further, it would contribute to tax equity by placing the IRS in a better position to distinguish between good-faith mistakes and intentional tax noncompliance.
The Taxpayer Advocate recommended that the IRS send taxpayers a proposed penalty notice to allow them to provide mitigating evidence such as reasonable cause; if timely filed, proof of timely filing; or application of the FTA administrative relief. The Taxpayer Advocate also recommended that the IRS provide taxpayers 60 days to respond to proposed penalty notices and give IRS employees time to review and consider reasonable cause relief, FTA relief, or the issue of timeliness. Finally, the Taxpayer Advocate continues to call for the IRS to reinstitute a penalty-free voluntary disclosure program, similar to the former FAQ 18 of the 2012 Offshore Voluntary Disclosure Program, in which taxpayers will be encouraged to come forward, file delinquent information returns, and be compliant for future years. Specifically address those taxpayers who do not have other tax liabilities besides penalties associated with the missing IIRs, are not under examination, and have not been contacted for the delinquent IIRs.
Nina Olson, the former Taxpayer Advocate, stated that of the current $441 billion gross tax gap estimate by IRS, some portion of the underreporting gap is attributable to errors made as a result of tax law complexity (unknowing noncompliance) and others are attributable to procedural complexity and barriers – for example, where taxpayers are eligible for a deduction or credit but cannot navigate the bureaucracy on their own and cannot afford representation, so they just give up (functional or characteristic noncompliance).[14] She stated that studies estimating the amount of unreported income by the highest-income taxpayers, and proposals to reduce the underreporting component of the tax gap by increased information reporting, along with the Commissioner’s guestimate that the annual tax gap could be as much as $1 trillion, have led policymakers, commentators, and the media to equate the tax gap with tax evasion. She cautioned that the ubiquitous usage of this phrase actually dilutes its meaning and impact because it allows very different types of noncompliance attributable to very different causes to be lumped together. She found that “framing noncompliance as tax evasion not only undermines compliance among the currently compliant, who will begin to feel naïve for complying, but it creates an environment in which tax agency personnel can feel justified in undermining if not outright ignoring taxpayer rights and protections.”
Nina Olson pointed out the IRS’ heavy emphasis on data-matching and rule-based systems, instead of pattern/network recognition algorithms that include feedback loops.[15] The IRS underutilizes financial account data it receives pursuant to FATCA because it cannot match much of it to existing returns. She also uncovered that many IRS systems have high false-positive and abatement rates. The National Taxpayer Advocate has reported that during the 2020 filing season, the IRS “refund fraud filters” selected 3.2 million returns of which approximately 66 percent were false positives. She concluded that the IRS requires a culture shift about how it approaches data and that the IRS must proactively use data to assist taxpayers, avoiding labeling taxpayer returns as “potentially fraudulent” before the IRS has conclusive evidence of fraud because most taxpayer error is not fraud. Regarding the Biden administration’s proposed changes to GILTI, the following three aspects are most impactful: The U.S. shareholder’s entire net CFC tested income will be subject to U.S. tax. The qualified business asset investment (QBAI) exemption that allows 10 percent of the adjusted basis of QBAI to be exempt from GILTI would be repealed.
The IRC section 250 deduction of 50 percent of the global minimum tax inclusion would be reduced to 25 percent, thereby generally increasing the U.S. effective tax rate under the global minimum tax to 21 percent under the proposed U.S. corporate income tax rate of 28 percent. The “global averaging” method for calculating a U.S. shareholder’s global minimum tax would be replaced with a “jurisdiction-by-jurisdiction” calculation. Under the new standard, a U.S. shareholder’s global minimum tax inclusion and, by extension, residual U.S. tax on such inclusion, would be determined separately for each foreign jurisdiction in which its CFCs have operations. As a result, a separate foreign tax credit limitation would be required for each foreign jurisdiction. A similar jurisdiction-by-jurisdiction approach would also apply with respect to a U.S. taxpayer’s foreign branch income. These changes mean that foreign taxes paid to higher-taxed jurisdictions will no longer reduce the residual U.S. tax paid on income earned in lower-taxed foreign jurisdictions.
