Tax Relief BlogThe most important IRS Tax Development in Q1 2008
Articles Posted in IRS Notice
Intellectual property contribution tax problem resolution
Final regs detail donee’s filing requirements for qualified intellectual property contributions
T.D. 9392, 04/04/2008; Reg. § 1.6050L-2
MyIRSTaxRelief.com
IRS has issued final regs explaining the information return requirements for donees receiving net income from qualified intellectual property contributions made after June 3, 2004.
Estate and Gift Tax Problem Resolution
Estate and Gift Tax Relief – Joint Committee Staff examines options for reforming transfer taxes
Mike Habib, EA
MyIRSTaxRelief.com
The Staff of the Joint Committee on Taxation has released JCX-23-08, Taxation Of Wealth Transfers Within A Family: A Discussion Of Selected Areas For Possible Reform. This document, which was prepared in conjunction with an Apr. 3, 2008 hearing conducted by the Senate Finance Committee, explains the estate and gift tax system’s current state of flux and explores ways to reform it. The full-text document can be viewed at http://www.house.gov/jct/x-23-08.pdf.
Observation: Estate planning has become unduly difficult in the face of uncertainty posed by the current regime, which calls for a one-year repeal of estate tax followed by a return to harsher rules. While it is a fairly good bet that estate tax won’t be permanently repealed, it seems certain that some types of changes will be implemented even before 2010. For example, there is a pretty good chance that a fully unified system will be restored with a higher exemption level.
Background. As noted in JCX-23-08, the Federal estate and gift tax rules are in a state of flux. Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), the estate tax and the gift tax are partially unified: a single tax rate schedule applies under the estate tax and the gift tax, but after 2003 the exemption amounts differ. The highest rate of estate and gift tax has decreased in steps from 55% in 2001 to 45% in 2007 through 2009. The estate tax exemption amount is increasing in several steps from $1 million in 2002 to $3.5 million in 2009. The gift tax exemption amount has remained at $1 million. The credit against Federal estate tax liability for State estate and inheritance taxes was phased down from 2002 through 2004 and replaced by a deduction starting in 2005.
Estimated tax payments – IRS Problem Resolution
New, changed and expired provisions affect 2008 individual estimated tax
Mike Habib, EA
MyIRSTaxRelief.com
Apr. 15, 2008 is the due date for affected calendar year taxpayers to make their first installment of 2008 estimated tax. There aren’t any drastic changes in the estimated tax rules themselves for 2008. However, there are a number of new, changed and expiring provisions that will affect some individuals’ estimated tax computations for 2008. This article provides a brief overview of the estimated tax rules for individuals and looks at the changes that may impact 2008 estimated taxes.
Who needs to pay estimated tax. Individuals who have income that is not subject to withholding (for example, earnings from self-employment, interest, dividends, rents, alimony, etc.) must pay estimated tax or face a penalty. In addition, taxpayers who do not elect voluntary withholding on unemployment compensation and the taxable part of social security payments also may have to pay estimated tax on those items or face a penalty. (Code Sec. 6654)
When and how much to pay. For 2008 estimated tax, in general, a taxpayer must pay 25% of a “required annual payment” by Apr. 15, 2008, June 16, 2008, Sept. 15, 2008 and Jan. 15, 2009 to avoid an underpayment penalty. (Code Sec. 6654(c))
Insurance Agent Tax Resolution
Retired insurance agents’ renewal commissions didn’t qualify for FICA special timing rule
Mike Habib, EA
myIRSTaxRelief.com
Chief Counsel Advice 200813042
Trucker Tax Relief – Trucker Tax Resolution Service
Truckers Tax Relief – Are you a truck driver with tax problems?
Trucking Tax & Accounting: Back Taxes – Unfiled delinquent tax returns – IRS & State audits – Messy books / accounting
If you’re a truck driver and owe the IRS, you’re better off resolving your tax debt now. As you know, tax problems do not go away by themselves! Stop your IRS wage garnishment today, stop your IRS bank levy today, and release your IRS tax lien today.
PPA Pension Protection Act Tax Issues
IRS issues proposed regs reflecting PPA changes and guidance for notice of retroactively effective plan amendments
Lower interest rate could result in higher taxes
How falling interest rates and the declining stock market affect tax and estate planning
IRA Tax Problem? What options you have
“Makeup” required minimum distributions salvage lifetime payouts to nonspouse IRA beneficiary
Mike Habib, EA
myIRSTaxRelief.com
A private letter ruling allows the nonspouse beneficiary of an IRA to salvage lifetime payouts even though she failed an essential rule requiring distributions to begin by the end of the year following the year of the IRA owner’s death. She made up missed annual required minimum distributions (RMDs) and paid a penalty excise tax, but by doing so she avoided a tough 5-year payout rule.
Background. If an IRA owner dies before his required beginning date (RBD), namely Apr. 1 of the year following the year in which age 70 1/2; is attained, then as a general rule his entire interest must be distributed within 5 years of his death. (Code Sec. 401(a)(9)(B)(ii)) However, if any part of the IRA is (1) payable to (or for the benefit of) a designated beneficiary, (2) that part is to be distributed under regs over the life or life expectancy of the designated beneficiary, and (3) the distributions begin not later than 1 year after the date of the deceased’s death (or a later date as prescribed by regs), then that part is treated, for Code Sec. 401(a)(9)(B)(ii) purposes, as paid out when distributions commence. (Code Sec. 401(a)(9)(B)(iii))
Reg. § 1.401(a)(9)-3, Q&A 3(a), says that where there’s a nonspouse beneficiary for the IRA (or a qualified plan account), in order to satisfy the life expectancy payout rule in Code Sec. 401(a)(9)(B)(iii), “distributions must commence on or before the end of the calendar year immediately following the calendar year in which the [IRA owner or employee] died.”
The determination of whether the five-year or lifetime payout rule applies depends on the provisions of the IRA. It may be silent as to which rule (5-year or lifetime payout) applies, specify which rule applies, or it may allow the owner (or beneficiary) to elect which rule applies. (Reg. § 1.401(a)(9)-3, Q&A 4)
