News and Events

IRS more aggressive, less sympathetic these days

Date: Mon 25th Jul, 2011

Recent high-profile examples of stepped-up enforcement by the Internal Revenue Service indicate what is happening at many levels, some say. The IRS is increasing scrutiny and enforcement on wealthier taxpayers and is not as sympathetic to taxpayers' arguments. The Washington Post (7/23)

IRS targets HSBC's offshore accounts of U.S. citizens

Date: Mon 18th Jul, 2011

HSBC received a summons from the Internal Revenue Service demanding the names of Americans who have offshore accounts with the London-based bank. HBSC has not said whether it will comply with the summons but urged its American-Indian clients to seek tax advice and to be aware that there is a voluntary disclosure program. USA TODAY

Credit Suisse target of U.S. probe

Date: Mon 18th Jul, 2011

The Credit Suisse release on DOJ investigation (07.15.2011) can be viewed Swiss bank Credit Suisse is being investigated by the U.S. Department of Justice (DOJ) as part of a broader inquiry into banks suspected of assisting U.S. persons evade tax according to a recent press release. The investigation concerns historical private banking services provided on a cross-border basis to people in the United States, Credit Suisse said on July 15, adding the bank had received a letter notifying it that it was being investigated on July 14.

In 2009, Credit Suisse's local rival UBS AG averted indictment over its undeclared offshore private banking services by agreeing to pay $780 million, admitting to criminal wrongdoing and turning over about 255 client names, later raised by the two sides to an additional 4,450. "Subject to our Swiss legal obligations, we will continue to cooperate with the U.S. authorities in an effort to resolve these matters," Credit Suisse said in a statement. Credit Suisse said in the statement that as previously disclosed, it had been responding to requests for information, including subpoenas, from the DOJ. The DOJ has been conducting a broad investigation into a number of Swiss banks, bankers, and third-party intermediaries to determine if they have helped U.S. clients evade tax. Companies involved in the probe include Credit Suisse, HSBC, Julius Baer and Basler Kantonalbank. A spokesman for Julius Baer said the bank had not been contacted by the DOJ so far. Basler Kantonalbank was not immediately available for comment. A spokesman for the Swiss finance department said the ministry had taken note of the investigation.

At a June conference in Washington organized by the Organization for Economic Cooperation and Development (OECD), the IRS Deputy Commissioner for Services and Enforcement Steven Miller said his agency planned to move against "one or more banks in the next month or so".


Payroll surtax meant to be temporary is finally expiring

Date: Tue 12th Jul, 2011

A 35-year-old "temporary" payroll tax on employers is expiring. The 0.2% surtax was enacted after a recession in the mid-1970s, and then extended eight times. Ending it will cut taxes by $14 per employee

IRS finalizes shorter extensions for partnership, trust returns

Date: Tue 12th Jul, 2011

The Internal Revenue Service issued final regulations setting the period for automatic extension of partnership Forms 1065 and trust and estate Forms 1041 at five months, meaning that they will generally be due Sept. 15. This allows partners and beneficiaries enough time after receiving their Schedules K-1 to prepare their own extended individual or corporate income tax returns, generally due Oct. 15. The AICPA has advocated for the Sept. 15 due date.

IRS reminds taxpayers of June 30 FBAR deadline

Date: Thu 30th Jun, 2011

In a news release, IRS has reminded taxpayers of the pending June 30th deadline for individuals who either have a bank or other financial account in a foreign country, or who have signature authority over such an account, to file Form TD F 90-22.1, Report of Foreign Bank and Foreign Accounts (FBAR) for the 2010 tax year. IR 2011-70

FBAR Filing: Foreign Bank and Financial Accounts

Date: Tue 28th Jun, 2011

Individuals with signature authority over, but no financial interest in, a foreign financial account in 2009 or prior calendar years for which the reporting deadline was extended will have until 11/1/11 to file Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, or FBAR) for those accounts. However, the deadline for reporting signature authority over, or a financial interest in, foreign financial accounts for the 2010 calendar year remains 6/30/11. Notice 2011-54, 2011-29 IRB .

Standard Mileage Rates Increased for Rest of 2011

Date: Tue 28th Jun, 2011

To reflect the recent increase in gas prices, the IRS raised the standard mileage rates for the last six months of the year. The rate will increase to 55.5 cents per mile for business miles driven from 7/1/11 through 12/31/11, a 4.5 cent per mile increase from the rate in effect for the first six months of 2011 [see Rev. Proc. 2010-51 (2010-51 IRB 883) ]. The rate for computing deductible medical or moving expenses will also increase by 4.5 cents per mile to 23.5 cents per mile, up from 19 cents per mile for the first six months of 2011. The rate for providing services for a charity is set by statute, and remains at 14 cents per mile. IRS Ann. 2011-40, 2011-29 IRB .

