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2008

Looking for Your Refund?
Distributed by the IRS Tax Tips -- April 2008

If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund.One way is to use “Where’s My Refund?” an interactive tool on the IRS Web site. Simple online instructions guide taxpayers through a process that checks the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:

• Acknowledgement that your return was received and is in processing.
• The mailing date or direct deposit date of your refund.
• Notice that the IRS could not deliver your refund due to an incorrect address. To ensure delivery, you can change or correct your address online.

How Do You Spell “Success”? -- March 2008
3 hallmarks of a profitable business
Every business owner wants his or her company to succeed. Whether one leads a startup or a generations-old enterprise, it’s an easy (and obvious) thing to wish for. But what are the hallmarks of a successful company? This article names three: strong revenues, low production costs and minimal operating expenses.

Risk Management -- March 2008
Buy-sell agreements protect companies from themselves
When business owners speculate about threats to their companies, they often overlook the human beings sitting next to them in the boardroom. An unanticipated ownership change can cripple a company’s ability to make executive decisions. One wise risk management move is creating and maintaining a buy-sell agreement. This article explains why.

Practical Perspectives: Key Financial Issues for You and Your Family -- March 2008
Getting back to basics with life insurance
In this month’s Practical Perspectives, we meet newlyweds Nathan and Penelope, who recently decided they needed a financial advisor. With successful careers and a beautiful home, they had a lot to lose: If one of them died prematurely, the survivor might not be able to pay the mortgage. Among the first topics they discussed with their CPA were the two fundamental types of life insurance: term and permanent.

Economic Stimulus Act of 2008 -- February 2008

Both the Senate and House of Representatives passed the “Economic Stimulus Act of 2008” on February 7 clearing it for the President’s signature.  As expected, the bill contains benefits for both individuals and business. 

Looking for a Successor? For Best Results, Keep an Open Mind -- February 2008

For many business owners, among the hardest aspects of retiring (or otherwise moving on) is choosing a successor. Many, if not most, have a few viable candidates to consider — often too few. This article recommends that, when looking for a successor, business owners keep an open mind and take a close look at all options, including family members, nonfamily employees and external candidates.

Moneylines: News Briefs for Businesses and Individuals

This section offers four news briefs about: 1) A recent survey indicating that many companies are still ill-prepared for a technological disaster, 2) How the IRS has recently adjusted the allowable living expense standards that help determine how much delinquent taxpayers must pay, 3) The results of a recent survey revealing that many workers intend to delay their retirements, and 4) Why the beginning of the year is a great time to contribute to a traditional or Roth IRA.

Qualified Plan Loans: What You Don’t Know Can Hurt You -- February 2008

Among the risks of offering workers a “qualified” retirement plan (one that follows certain rules to qualify for beneficial tax treatment), such as a 401(k), is that the arrangement may allow participants to take loans from their accounts. Although employees often appreciate this feature, taking out a qualified plan loan can get workers into trouble — and hurt their companies as a whole. This article gives an overview of how qualified plan loans work for employers who may not be fully aware of all the risks involved.

5 Easy Steps to Creating a Financial Disaster Recovery Plan -- February 2008
Whether a massive flood that affects thousands or a sudden illness that affects only one person, should disaster strike, an individual’s financial solvency could very well depend on whether he or she has a clear strategy in place for paying the bills. This article offers five easy steps to creating a financial disaster recovery plan.

AMT Patch Update-- January 2008
The alternative minimum tax (AMT) continues to be a bugaboo for Congress. They understand the need to overhaul the system, but can’t seem to find the key to simplifying it. With time running out, Congress finally approved a “patch” that includes 2007 AMT exemption amounts that are significantly higher than they would have been without the act but only slightly higher than the 2006 amounts.

Energy Issues -- January 2008

On Dec. 19, 2007, the president signed into law a new energy bill. The Energy Independence and Security Act of 2007 raises fuel economy standards for automobiles and sets standards for improving the efficiency of home appliances.

