William Byrnes' Tax, Wealth, and Risk Intelligence

Under normal circumstances, cafeteria plans are not permitted to allow participants to make mid-year election changes except in limited situations. Notice 2020-29 permits employees to allow certain mid-year elections made during calendar year 2020 that would otherwise be impermissible, including changes to salary reduction contribution elections. For more information on the mid-year election rules for cafeteria plans, visit Tax Facts Online. Read More

IRS Notice 2020-33 and Notice 2020-29, released concurrently, provides relief with respect to unused funds in a flexible spending account. Under Notice 2020-29, if an employee has unused amounts remaining in a health FSA or a dependent care assistance program at the end of a grace period (or plan year) ending in 2020, a cafeteria plan may permit employees to apply those unused amounts to pay or reimburse medical care expenses or dependent care expenses incurred through December 31, 2020. Notice 2020-33 makes a change to the carryover rules that apply to health FSAs, so that the amount that can be carried over to the following year will equal 20 percent of the maximum inflation-indexed salary reduction amount under Section 125 (increasing the carryover amount from $500 to $550 for 2020). For more information on the rules governing health FSAs, visit Tax Facts Online. Read More

The IRS has released proposed regulations that would permit the deduction for certain administrative fees incurred by trusts and estates (including the S portion of an ESBT). The guidance addresses the treatment of these expenses in light of the suspension of all miscellaneous itemized deductions for 2018-2025 under the 2017 tax reform legislation. For more information on the tax treatment of trusts and estates, visit Tax Facts Online. Read More