The Biden proposal would repeal the Base Erosion and Anti-Abuse Tax (BEAT), replacing it with a new rule disallowing deductions to domestic corporations or branches by reference to the low-taxed income of entities that are members of the same financial reporting group (including a member that is the common foreign parent, in the case of a foreign-parented controlled group). Specifically, under the Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) rule, a deduction (whether related or unrelated party deductions) would be disallowed to a domestic corporation or branch, in whole or in part, by reference to all gross payments that are made (or deemed made) to low-taxed members, which is any financial reporting group member whose income is subject to (or deemed subject to) an effective tax rate that is below a designated minimum tax rate. The proposal to repeal BEAT and replace with SHIELD would be effective from 2023.
Draft Schedules K-2 and K-3 released to enhance reporting of international tax matters for pass-through entities. The IRS released April 30, 2021, updated early drafts of new Schedules K-2 and K-3 for Forms 1065, 1120-S, and 8865 for tax year 2021 (filing season 2022).[17] The schedules are designed to provide greater clarity for partners and shareholders on how to compute their U.S. income tax liability with respect to items of international tax relevance, including claiming deductions and credits. The drafts of the schedules are intended to give a preview of the changes before final versions are released. The release of an early draft of the instructions for the schedules is planned for later in 2021. The redesigned forms and instructions will also give useful guidance to partnerships, S corporations and U.S persons who are required to file Form 8865 with respect to controlled foreign partnerships on how to provide international tax information. The updated forms will apply to any persons required to file Form 1065, 1120-S or 8865, but only if the entity for which the form is being filed has items of international tax relevance (generally foreign activities or foreign partners). The changes do not affect partnerships and S corporations with no items of international tax relevance. To promote compliance with adoption of Schedules K-2 and K-3 by affected pass-through entities and their partners and shareholders, the IRS intends to provide certain penalty relief for the 2021 tax year.
[2] Proposal for a Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market, SWD (2021) 99 final – SWD (2021) 100 final – SEC (2021) 182 final (May 5, 2021).
[3] Inception Impact Assessment of Commission proposal(s) for Regulation(s) of the European Parliament and the Council to address distortions caused by foreign subsidies in the internal market generally and in the specific cases of acquisitions and public procurement. Ref. Ares (2020) 5160372 (Oct 1, 2020).
[4] Commission Staff Working Document Impact Assessment, Accompanying the Proposal for a Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market, COM (2021) 223 final – SEC (2021) 182 final – SWD (2021) 100 final (May 5, 2021).
[5] Estimating International Tax Evasion by Individuals – Final Report 2019, Taxation Papers, Working Paper No 76 – 2019, European Commission Directorate-General for Taxation and Customs Union (Sept 2019) at 9.
[6] Estimating International Tax Evasion by Individuals – Final Report 2019, Taxation Papers, Working Paper No 76 – 2019, European Commission Directorate-General for Taxation and Customs Union (Sept 2019) at 11.
[7] “Closing the Tax Gap: Lost Revenue from Non-Compliance and the Role of Offshore Tax Evasion”, Testimony Of The Honorable J. Russell George, Treasury Inspector General For Tax Administration, Committee On Finance Subcommittee On Taxation And IRS Oversight, United States Senate (May 11, 2021).
[12] Tax Evasion at the Top of the Income Distribution: Theory and Evidence, John Guyton, Patrick Langetieg, Daniel Reck, Max Risch, and Gabriel Zucman, NBER Working Paper No. 28542, March 2021 at 8.
[13] Objectives Report To Congress, National Taxpayer Advocate, Fiscal Year 2022 at p 45.