Applicable Federal Rates (AFRs) for July

Date: Tue 28th Jun, 2011

 The Section 7520 rate for July 2011 is 2.4%, while the Applicable Federal Rates (AFRs) are as follows (Rev. Rul. 2011-14, 2011-27 IRB ):

Annual Semiannual Quarterly Monthly
Short-term (≤ 3 years) 0.37% 0.37% 0.37% 0.37%
Mid-term (> 3 years but ≤ 9 years) 2.00% 1.99% 1.99% 1.98%
Long-term (> 9 years) 3.86% 3.82% 3.80% 3.79%

Government budget deal forestalls tax season delays

Date: Mon 11th Apr, 2011

The continuing resolution approved on Saturday and the announced federal budget deal should allow tax season to proceed without disruptions to Internal Revenue Service operations. The IRS on Friday released its contingency plan for how it would operate during a federal government shutdown. (4/10)

Form 1099 Reporting Requirements

Date: Mon 11th Apr, 2011

Congress passes bill repealing expanded 1099 information reporting requirements—President expected to sign

Date: Wed 6th Apr, 2011

Congress passes bill repealing expanded 1099 information reporting requirements—President expected to sign

On April 5, the Senate by a vote of 87-12 approved H.R. 4, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.” The measure, which retroactively repeals expanded Form 1099 information reporting rules added by recent legislation, was passed by the House on March 3 by a vote of 314-112. Thus, H.R. 4 (the Act) is cleared for the President's expected signature.

Here are highlights of the tax changes in the Act:

Original information reporting rules. Before amendment by the Small Business Jobs Act of 2010 (P.L. 111-240) and the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), Code Sec. 6041 generally required payments totaling at least $600 in a single calendar year to a single recipient to be reported to IRS. Reporting on Form 1099 was required only when the payor was considered to be engaged in a trade or business and has made the payment in connection with that trade or business. The type of payment that most commonly triggered the reporting requirement was payment for services. There were a number of exemptions from Code Sec. 6041 's reporting requirements under prior law, notably including payments to corporations (which were exempt under Reg. § 1.6041-3(p)(1)).

Pre-Act law—changes made by 2010 legislation. Beginning in 2012, Sec. 9006 of PPACA added payments of amounts in consideration for any type of property and gross proceeds—i.e., it added payments for goods or other property—to the list of payments subject to information reporting. Sec. 9006 of PPACA further provided that, beginning in 2012, payments to non-tax-exempt corporations—which had previously been exempt from the reporting requirement—would be subject to information reporting.

Additionally, for payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide an information return to the service provider and IRS.

New law. For payments made after Dec. 31, 2011, the Act repeals the provisions in Sec. 9006 that impose a reporting requirement for payments to corporations and payments for goods or other property. (Code Sec. 6041(a), Code Sec. 6041(i), and Code Sec. 6041(j), as amended by Act Sec. 2) And for payments made after Dec. 31, 2010, the Act also repeals application of the information reporting requirements to recipients of rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting property. (Code Sec. 6041(h), as repealed by Act Sec. 3)

      RIA observation: In other words, under the Act, the information reporting rules effectively revert to the way they read before enactment of PPACA and the Small Business Jobs Act of 2010.

Revenue offset. The Act provides an offset for the lost revenue from repealing the new information reporting provisions, estimated at $21.9 billion. It increases the amount of “excess advance payments” of the premium assistance credit (enacted as part of the 2010 health care reform legislation to help lower-income individuals acquire affordable health insurance coverage) that a taxpayer must repay under Code Sec. 36B(f)(2) for tax years ending after Dec. 31, 2013. The credit is available for a taxpayer who doesn't receive health insurance through his employer (or his spouse's employer) and whose income falls between 100% and 400% of the federal poverty line (FPL), based on the most recently filed tax return.

Under pre-Act law, if the taxpayer's income increases such that the credit exceeds that to which his current income level actually entitles him to, but his income is still under 500% of FPL, he had to repay some credit amounts. The limit on amounts he had to repay were capped and ranged from $600 to $3,500.

New law. Under the Act, for tax years ending after Dec. 31, 2013, the repayment caps are increased for taxpayers with household income of at least 200% but less than 400% of FPL, and full repayment is required for taxpayers whose incomes exceed 400% of FPL. (Code Sec. 36B(f)(2)(B)(i), as amended by Act Sec. 4)

IRS having trouble processing returns with 2008 first time homebuyers credit payback

Date: Thu 24th Mar, 2011

The Internal Revenue Service announced that it is having trouble processing returns for certain taxpayers who claimed the first-time homebuyer credit in 2008 and are now starting to pay it back. Affected taxpayers will see their refunds delayed, and in some cases the IRS will be unable to process their returns until April.