Farmer’s Tax Guide highlights administrative and tax law changes for 2008 IRS Publication 225
IRS recently released Publication 225, Farmer’s Tax Guide, for use in preparing 2008 returns on its web site. It highlights several administrative and tax law changes for 2008 and 2009.
IT company owes nearly $1.7 million in back wages due to H-1B Visa Program violations [DOL ESA News Release, 10/30/08]:
An information technology (IT) company has agreed to pay $1,683,584 in back wages to 343 non-immigrant workers after a Department of Labor (DOL) investigation found that the company had violated the H-1B visa provisions of the Immigration and Nationality Act.
Roundup of recent employment tax rulings
There have been several recent rulings issued in the employment tax area. Here is a summary:
Gambling winnings or losses?
As a US taxpayer, you can deduct gambling losses only if you itemize your deductions on form 1040. You can claim your gambling losses as a miscellaneous deduction on IRS Form 1040, Schedule A. However, the amount of losses you deduct can not total more than the amount of gambling income you’ve reported on your return. It’s important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
Estate not taxed on transfer of decedent’s pension to charitable beneficiary PLR 200845029
IRS has privately ruled that an estate will not be taxed on a distribution of the decedent’s pension benefits to a charitable beneficiary of the estate.
Facts. An individual, whom we’ll call, Smith, died owning an interest in a defined benefit pension plan (the Plan Interest) of which his estate (Estate) was the beneficiary. His will (Will) named Charity as a residuary beneficiary. The executor of Estate proposes to assign the benefit of the Plan Interest to Charity in partial satisfaction of Charity’s share of the residue. The Will gave the executor the power to distribute property in kind and state law further allows distributions in kind without any requirement that they be made on a pro-rata basis.
Year-end tax planning client letter with checklist
As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill this year and possibly the next. Factors that compound the challenge include the stock market’s swoon, the difficult economic climate we’re in right now, and the strong possibility that there will be tax changes in the works next year. In fact, there might even be another economic stimulus package carrying tax changes enacted before the end of this year.
The indisputably good news we are certain of is that Congress has acted to “patch” the AMT problem for 2008, has retroactively reinstated a number of tax breaks (such as the option to deduct state and local general sales tax instead of state and local income tax and the above-the-line deduction for higher education expenses), and has created new tax breaks that go into effect for the 2008 tax year (including a tax credit for first-time homebuyers, a nonitemizers’ deduction for state and local property tax and a nonitemizers’ deduction for certain disaster losses). For 2008, businesses enjoy tax breaks such as a beefed-up expensing option and a 50% bonus first-year depreciation write-off for most machinery and equipment placed into service this year and a reinstated research credit.
How businesses are affected by tax changes in the Emergency Economic Stabilization Act of 2008
As I’m sure you’re aware, on Oct. 3, 2008, the President signed into law the Emergency Economic Stabilization Act of 2008 (P.L. 110-343). Although virtually all of the press coverage of this law has concentrated on its hotly debated $700 billion financial industry bailout plan, the legislation also contains scores of mostly beneficial tax changes for business.
Most of the new law’s tax changes for business fall into one of these categories: tax changes that apply to a wide range of businesses; special tax breaks for disaster areas; and tax changes for specialized industries (there are numerous tax breaks relating to alternative energy production, but they are highly specialized and so not covered in this letter).
Timely reminder for small businesses to steer clear of trouble on payroll tax and retirement plan contributions IRS Employee Plan News (Fall 2008)
In these trying times, with cash scarce and credit hard to find, a small business might be tempted to “temporarily” use money it deducts for taxes and retirement plan contributions from employees’ wages. The Fall 2008 issue of IRS’s Employee Plans News [https://www.irs.gov/pub/irs-tege/fall08.pdf] suggests that practitioners remind clients that failing to remit payroll taxes and retirement plan contributions in a timely manner not only would violate an employer’s legal obligation, but also could subject them to heavy penalties.
Payroll taxes. IRS suggests that small business employers be reminded that when they deduct income and Social Security taxes from employees’ wages, the money is not theirs to use, even for a short period of time. Deducted amounts must be remitted, along with their portion of payroll taxes, by the next scheduled Federal Tax Deposit deadline. An employer that doesn’t deposit the money on time could be hit with:
The rate of these penalties increases with each passing day until deposits are made. Interest is also charged on the total unpaid tax and the penalty. These penalties and interest can add up quickly and lead to even bigger financial troubles for noncompliant businesses.
IRS seeks to return $266 million in undeliverable refunds and economic stimulus payments to taxpayers [IR 2008-123]:
More than 383,000 regular refund and economic stimulus checks have been returned by the U.S. Postal Service as undeliverable, IRS said on Oct. 23. This figure included 279,000 economic stimulus checks totaling $163 million and 104,000 regular refund checks totaling $103 million.
The problem is more urgent for those who have not received their economic stimulus checks which, by law, must be sent out by Dec. 31, IRS said. The agency is urging individuals who have not received the stimulus payment to check on the status of their payment immediately and, if necessary, update their addresses by Nov. 28.
As I’m sure you’re aware, on Oct. 3, 2008, the President signed into law the Emergency Economic Stabilization Act of 2008 (P.L. 110-343). Although virtually all of the press coverage of this law has concentrated on its hotly debated $700 billion financial industry bailout plan, the legislation also contains scores of tax changes, mostly beneficial, for individuals and businesses alike.
Here’s a brief review of the tax provisions individuals need to know about right now.
AMT relief: In general terms, to find out if you owe alternative minimum tax (AMT), you start with regular taxable income, modify it with various adjustments and preferences (such as addbacks for property and income tax deductions and dependency exemptions), and then subtract an exemption amount (which phases out at higher levels of income). The result is multiplied by an AMT tax rate of 26% or 28% to arrive at the tentative minimum tax. You pay the AMT only if the tentative minimum tax exceeds your regular tax bill. Although it was originally enacted to make sure that wealthy individuals did not escape paying taxes, the AMT has wound up ensnaring many middle-income taxpayers. One reason is that many of the tax figures (such as the tax brackets, standard deductions, and personal exemptions) used to arrive at your regular tax bill are adjusted for inflation, but the tax figures used to arrive at the AMT are not.
Tax Relief Blog