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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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 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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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 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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• top 10 for the employment of its law graduates
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Consolidated Appropriations 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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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 product that 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)
• soft skills (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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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 product that 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)
• soft skills (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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

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.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

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.)

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #2 endowment for U.S. public universities, #8 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• #1 employment outcome for law schools in Texas and in top 10 in the USA
• #1 bar passage in Texas
• Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
• 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

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, 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!

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #1 endowment for U.S. public universities, #7 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• 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

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

The big news this week: One complication to the FFCRA and FMLA leave changes introduced by the CARES Act is the issue of W-2 reporting. While it’s not front-and-center in everyone’s mind right now, reporting season will come around again before you know it and the IRS has new guidance about how those types of leave should appear on an employee’s W-2. We also see updates on the Section 199A deduction for REIT shareholders and Premium Tax Credit-Related Inflation Adjustments for 2021.

IRS Provides Guidance on W-2 Reporting of FFCRA Paid Sick Leave and Expanded FMLA Leave

The Families First Coronavirus Response Act (FFCRA) requires smaller employers (under 500 employees) to provide paid sick leave and expanded FMLA leave for COVID-19-related reasons. IRS guidance requires W-2 reporting of those payments that provides important clarity for self-employed taxpayers. Self-employed taxpayers can claim a tax credit for FFCRA sick leave amounts. If they receive any FFCRA pay as an employee, they must reduce their credit amount by the amount paid by the employee. Because of this, employers are required to separately state the paid leave portion of employee compensation on their Form W-2, in Box 14. The employer can also report the FFCRA pay on a separate statement included with the employee’s W-2 for 2020. If the W-2 is provided electronically, the separate statement must be provided in the same manner and at the same time. For more information, visit Tax Facts Online. Read More

IRS Final Rules Confirm: RIC Shareholders Receiving REIT Dividends Qualify for 199A Deduction

The IRS released final rules that allow dividends that a RIC shareholder receives from a REIT to qualify for the Section 199A deduction. These REIT dividends qualify for conduit treatment–so they are treated as though the shareholder received them directly. On the other hand, the treatment of qualified PTP income remains uncertain. The law itself states that directly received PTP income is eligible for the 20% deduction, but the IRS has not permitted similar conduit treatment for PTP income. This uncertainty could encourage more investors to invest directly in the PTP. For more information on the treatment of REIT dividends and PTP income in calculating the Section 199A deduction, visit Tax Facts Online. Read More

IRS Releases Premium Tax Credit-Related Inflation Adjustments for 2021

The IRS has released the Affordable Care Act (ACA) premium tax credit-related inflation-adjusted numbers for use in 2021. In 2021, the percentage used to determine whether an individual is eligible for employer-sponsored health insurance that is affordable is 9.83 percent (up from 9.78 percent in 2020). This means that if the individual is required to contribute more than 9.83 percent of his or her household income toward health insurance in 2021, he or she may be eligible for premium tax credit assistance. For more information on determining when health coverage is deemed affordable for ACA purposes, visit Tax Facts Online. Read More

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