[14] Statement by Nina E. Olson, Executive Director, Center for Taxpayer Rights, Hearing on Closing the Tax Gap: Lost Revenue from Noncompliance and the Role of Offshore Tax Evasion, Subcommittee on Taxation and IRS Oversight Committee on Finance United States Senate (May 11, 2021) at 9.
[15] Statement by Nina E. Olson, Executive Director, Center for Taxpayer Rights, Hearing on Closing the Tax Gap: Lost Revenue from Noncompliance and the Role of Offshore Tax Evasion, Subcommittee on Taxation and IRS Oversight Committee on Finance United States Senate (May 11, 2021) at 10.
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
Did Your Clients Properly Report Their Pre-Tax Reform Cryptocurrency Trading Gains? Seven years after the IRS declared cryptocurrency would be taxed as personal property under capital gains rules, it has now announced that pre-tax reform trades won’t qualify for like-kind exchange treatment under Section 1031, creating a potential tax headache for taxpayers with substantial pre-reform crypto gains. Meanwhile, challenges to the IRS’s ability to impose substantial FBAR penalties for failure to report foreign accounts continue to flare up in federal courts despite a clear consensus in both Texas and the 9th Circuit. Read on to make sure you’re up to speed.
By the way subscribers, Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education
New IRS Guidance Nixes Tax-Free Exchange Treatment for Cryptocurrency Swaps. New IRS guidance has confirmed that pre-2018 exchanges of Bitcoin, Ether and Litecoin do not qualify for Section 1031 exchange treatment. Prior to 2018, taxpayers were permitted to defer capital gains taxes under Section 1031 for certain exchanges of personal property (1031 is now limited only to exchanges of real property). The IRS’s rationale is that these were not exchanges of like-kind property and so were taxable even prior to tax reform. The IRS found that Bitcoin and Ether each had special roles in cryptocurrency trading because if taxpayers wanted to trade in other types of virtual currency, they had to first exchange the other currency into or from Bitcoin or Ether. Therefore, exchanges between Litecoin and Bitcoin/Ether did not qualify as “like kind”. Further, the IRS identified differences in design, intended use and actual use of Bitcoin and Ether. While this guidance currently only extends to exchanges involving Bitcoin, Ether and Litecoin, it is possible that the IRS could extend the rationale to other types of cryptocurrency. Taxpayers who trade in cryptocurrency under current tax rules should remember that these trades are taxable events. For more information, visit Tax Facts Online. Read More
New Challenge Posed to Federal Courts’ $10,000 Per-Year Limit on FBAR Penalties. Several recent federal court decisions have confirmed that the total FBAR penalties that can be imposed on an individual should be limited to $10,000 per year, rather than $10,000 per financial account. Now, a federal court in Georgia is once again hearing a similar case. In 2018, the IRS assessed $120,000 in penalties for a three-year period for each of the foreign banks with which the taxpayer had a relationship that she failed to report via FBAR filing. Federal courts in both Texas and California have confirmed that the IRS must limit penalties for a non-willful failure to file FBAR reports based on the year, not the number of the taxpayer’s foreign accounts. In the current case, the taxpayer had also participated in an amnesty program where she paid back taxes on the accounts she held with banks in France, Lebanon and Monaco. For more information on the FBAR filing requirements and penalties for noncompliance, visit Tax Facts Online. Read More
IRS Extends Relief for Employee Donations of Unused Sick, Vacation & PTO. The IRS has extended the relief provided in Notice 2020-46 to allow employees to continue to forgo, or “donate”, sick, vacation and personal leave because of the COVID-19 pandemic without adverse tax consequences through the end of the 2021 tax year. After December 31, 2020 and before January 1, 2022, employers may make cash payments to Section 170(c) charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave which their employees gave up. Those amounts will not be treated as compensation and the employees will not be treated as receiving the value of the leave as income. While taxable income will not be increased, employees cannot claim a charitable deduction for the leave donated to their employer. Employers, however, may deduct these cash payments as Section 162 business expenses or Section 170 charitable contributions if the employer otherwise meets the respective requirements of either section. For more information on the deduction for charitable contributions, visit Tax Facts Online. Read More
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
This week’s newsletter is dedicated to helping clients—both employers and employees—maximize their health-related benefits and tax credits (even when those benefits are only available for a limited time). Do you have questions about situation-specific COBRA eligibility, little-known HSA tricks, or the ever-evolving EEOC vaccine guidance for employers? Read on to see if we’ve got the answers in Tax Facts – or ask us to include in the future online/book updates.
