On June 10, 2014, the IRS adopted the Taxpayer Bill of Rights. It is in IR-2014-72. It can be found on the IRS’s website, and it can be used against the IRS. It is difficult to see how these rights can hurt taxpayers. While the rights are very subjective in nature, one should be able to successfully argue that a common sense meaning should be given to all terms. The ten enumerated ...
20
Jun 2014
IRS Issues Taxpayer Bill of Rights
June 20, 2014 By
13
Jun 2014
Form 5500-EZ Nonfiling Relief
June 13, 2014 By
The IRS has announced an amnesty action for single person (or person plus spouse) and small partnership (i.e., only partners and spouses participate) tax-qualified plans with respect to failure to file Form 5500-EZ. The penalty-free corrective filing(s) can be made by filing the delinquent returns during a one-year window that began on June 2, 2014. ...
09
Jun 2014
ESOP Dangers Summarized
June 9, 2014 By
A recent U.S. Court of Appeals for the Seventh Circuit case, Fish v. GreatBanc Trust Co., shows the dangers of ESOPs. The majority family owners of The Antioch Company sold their remaining 57 percent stake to the ESOP (the ESOP already owned 43 percent) at a relatively high price. As part of the deal, the put option rights of participants were expanded. A temporary trustee, GreatBanc Trust ...
05
Jun 2014
Attorney-Client Privilege in Tax Matters Takes One on the Chin
June 5, 2014 By
An April U.S. Tax Court case, Ad Investment 2000 Fund LLC, Community Media, Inc. v. Commissioner, 142 T.C. No. 13, provides that the attorney-client privilege does not apply to a tax shelter opinion letter if the taxpayer claims to have analyzed the facts and authorities to conclude in good faith that there was a greater than 50 percent likelihood of success with regard to the challenged issue if ...
23
May 2014
Target Date Funds Outside ERISA
May 23, 2014 By
In my April newsletter, I noted that target date funds continue to make news and that as interest rates rise, value decreases will be experienced. A reader commented that, based on the information provided, he would review his 529 plans that were partially invested in bonds. A fiduciary duty to make (only) prudent investments available to retirement plan participants exists under ERISA, but ...
13
May 2014
Supreme Court Ruling on FICA Taxation of Severance Payments
May 13, 2014 By
The U.S. Supreme Court unanimously ruled (8-0) in United States v. Quality Stores, Inc. that severance payments are subject to FICA tax. The U.S. District Court and the U.S. Court of Appeals for the Sixth Circuit had ruled that such payments were not subject to FICA tax. Query how all the U.S. Supreme Court justices could rule that both the lower courts got it wrong? It shows that ...
09
May 2014
Recently, the IRS issued Notice 2014-19, relating to same sex couples and retirement plans. In the 2013 Windsor decision, the U.S. Supreme Court struck down part of the Defense of Marriage Act, basically causing state law to determine whether people are lawfully married. In Rev. Rul. 2013-17 (issued by the IRS after the Windsor decision), the IRS ruled that persons married in a state where gay ...
08
May 2014
Target Date Fund Upcoming Pitfalls
May 8, 2014 By
Target date funds continue to make news, in part because a large percent of their assets (particularly for older participants) are long-term bonds. Many or perhaps most participants view bonds as being relatively safe investments, and do not expect value decreases. However, as interest rates rise, value decreases will be experienced. While the interest payments on the bonds will reduce ...
07
May 2014
IRA Prohibited Transaction Real Estate Flipping Ruling
May 7, 2014 By
Last September, I gave the closing argument in a U.S. Bankruptcy Court case involving an IRA and the prohibited transaction rules. The IRA owner regularly “flipped” houses through his IRA. He also made sure work was properly done, hired sales agents and decided what properties would be bought and sold. He also negotiated sales terms. The Court ruled that there was no prohibited ...
06
May 2014
IRS Guidance on Roll-Ins to Plans
May 6, 2014 By
In Rev. Rul. 2014-9, the IRS issued guidance on “roll-ins” to tax-qualified plans from other plans and IRAs. Taking “bad” money can disqualify a plan. Basically, if the plan of the former employer stated on its most recent Form 5500 that it is intended to be tax-qualified, then money can be taken from the former employer’s plan. IRA money generally is alright as long as certain ...
