William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Payment’

When are policy loans taxable?

Posted by William Byrnes on November 23, 2011


Generally, life insurance policies be withdrawn without income tax consequences. However, there are circumstances where a “loan” is immediately taxable. We have covered situations where a policy is surrendered with a loan outstanding, resulting in taxable income. This article discusses another case where a policy “loan” will be treated as taxable income.

In Frederick D. Todd II et ux. v. Commissioner (T.C. Memo. 2011-123), the Tax Court considered whether a distribution from a welfare benefit fund to a fund participant was a policy loan or a taxable distribution.

For previous coverage of life insurance policies held by welfare benefit funds in Advisor’s Journal, see Deductions for Life Insurance Premium Payments to Welfare Benefit Plan Denied (CC 10-29).

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of welfare benefit funds, see Advisor’s Main Library: B—Welfare Benefit Funds.

 

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Clients may be subject to new reporting to IRS (beware of mis-matching leading to audits)

Posted by William Byrnes on October 16, 2010


Why is this Topic Important to Wealth Managers?  Provides critical information in regards to who will be the subjects of new reports going to the IRS beginning in January.  Chances are, a significant portion of clients accept credit and debit cards in transactional exchanges.  The new law applies, and has ramifications, directly related to these merchants and services providers.

The same legislation that brought us the first time homebuyer’s credit, the “Housing Assistance Tax Act of 2008”, is back again, this time in the form of additional reporting for those who accept credit or debit cards in consideration for goods or services. [1] The act requires return reporting to the Internal Revenue Service, “relating to payments made in settlement of payment card and third party network transactions.”  [2]

The requirements establish that “banks or other organizations that have contractual obligation to make payment to participating payees in settlement of payment card transactions” [3], are required to return to the Service, “(1) the name, address, and [Taxpayer Identification Number] of each participating payee to whom one or more payments in settlement of reportable payment transactions are made, and (2) the gross amount of the reportable payment transactions with respect to each such participating payee.” [4]

Read all about the new requirements that become effective for information returns for reportable payment transactions for calendar years beginning after December 31, 2010 at Special Alert

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