Tax News

CCH (cch.taxgroup.com) reports:

  President-elect Barack Obama intends to move forward immediately on a middle-income tax cut once he takes office on January 20 but he has not decided whether to propose a repeal of the 2001 and 2003 tax cuts benefiting upper income taxpayers or simply let them expire, according to Obama's chief strategist David Axelrod. Continuing tax cuts for the wealthiest taxpayers is "something that we plainly can't afford moving forward." Axelrod noted in an interview on NBC News' "Meet the Press" on December 28.

  Axelrod noted that the upcoming economic recovery package will include a portion of the middle-income tax cut and that it will be made permanent in Obama's upcoming budget plan. The economic recovery package to be considered by Congress in early January could cost between $675 billion to $775 billion, Axelrod estimated in an interview on CBS News' "Face the Nation" on December 28.

  Obama repeatedly has called for bold action on a large stimulus package. National Economic Council Director-designate Larry Summers is among Obama's top economic advisors who maintain that a stimulus package must be large to have a positive effect on the U.S. economy and to avoid a double-digit unemployment rate. "We want to do it in a way that leaves a lasting footprint, by investing in energy and health care projects" and by repairing schools and transportation infrastructure, Axelrod said. The Obama administration's employment goal is to create three million jobs or save three million in an effort to turn around the U.S. economy, Axelrod said.

  By Paula Cruickshank, CCH News Staff

 

CCH (cch.taxgroup.com) reports:

  The IRS has identified a transaction wherein a U.S. taxpayer owns a controlled foreign corporation (CFC) that holds stock of a lower tier CFC through a domestic partnership that takes a position that subpart F income of a lower tier CFC does not result in income inclusion as another type of transaction that has potential for tax avoidance or evasion for purposes of Reg. §1.6011-4(b)(6) and Code Secs. 6111 and 6112. The U.S. taxpayer takes the position that the subpart F income of a lower tier CFC was already included in the domestic partnership's income, which is not subject to U.S. tax and, thus, should not be included in the income of the U.S. taxpayer. Without the interposition of the domestic partnership, the subpart F income of the lower tier CFC would be taxable to the U.S. taxpayer.

  The IRS is concerned that taxpayers are taking the position that the structures describedresult in no income inclusion under Code Sec. 951. Therefore, the IRS has identified these structures and other substantially similar transactions as transactions of interest that are contrary to the purpose and intent of the provisions of subpart F.

  Persons who entered into these transactions on or after November 2, 2006, must disclose the transactions. Material advisors who make tax statements on or after November 2, 2006, must comply with disclosure and list maintenance obligation. Otherwise, penalties under Code Sec. 6707(a), 6707A or 6708(a) and accuracy-related penalties will be imposed.

Notice 2009-7,
2009FED ¶46,215

Other References:

 
Code Sec. 951

  CCH Reference - 2008FED ¶28,474.021

 
Code Sec. 6011

  CCH Reference - 2008FED ¶35,141.06

  CCH Reference - 2008FED ¶35,141.78

 
Code Sec. 6111

  CCH Reference - 2008FED ¶37,002.156

 
Code Sec. 6112

  CCH Reference - 2008FED ¶37,022.157

  Tax Research Consultant

  CCH Reference - TRC FILEBUS: 9,450.10
CCH Reference - TRC FILEBUS: 9,454.05
 

CCH (cch.taxgroup.com) reports:

  The IRS has released a fact sheet highlighting recent tax law changes made by the Heartland Disaster Tax Relief Act of 2008, which is part of the Emergency Economic Stabilization Act of 2008 (P.L. 110-343).
P.L. 110-343 provides certain tax breaks to victims of the severe storms, flooding and tornadoes that occurred in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Missouri, Minnesota, Nebraska and Wisconsin (the Midwestern disaster area) where the government declared a disaster during the period beginning May 20, 2008, and ending July 31, 2008.

  The law changes are intended to help individuals who suffered losses as a result of the Midwestern disasters and make it easier for individuals and businesses to engage in charity to benefit those affected by the severe storms, flooding and tornadoes. Taxpayers located in the counties listed in Table 1 are generally eligible for all portions of the relief, while taxpayers located in the counties listed in Table 2 are eligible only for certain of the special tax provisions. The IRS will provide an explanation of the recently enacted legislation in Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas, which will be available in January 2009.

  Generally, for individuals affected by the Midwestern disasters, P.L. 110-343 eliminates the limitations on claiming casualty or theft losses of personal-use property and permits certain earned income tax credit and refundable child tax credit recipients to choose either tax year 2008 or 2007 to determine their earned income and use the more beneficial result. P.L. 110-343 also expands the Hope and Lifetime Learning educational credits to provide assistance to students enrolled and paying tuition at eligible educational institutions located in the Midwestern disaster area.

