Tax Court limits annual amount of IRA Rollovers
A law limits the number of IRA rollovers that can be made in any
1-year period to one. Recently, the Tax Court held that the limit applies not
to each separate IRA an individual may own, but to all of his or her IRAs. It
reached this result even though the IRS had indicated in proposed regulations
and tax publications that the limit applies to each IRA. Thus, an individual
with three IRAs could make three rollovers in a 1-year period under the IRS
guidance but only one under the Tax Court decision. After considering the
matter, the IRS has announced that it will adopt the more restrictive view of
the Tax Court. However, the new rule won't apply to any rollover that involves
a distribution occurring before 2015. The IRS emphasized that an IRA owner will
continue to be able to transfer funds from one IRA trustee directly to another
as frequently as desired. Such transfers are not rollovers and thus are not
subject to the limit.
Popular tax breaks expire, under congressional revision
A number of popular tax breaks expired at the end of 2013. For
individuals, these expired items include, among others, the deduction for state
and local sales taxes, the deduction for qualified tuition and related
expenses, tax-free distributions from IRAs for charitable purposes, the
deduction for mortgage insurance premiums, the exclusion for discharged principal
residence debt, and the provision allowing a higher exclusion for
employer-provided transit benefits. Work has begun in Congress to revive these
provisions and extend them through 2015. Some key business breaks might also be
brought back, including the research credit, higher expensing, bonus
depreciation, employer wage credit for activated military reservists, work
opportunity tax credit, and 15-year straight line cost recovery for qualified
leasehold, restaurant, and retail improvements, among other items.
Supreme Court holds severance payments subject to social security taxes
In a unanimous decision
(with one justice not participating), the Supreme Court, reversing the Sixth
Circuit Court of Appeals, has held that severance payments that were made to involuntarily
terminated employees, and that weren't tied to the receipt of State
unemployment insurance, are subject to tax under the Federal Insurance
Contributions Act (social security taxes). The Court concluded that the
severance payments at issue fell within the law's broad definition of “wages”
for social security tax purposes.
IRS releases inflation-adjusted luxury auto depreciation limits
for 2014
Under special “luxury
automobile” rules, a taxpayer's otherwise available depreciation deduction for
business autos, light trucks, and minivans is subject to additional limits,
which operate to extend depreciation beyond its regular period. The IRS has released
the inflation-adjusted depreciation limits for business autos, light trucks and
vans (including minivans) placed in service in 2014.
The IRS has released the 2014 maximum fair market values for employer-provided
autos, trucks and vans, the personal use of which can be valued for fringe
benefit purposes at the mileage allowance rate. An employer must treat an
employee's personal use of an employer-provided auto as fringe benefit income
and value it using one of several methods. One of the permitted methods allows
an employer to value personal use at the mileage allowance rate (56¢ per mile
for 2014). However, this method may be used only if the auto's fair market
value does not exceed $12,800, as adjusted for inflation. The
inflation-adjusted figures for vehicles first made available to employees for
personal use in 2014 are $16,000 for autos (same as for 2013) and $17,300 for
trucks and vans (up from $17,000 for 2013).
Relief from individual mandate for certain limited health coverage
The health care law contains an “individual mandate”—a requirement
that most U.S. citizens and legal residents maintain minimum essential health
insurance coverage (i.e., government-sponsored programs such as Medicare,
Medicaid, Children's Health Insurance Program; eligible employer-sponsored
plans; plans in the individual market; certain grandfathered group health
plans; and other coverage as recognized by Health and Human Services) or be
subject to a tax penalty for 2014 and later years. The IRS has provided relief
from the penalty for months in 2014 in which individuals have, under Medicaid
and chapter 55 of Title 10, U.S.C. (medical and dental care for members and
certain former members of the uniformed services, and for their dependents),
limited-benefit health coverage that is not minimum essential coverage.
IRS proposes regulations on the individual mandate to carry health
insurance
The IRS has issued proposed regulations on the individual mandate
to carry health insurance. The regulations include additions to the list of
government-provided health plans that don't provide minimum essential coverage
and a liberalization of the hardship exemption rules under which an individual
who fails to carry coverage can escape the penalty.
FAQ provides guidance for employers on subject of
individual mandate
The IRS has issued final regulations and guidance in the form of
frequently asked questions (FAQs) on the health care law's so-called employer
mandate imposed on a large employer (one that employed on average at least 50
full-time employees on business days during the preceding calendar year). The
FAQs cover a variety of topics including how to determine whether an employer
is subject to the mandate, how to properly identify full-time employees, and
how to calculate the shared responsibility payment. The mandate or employer
shared responsibility provisions, as they are called, essentially impose a
penalty on such employers if one or more of their full-time employees obtains a
premium tax credit through the insurance exchange. The mandate has been delayed
until 2015 and its applicability to mid-sized employers (between 50 and 99
full-time employees) has been delayed until 2016 if the employer meets certain
requirements. In addition, they provide a phased-in coverage requirement for
large employers.
Small estates get more time to transfer unused exclusion to
surviving spouse
The estate of a decedent who is survived by a spouse may make a
portability election. This allows the surviving spouse to apply the decedent's
unused exclusion amount to the surviving spouse's own transfers during life and
at death. The amount received by the surviving spouse is called the deceased
spousal unused exclusion, or DSUE, amount. In general, the election must be
made within nine months of the decedent's death on the estate tax return, even
if the estate is below the exclusion amount so that a return normally would not
be required. Because many estates below the threshold did not file, the IRS
provided a simplified method to obtain an extension of time to elect
portability. Provided certain requirements are met, the IRS will grant an
automatic extension to make the election on an estate tax return filed on or
before Dec. 31, 2014. Taxpayers failing to qualify for this relief may request
an extension of time to make the election by requesting a letter ruling.
IRS releases new guidance on virtual currency
The IRS has provided
guidance in the form of frequently asked questions (FAQs) on the tax treatment
of virtual currency, such as Bitcoin. This guidance treats virtual currency as
property for U.S. federal tax purposes. Thus, the general tax principles that
apply to property transactions apply to transactions using virtual currency.
No comments:
Post a Comment