By the way subscribers, Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education
The EEOC posted an update about offering incentives to employees to take a COVID vaccine, especially relevant now that the Delta COVID-19 variation has brought hospitalization levels back to record pandemic levels. Under the new guidance, employers are permitted to offer incentives to employees who voluntarily provide confirmation that they have received the COVID-19 vaccine from a third party. Requesting these confirmations will not be treated as disability-related inquiries under the ADA or requests for genetic information under GINA. Employers should be aware that these incentives are treated differently than incentives offered for employer-provided vaccines. If the incentive is actually for the purpose of encouraging an employee to receive the vaccine from the employer or an agent, employers should continue to use caution against offering an incentive that can be construed as “coercive”. That’s because employees must provide certain health information before receiving the vaccine—and employees should not be pressured to disclose medical information to their employers. For more information on the available tax credit for employers who offer paid vaccine leave to employees, visit Tax Facts Online. Read More
Some legal-health experts have raised the issue of whether an employer can require an employee to undergo a treatment that has not yet received approval? The current COVID-19 vaccines are being administered under an Emergency Use Authorization. The FDA, which is empowered by law to authorize an emergency use designation for unapproved vaccinations and other medical treatments, states that:
An Emergency Use Authorization (EUA) is a mechanism to facilitate the availability and use of medical countermeasures, including vaccines, during public health emergencies, such as the current COVID-19 pandemic. Under an EUA, FDA may allow the use of unapproved medical products, or unapproved uses of approved medical products in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions when certain statutory criteria have been met, including that there are no adequate, approved, and available alternatives.
In response to the concerns raised by employers regarding the legal requirement to inform individuals of the “option to accept or refuse administration” of the unapproved product [see 21 U.S. Code § 360bbb–3(e)(1)(A)(ii)(III)- Authorization for medical products for use in emergencies], especially as regards the potential liability, the DOJ released its opinion that employers may require employees to submit to emergency-use vaccines. The DOJ opinion, “Whether Section 564 of the Food, Drug, and Cosmetic Act Prohibits Entities from Requiring the Use of a Vaccine Subject to an Emergency Use Authorization?” concludes that: “… This language in section 564 specifies only that certain information be provided to potential vaccine recipients and does not prohibit entities from imposing vaccination requirements.” Both public and private employers, according to the DOJ opinion, may require the COVID-19 vaccination of employees. To roughly summarize the reasoning: The applicant or employee has an option to refuse to submit to vaccination, but the employer also has an option to either not offer or continue to offer employment. The DOJ’s legal analysis goes beyond this simplification with arguments why the option to refuse is not applicable. Certainly, these issues and arguments will see substantial litigation in the courts (the DOJ memo references the opening salvo). But the memo does its job in providing reasonable legal cover for employers, employers’ legal counsel, and employers’ insurers to implement vaccination requirements.
A separate issue is whether employers can require employees or applicants for employment to prove via a vaccination card or similar medical record that a COVID-19 vaccination has been administered and when administered? Check your Tax Facts app for the discussion.