  In addition, the new law allows certain taxpayers who provided housing to individuals displaced by the Midwestern disasters to claim an additional $500 exemption, and provides tax-favored treatment for early distributions and loans from retirement accounts. P.L. 110-343 further allows affected individuals to exclude from income certain cancellations of debt and extends, from two years to five years, the replacement period for converted properties. Finally, the new law suspends the limits on certain charitable contributions, increases the standard mileage rate for charitable use of vehicles and excludes from gross income mileage reimbursements to charitable volunteers.

FS-2008-27,
2009FED ¶46,214

Other References:

 
Code Sec. 24

  CCH Reference - 2008FED ¶3770.35

 
Code Sec. 25A

  CCH Reference - 2008FED ¶3830.20

 
Code Sec. 32

  CCH Reference - 2008FED ¶4082.11

 
Code Sec. 108

  CCH Reference - 2008FED ¶7010.25

 
Code Sec. 151

  CCH Reference - 2008FED ¶8005.01

 
Code Sec. 165

  CCH Reference - 2008FED ¶10,005.041

  CCH Reference - 2008FED ¶10,101.023

 
Code Sec. 170

  CCH Reference - 2008FED ¶11,670.01

  CCH Reference - 2008FED ¶11,680.01

 
Code Sec. 408

  CCH Reference - 2008FED ¶18,922.0325

  Tax Research Consultant

  CCH Reference - TRC INDIV: 51,250
CCH Reference - TRC INDIV: 54,200
CCH Reference - TRC INDIV: 57,058
CCH Reference - TRC INDIV: 57,262
CCH Reference - TRC FILEIND: 6,050
CCH Reference - TRC RETIRE: 66,450

 

CCH (cch.taxgroup.com) reports:

  The IRS has issued procedures for eligible small employers to elect out of filing Form 944, Employers ANNUAL Federal Tax Return, but instead to continue to file Form 941, Employer's QUARTERLY Federal Tax Return. Guidance is also provided on how employers can contact the IRS to receive notification of their eligibility for Form 944. The guidance is effective as of January 1, 2009.

Form 944

  Generally, employers are required to file returns quarterly on Form 941 to report income and employment taxes withheld from employee wages. Certain exceptions to the reporting requirement exist for agricultural employers and for wages paid for domestic service. To alleviate the reporting burden on eligible small employers, the IRS issued rules in 2006 that permit eligible employers to file annual employment tax returns on Form 944, rather than quarterly returns. Revised temporary and proposed regulations relating to Form 944 were released by the IRS on December 29, 2008 (T.D. 9440;
NPRM REG-148568-04; TAXDAY, 2008/12/29, I.8). Under the regulations, an employer is eligible for file Form 944 beginning in 2009 if its estimated annual tax liability is $1,000 or less. Once notified, the employer is required to file Form 944 for the tax year. However, temporary regulations permit an employer to elect out of filing Form 944 after notification from the IRS and to continue to file Form 941 quarterly.

Election Out

  Effective for tax year 2009, an employer is eligible to opt out of filing Form 944 if it timely notifies the IRS that it either: (1) anticipates that its employment tax liability for the year will be more than $1,000; or (2) it wants to file electronically quarterly Form 941 for the year. An employer who satisfies one of these conditions must notify the IRS by either calling or writing the IRS before an applicable due date. In the case of an employer who filed a Form 941 or Form 944 for a tax year prior to 2009, a call to opt-out of filing Form 944 must be made on or before April 1, 2009. A written notification by such an employer must be postmarked on or before March 15, 2009.

  In the case of a new employer or an employer who was not previously required to file Form 941 or Form 944 prior to 2009, a telephone call to the IRS to elect out of filing Form 944 for the 2009 tax year must be made before the first day of the month that its first required Form 941 is due (i.e., April 1, July 1, October 1, 2009, or January 1, 2010). A written notification by a new employer must be postmarked on or before the 15th day of the month before its first required Form 941 would be due (i.e., March 15, June 15, September 15, or December 15, 2009).

Requests for Notification

  Beginning in 2009, the IRS will send notification of eligibility to file Form 944 only upon request by a qualified employer. The employer may request to receive the notification by calling the IRS at the telephone numbers identified in procedure. An employer who previously received notification of qualification to file Form 944 must continue to file Form 944 unless an election out is filed.

Rev. Proc. 2009-13, 2009FED ¶46,213

Other References:

 
Code Sec. 6011

  CCH Reference - 2008FED ¶35,141.51

 
Code Sec. 6302

  CCH Reference - 2008FED ¶38,070.115

  Tax Research Consultant

  CCH Reference - TRC PAYROLL: 3,352.05

  CCH Reference - TRC PAYROLL: 3,352.15

Tax Analysts report: