IRS explains how in-plan Roth rollovers work and who can use them
IRS has released guidance on the mechanics and consequences of in-plan Roth rollovers (IPRRs), and how this option may be implemented by plan sponsors. The guidance is taxpayer-friendly in some respects (e.g., it allows surviving-spouse beneficiaries to make IPRRs) but not in others (e.g., IPRRs can't be reversed by way of a recharacterization). Plan sponsors have long lead times to adopt the IPRR option, as long as the plan amendment is effective as of the date the plan first operates in accordance with the amendment. Notice 2010-84, 2010-51 IRB
IRS issues guidance on reporting qualified plan to Roth IRA conversions
IRS has issued guidance on how plan sponsors should report direct rollovers from 401(k) or 403(b) plans to designated Roth accounts in the same plan and subsequent distributions allocable to such rollovers. Most significantly, the guidance spells out that mandatory withholding doesn't apply to the rollovers.
IRS extends and expands Code Sec. 409A document failure relief for deferred comp plans
IRS has clarified and expanded the types of plans previously eligible for Code Sec. 409A relief for nonqualified deferred compensation plans under previous guidance and provided an additional correction method and transition relief for plan document failures relating to payments at separation from service. The previous correction reporting requirements are also modified. Notice 2010-80, 2010-51 IRB
Defined benefit plans get one year reprieve for making various amendments
A new Notice extends the deadline for amending qualified defined benefit plans to meet certain Code requirements that were added and modified by recent legislation. The deadline is now extended to the last day of the first plan year that begins on or after Jan. 1, 2011. Notice 2010-77, 2010-51 IRB
FAQs address new PTIN requirement and reporting agents preparing employment tax returns
IRS has updated its online FAQs explaining the new post-2010 requirement for tax return preparers to obtain and furnish a preparer tax identification number (PTIN) on tax returns and claims for refund of tax that they prepare. The updated FAQs provide examples illustrating the application of the new PTIN requirements to reporting agents who prepare employment tax returns for clients.
IRS explains tentative computation of new annual fee on prescription drug sales
In a Notice, IRS has provided guidance on the calculation of the annual fee imposed against branded prescription pharmaceutical manufacturers and importers for calendar years beginning after Dec. 31, 2010. Notice 2010-71, 2010-50 IRB
IRS provides guidance on special funding rules for multiemployer defined benefit plans
In a Notice, IRS has provided guidance in a question and answer format for sponsors of multiemployer defined benefit plans on the special funding rules under Code Sec. 431(b)(8), as added by the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA, P.L. 111-192, 6/25/2010). Notice 2010-83, 2010-51 IRB
Sixth Circuit affirms that loss-generating “BLISS” transaction was a sham
The Court of Appeals for the Sixth Circuit has affirmed a Tax Court decision which disallowed a corporation's claimed losses and legal fee deductions incurred in a “Basis Leveraged Investment Swap Spread” (BLISS) transaction because the transaction lacked economic substance. New Phoenix Sunrise Corporation, (CA 6 11/18/2010) 106 AFTR 2d ¶2010-5501
Spouse gets relief from joint tax liability despite knowledge of possible nonpayment
The Tax Court has granted an individual's request for equitable innocent spouse relief under Code Sec. 6015(f) even though she knew that taxes might not be paid. While she failed to qualify for safe harbor relief, the Court applied a balancing test to determine that relief was appropriate. Gail Prescott Drayer, TC Memo 2010-257
Practice Alert: Estate and GST taxes—where we are and where we're headed if Congress doesn't act
This Practice Alert explains what estate and generation-skipping transfer tax repeal means, what old rules from 2001 are scheduled to return in 2011, and relevant concerns and planning considerations both for this year and next year.
Washington Alert—Part I
TIGTA audit looks at law affecting the disclosure of foreign financial assets; and CRS report examines political campaign activity by social welfare organizations.
Washington Alert—Part II
U.S. and Panama enter a new tax information exchange pact; TIGTA calls Currency Transaction Reports a good source for audit leads; and a CRS report examines IRAs and policy options for Capitol Hill.