Am I Eligible for Federal COBRA Assistance? Case-Specific IRS Guidance
The IRS guidance on the availability and implementation of the ARPA 100 percent COBRA premium assistance provides some useful guidance on specific scenarios that employers and employees may now be facing. Generally, individuals remain assistance-eligible individuals (AEIs) during eligibility waiting periods if the period overlaps with the subsidy period. For example, the individual will be an AEI during periods outside the open enrollment period for a spouse’s employer-sponsored health coverage. Employers who change health plan options must place the AEI in the plan that’s most similar to their pre-termination plan, even if it’s more expensive (and the 100 percent subsidy will continue to apply). Importantly, employers who are no longer covered by federal COBRA requirements may still be required to advance the subsidy (for example, if the employer terminated employees so that the federal rules no longer apply). If the employer was subject to COBRA when the individual experienced the reduction in hours or involuntary termination, the employer must offer the subsidy. For more information on the COBRA premium subsidy, visit Tax Facts Online. Read More
HSAs and other tax-preferred health benefits have taken on a whole new meaning in the wake of the pandemic. It’s important that clients fully understand the rules so that they aren’t leaving valuable benefits on the table. In 2022, annual HSA contribution limits will rise to $3,650 for self-only coverage or $7,300 for family HDHP coverage. (HDHPs are health insurance plans that have a minimum annual deductible of $1,400 for self-only coverage ($2,800 for family coverage).). Taxpayers aged 55 and up can contribute an extra $1,000 per year. Taxpayers don’t have to fund an employer-sponsored HSA. Even if the client has been laid off or furloughed, clients with HDHP coverage can open an HSA at their bank and fund the account independently. Additionally, clients who have lost their jobs continue to have access to the funds in their old HSA, and can even transfer that HSA to a new provider. In other words, as long as the client remains covered by a HDHP, there is no “use it or lose it” rule. The funds simply roll over from year to year and continue to grow tax-free. For 2021, that same benefit has been extended to health FSAs. With an HSA, however, the rollover benefit is even more substantial because once the participant reaches age 65, the account can be accessed without penalty for any reason—much like a typical retirement account. The funds are simply taxed as ordinary income upon withdrawal, like a 401(k) or IRA. For more information on HSA advantages, visit Tax Facts Online. Read More
IRS Extends Relief for Employee Donations of Unused Sick, Vacation & PTO. The IRS has extended the relief provided in Notice 2020-46 to allow employees to continue to forgo, or “donate”, sick, vacation, and personal leave because of the COVID-19 pandemic without adverse tax consequences through the end of the 2021 tax year. After December 31, 2020, and before January 1, 2022, employers may make cash payments to Section 170(c) charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation, or personal leave which their employees gave up. Those amounts will not be treated as compensation and the employees will not be treated as receiving the value of the leave as income. While taxable income will not be increased, employees cannot claim a charitable deduction for the leave donated to their employer. Employers, however, may deduct these cash payments as Section 162 business expenses or Section 170 charitable contributions if the employer otherwise meets the respective requirements of either section. For more information on the deduction for charitable contributions, visit Tax Facts Online. Read More
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
It’s been another busy week for the IRS and DOL. Both agencies have responded to taxpayer questions on various issues–the DOL, by providing helpful clarifications on plan sponsors’ obligations under the new SECURE Act lifetime income disclosure rules, and the IRS by expanding the availability of tax credits for employers who offer paid leave to encourage COVID-19 vaccination. On another note, the IRS reminds taxpayers: remember your substantiation when claiming reimbursement from tax-preferred health savings accounts!
By the way subscribers, Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education
A Reminder for Clients: IRS Emphasizes Need for Health FSA Substantiation
Recent IRS activity indicates that the agency is paying attention to whether or not clients are properly substantiating items reimbursed through tax-preferred health savings accounts. In IRS Information Letter 2021-13, the IRS restated that flexible spending account (FSA) items paid using an FSA debit card must have substantiation containing all of the information required for claims submitted through other means. A simple receipt is usually not sufficient. Substantiation from a third-party must include: (1) the name of the person receiving the services, (2) the date the service was provided, (3) a description of the service or item purchased, (4) the name of the provider or merchant and (5) the claim amount. The only exception is for certain merchants and providers that can be automatically substantiated by the Merchant Category Code (MCC) on the provider’s debit card machine and the actual item/service via identification by an Inventory Information Approval System (IIAS) from non-healthcare providers. For more information on the health FSA rules, visit Tax Facts Online. Read More
DOL Releases FAQ on SECURE Act Lifetime Income Illustrations
The DOL issued a temporary set of FAQ to implement the interim final rule on the SECURE Act lifetime income illustration provisions. Under the SECURE Act, plan sponsors must disclose a participant’s account balance as both a single life annuity and joint and survivor annuity income stream. Plans must furnish lifetime income illustrations annually (or more frequently). The FAQ clarifies that the earliest statement for which the illustrations are required is a statement for a quarter ending within 12 months of the rule’s effective date (September 18, 2021) if the plan issues quarterly statements. Therefore, the illustrations can be incorporated into any quarterly statement up to the second calendar quarter of 2022. For non-participant-directed plans, the lifetime income illustrations must be included on the statement for the first plan year ending on or after September 19, 2021 (or, no later than October 15, 2022, which is the last day for filing the annual return for a calendar year plan that year). The FAQ also clarifies that plans are permitted to provide additional lifetime income illustrations as long as the required illustrations are also provided, recognizing that some plans have been including illustrations for many years. For more information on the lifetime income disclosure rules, visit Tax Facts Online. Read More
IRS Updates FAQ on ARPA Paid Sick and Family Leave Tax Credits
The IRS updated its frequently asked questions on the American Rescue Plan Act (ARPA) paid sick and family leave credits. Now, employers are entitled to claim the tax credits if they provide paid leave for employees to accompany family, household members and certain others to obtain a COVID-19 vaccine or to care for someone recovering from immunization. The new eligibility requirement also applies to self-employed taxpayers. Generally, employers are no longer obligated to provide employees with paid sick and family leave. However, those who choose to offer paid leave for qualifying reasons may claim a tax credit for wages paid. To date, the tax credits for leave have been extended through September 30, 2021. For more information on the FFCRA paid leave tax credits for sick and family leave, visit Tax Facts Online. Read More
The 2,702-page bi-partisan “Infrastructure Investment and Jobs Act of 2021” has been released by the Senate. The bill may be downloaded from the U.S. Senate website here. The bill contains approximately $550 billion of new project spending and carries over an additional $650 billion from previously funded projects for a total of over $1.2 trillion in infrastructure spending that will begin in 2021 and most end in 2026.
But the bill contains many energy provisions and excise taxes as well as fees that will impact all segments of the energy industry. These provisions include billions of dollars for the industry for expenditure and incentives for carbon capture; clean hydrogen R&D; nuclear; among others. By example, $500,000,000 is provided for clean hydrogen technology R&D (see page 1550 at section 40314). The excise taxes and fees include the extensions of the highway-related taxes, superfund excise taxes, and customs user fees.
The major tax reform provisions addressing estate and gift tax, capital gains, carried interests, real estate exchanges, retirement plans, and high-income earners have been reserved to the forthcoming yet-to-be-agreed/released Democratic reconciliation bill. However, the Infrastructure Investment and Jobs Act of 2021 contains some new tax provisions including:
Sec. 80501. Modification of automatic extension of certain deadlines in the case of taxpayers affected by Federally declared disasters.
Sec. 80502. Modifications of rules for postponing certain acts by reason of service in combat zone or contingency operation.
Sec. 80503. Tolling of time for filing a petition with the tax court.
Sec. 80504. Authority to postpone certain tax deadlines by reason of significant fires.
Sec. 80601. Modification of tax treatment of contributions to the capital of a corporation.
Sec. 80602. Extension of interest rate stabilization.
Sec. 80603. Information reporting for brokers and digital assets.
Sec. 80604. Termination of employee retention credit for employers subject to closure due to COVID–19.
The automatic extension for certain tax deadlines for Federally declared disasters addresses the situation of multiple declarations relating to a disaster area which are issued within a 60-day period. A separate 60-day period shall be determined with respect to each such declaration pursuant to the bill’s language.