IRS has released guidance on the mechanics and consequences of in-plan Roth rollovers (IPRRs), and how this option may be implemented by plan sponsors. The guidance is taxpayer-friendly in some respects (e.g., it allows surviving-spouse beneficiaries to make IPRRs) but not in others (e.g., IPRRs can't be reversed by way of a recharacterization). Plan sponsors have long lead times to adopt the IPRR option, as long as the plan amendment is effective as of the date the plan first operates in accordance with the amendment. Notice 2010-84, 2010-51 IRB
IRS issues guidance on reporting qualified plan to Roth IRA conversions
IRS has issued guidance on how plan sponsors should report direct rollovers from 401(k) or 403(b) plans to designated Roth accounts in the same plan and subsequent distributions allocable to such rollovers. Most significantly, the guidance spells out that mandatory withholding doesn't apply to the rollovers.
IRS extends and expands Code Sec. 409A document failure relief for deferred comp plans
IRS has clarified and expanded the types of plans previously eligible for Code Sec. 409A relief for nonqualified deferred compensation plans under previous guidance and provided an additional correction method and transition relief for plan document failures relating to payments at separation from service. The previous correction reporting requirements are also modified. Notice 2010-80, 2010-51 IRB
Defined benefit plans get one year reprieve for making various amendments
A new Notice extends the deadline for amending qualified defined benefit plans to meet certain Code requirements that were added and modified by recent legislation. The deadline is now extended to the last day of the first plan year that begins on or after Jan. 1, 2011. Notice 2010-77, 2010-51 IRB
FAQs address new PTIN requirement and reporting agents preparing employment tax returns
IRS has updated its online FAQs explaining the new post-2010 requirement for tax return preparers to obtain and furnish a preparer tax identification number (PTIN) on tax returns and claims for refund of tax that they prepare. The updated FAQs provide examples illustrating the application of the new PTIN requirements to reporting agents who prepare employment tax returns for clients.
IRS explains tentative computation of new annual fee on prescription drug sales
In a Notice, IRS has provided guidance on the calculation of the annual fee imposed against branded prescription pharmaceutical manufacturers and importers for calendar years beginning after Dec. 31, 2010. Notice 2010-71, 2010-50 IRB
IRS provides guidance on special funding rules for multiemployer defined benefit plans
In a Notice, IRS has provided guidance in a question and answer format for sponsors of multiemployer defined benefit plans on the special funding rules under Code Sec. 431(b)(8), as added by the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA, P.L. 111-192, 6/25/2010). Notice 2010-83, 2010-51 IRB
Sixth Circuit affirms that loss-generating “BLISS” transaction was a sham
The Court of Appeals for the Sixth Circuit has affirmed a Tax Court decision which disallowed a corporation's claimed losses and legal fee deductions incurred in a “Basis Leveraged Investment Swap Spread” (BLISS) transaction because the transaction lacked economic substance. New Phoenix Sunrise Corporation, (CA 6 11/18/2010) 106 AFTR 2d ¶2010-5501
Spouse gets relief from joint tax liability despite knowledge of possible nonpayment
The Tax Court has granted an individual's request for equitable innocent spouse relief under Code Sec. 6015(f) even though she knew that taxes might not be paid. While she failed to qualify for safe harbor relief, the Court applied a balancing test to determine that relief was appropriate. Gail Prescott Drayer, TC Memo 2010-257
Practice Alert: Estate and GST taxes—where we are and where we're headed if Congress doesn't act
This Practice Alert explains what estate and generation-skipping transfer tax repeal means, what old rules from 2001 are scheduled to return in 2011, and relevant concerns and planning considerations both for this year and next year.
Washington Alert—Part I
TIGTA audit looks at law affecting the disclosure of foreign financial assets; and CRS report examines political campaign activity by social welfare organizations.
Washington Alert—Part II
U.S. and Panama enter a new tax information exchange pact; TIGTA calls Currency Transaction Reports a good source for audit leads; and a CRS report examines IRAs and policy options for Capitol Hill.