The bill will resurrect energy industry-related tax credits (expired IRC Section 48C) worth up to 30 percent of expenditure for converting fossil energy production into green energy production. Senator Joe Manchin is doing his job of representing his West Virginia coal industry constituency!
The bill’s cryptocurrency reporting regime (Sec. 80603. Information reporting for brokers and digital assets) is marked to raise $28 billion from current non-compliance and tax evasion regarding taxpayers’ either ignorance or purposeful oversight of including gross income derived from investments or trading digital currency. The reporting threshold will only be lowered to $10,000 which is still rather high in our personal opinion. It creates a potential perspective (or perhaps incentive among cheaters) that only digital currency income of at least $10,000 is reportable for gross income. On the other hand, it is often better to build out first then and scale up an operation, tweaking it. For example, the $10,000 reporting amount will capture a substantial pool of taxpayers, and that threshold can be lowered in the future (with grossly overstated estimates of the ‘evasion’ income it will bring in to pay for an extension or some new program in next year’s budget bills).
The bill contains hundreds of not-obvious federal grants and contract opportunities for business. By the example of one provision related to education and training of workers, section 401513 includes $10 million dollars for FY2022 for government grants of 50 percent of the cost to provide ‘career skills training’ to identify and involve in training programs target populations of individuals who would benefit from training and be actively involved in activities relating to energy efficiency and renewable energy industries; and the ability to help individuals achieve economic self-sufficiency. The program students must concurrently receive classroom instruction and on-the-job training for the purpose of obtaining an industry-related certification to install energy-efficient buildings.
Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.
Wealth & Risk Management Studies for Industry Professionals
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
This week’s newsletter offers the download to the Infrastructure Investment and Jobs Act of 2021 plus insight into different issues that may be important to clients who sponsor employee benefit plans. It’s time to file annual Form 5500—and this year, potential penalties for noncompliance may be higher than ever. We also offer analysis of the newly-popular retirement plan auto-enrollment features—and a reminder that small business clients may now benefit from a new post-SECURE Act tax credit for adopting the feature—as well as information about the ARPA pension relief law. Read on for more!
$1.2 Trillion Infrastructure Bill Released Sunday night (August 1, 2021)
The 2,702-page bi-partisan “Infrastructure Investment and Jobs Act of 2021” has been released by the Senate. The bill may be downloaded from the U.S. Senate website here. The bill contains approximately $550 billion of new project spending and carries over an additional $650 billion from previously funded projects for a total of over $1.2 trillion in infrastructure spending that will begin in 2021 and most end in 2026.
But the bill contains many energy provisions and excise taxes as well as fees that will impact all segments of the energy industry. These provisions include billions of dollars for the industry for expenditure and incentives for carbon capture; clean hydrogen R&D; nuclear; among others. By example, $500,000,000 is provided for clean hydrogen technology R&D (see page 1550 at section 40314). The excise taxes and fees include the extensions of the highway-related taxes, superfund excise taxes, and customs user fees.
The major tax reform provisions addressing estate and gift tax, capital gains, carried interests, real estate exchanges, retirement plans, and high-income earners have been reserved to the forthcoming yet-to-be-agreed/released Democratic reconciliation bill. However, the Infrastructure Investment and Jobs Act of 2021 contains some new tax provisions including:
Sec. 80501. Modification of automatic extension of certain deadlines in the case of taxpayers affected by Federally declared disasters.
Sec. 80502. Modifications of rules for postponing certain acts by reason of service in combat zone or contingency operation.
Sec. 80503. Tolling of time for filing a petition with the tax court.
Sec. 80504. Authority to postpone certain tax deadlines by reason of significant fires.
Sec. 80601. Modification of tax treatment of contributions to the capital of a corporation.
Sec. 80602. Extension of interest rate stabilization.
Sec. 80603. Information reporting for brokers and digital assets.
Sec. 80604. Termination of employee retention credit for employers subject to closure due to COVID–19.
The automatic extension for certain tax deadlines for Federally declared disasters addresses the situation of multiple declarations relating to a disaster area which are issued within a 60-day period. A separate 60-day period shall be determined with respect to each such declaration pursuant to the bill’s language.
The bill contains hundreds of not-obvious federal grants and contract opportunities for business. By example of one provision related to education and training of workers, section 401513 includes $10 million dollars for FY2022 for government grants of 50 percent of the cost to provide ‘career skills training’ to identify and involve in training programs target populations of individuals who would benefit from training and be actively involved in activities relating to energy efficiency and renewable energy industries; and the ability to help individuals achieve economic self-sufficiency. The program students must concurrently receive classroom instruction and on-the-job training for the purpose of obtaining an industry-related certification to install energy efficient buildings.
Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.
Reminder: It’s Time to File Form 5500 for Employee Benefit Plans
It’s that time of year again. The deadline for filing Form 5500 for health plans and retirement plans with the IRS and DOL is July 31 for most calendar-year plans. The deadline is seven months after the end of the plan year. However, clients who aren’t yet ready to file should be advised that they may obtain a filing extension of up to 2.5 months. Penalties for failure to file Form 5500 on time have increased in recent years—and can equal as much as $2,000 per day in some cases. The forms are used by the IRS and DOL to identify potential compliance issues, so small business clients with employment benefits offerings should be advised to prepare the forms carefully and expect scrutiny. Form 5500 is filed under the penalty of perjury—for the employer who signs the document, not the service provider who prepared the document. For more information on Form 5500 filing requirements and increased penalties under the SECURE Act, visit Tax Facts Online. Read More
According to recent surveys, the majority of workers who have been automatically enrolled in employer-sponsored retirement savings plan have indicated that they are pleased with the decision. On the other hand, only about 30 percent of U.S. employers currently provide an auto-enrollment option. When asked whether they hoped their employer would offer financial wellness programs to help them better understand savings options, 80 percent of employees surveyed answered “yes”. At least one version of the “SECURE Act 2.0” bill would require a minimum 3 percent auto-enrollment rate for most newly adopted 401(k)s. Under the existing SECURE Act, small business owners may be entitled to a tax credit for adopting a plan that automatically enrolls employees. For more information on the tax credit, visit Tax Facts Online. Read More
PBGC Issues Interim Guidance on ARPA Special Financial Assistance for Multiemployer Pension Plans
The PBGC issued an interim final rule implementing the special financial assistance (SFA) rule for multiemployer pension plans in the American Rescue Plan Act. Eligible plans may apply to receive a lump-sum payment from a new Treasury-backed PBGC fund. Under the new rules, eligible plans are entitled to amounts that are sufficient to pay all benefits for the next 30 years. According to the PBGC interpretation, that means sufficient funds to forestall insolvency through 2051 (but not thereafter). Plans are entitled to receive the difference between their obligations and resources for the period. Surprisingly, the PBGC rule provides that SFA funds will be taken into account when calculating a plan’s withdrawal liability. However, plans are required to use mass withdrawal interest rate assumptions published by the PBGC when calculating withdrawal liability until the later of (1) 10 years after the end of the year in which the plan received the SFA or (2) the time when the plan no longer holds SFA funds. For more information on multiemployer pension plan withdrawal liability, visit Tax Facts Online. Read More
Wealth & Risk Management Studies for Industry Professionals
The Texas A&M graduate programs for risk management for areas like wealth management, tax risk management, financial risk, economic crimes, ESG risk, are accepting applications for fall. Over 500 candidates are currently enrolled in the graduate courses yet maximum enrollment per course section is maintained at 30 so that each student receives meaningful feedback throughout the course from the full-time academic and professional part-time faculty. Check out the graduate program here: https://law.tamu.edu/distance-education
Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20
William Byrnes' Tax, Wealth, and Risk Intelligence 