Mortgage Relief -- January 2008

Congress spent much of 2007 trying to hammer out legislation that would offer help to homeowners caught in the subprime mortgage crisis. The Mortgage Forgiveness Debt Relief Act of 2007, signed into law by President Bush on Dec. 20, 2007, creates a three-year exception (from Jan. 1, 2007, through Dec. 31, 2009) to current law so that affected homeowners won’t have to pay federal income taxes for debt forgiveness on their troubled loans.

Opening a Whole New World of Making Your Federal and Massachusetts Tax Payment Electronically… -- January 2008

It is easy, secure, fast, easy to use, convenient, timesaving and accurate! EFTPS is a system provided free by the U.S. Department of the Treasury to enable individual taxpayers to make all their federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone.

General Exception for Certain Business Use of Home -- January 2008

Taxpayers may deduct home business expenses, which may include such items as a portion of utility bills, mortgage interest, repairs, and depreciation, subject to the gross income limitation, in which the taxpayer uses both exclusively and regularly.

2007

AMT Patch-Good News For Many! -- December 2007

Congress finally passed an Alternative Minimum Tax (AMT) relief Bill in The Tax Increase Prevention Act Of 2007, which should allow over 20 million taxpayers to either reduce or avoid the 2007 AMT thereby saving an estimated $2,000 in tax per taxpayer who would otherwise be subject to the AMT. President Bush is expected to sign this Bill immediately. Read the full article for specifics...

2008 Tax Calendar -- December 2007

To help make sure you don't miss any important 2008 deadlines, we've provided this summary of when various tax-related forms, payments and other actions are due. This is not an all inclusive list, but rather mor for the common filings. Please read the full article for your review...

Mortgage Forgiveness Debt Relief Act of 2007 -- December 2007

President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007 last week. This law change excludes from taxation discharges of up to $2 million of indebtedness that is secured by a principal residence and is incurred in the acquisition, construction, or substantial improvement of the principal residence.  It will be available for three years from January 1, 2007 through December 31, 2009.  This act also includes an expanded time-period for a surviving spouse to use the higher home sale exclusion, and a three-year extension of the mortgage insurance premium deduction. 

IRS Announces 2008 Standard Mileage Rates -- December 2007
2008 mileage rates per mile will be: 50.5 cents for business miles driven; 19 cents for medical or moving purposes; and 14 cents in service of charitable organizations.

409A Regulations: A Pleasant Alternative to Root Canal? -- November 2007

Congress enacted Internal Revenue Code section 409A in 2004 to address perceived abusive arrangements involving nonqualified deferred compensation plans. Employees and independent contractors are exposed to severe tax consequences if the plan fails to comply with 409A. For the three basic requirements under 409A, please refer to the full article.

Tax Savings: Heavy SUV and Hybrid Vehicle Purchases -- November 2007

Thinking of buying a heavy SUV between 6,000 and 14,000 pounds for your business?  You may well be better off buying the vehicle in 2007 rather than waiting until 2008. And while on the topic of motor vehicles, don’t forget the tax credit for certification of certain hybrid vehicles. Read the full article for specifics.

No Sure Thing: Donation Do's and Don’ts -- November 2007

If you donate money, goods or services to charity, you may be able to augment the personal satisfaction you get from the good deed with a tax deduction. But a tax break is no sure thing; you’ve got to follow the rules. Here are some donation dos and don’ts to keep in mind.

Lending Money to Family Members Can Be Risky -- October 2007
Practical Perspectives: Key Financial Issues For You and Your Family

In this month’s “Practical Perspectives,” we meet Sarah and her sister Sylvia, who were always of a different ilk. Sarah settled down quickly after college to start a family and a career. Sylvia spent years traveling the world. For various reasons, Sylvia recently decided it was time to cease her travels and put down roots. The problem: She was deeply in debt. Sarah wanted to help her but was concerned about the tax implications of a loan. She visited her financial advisor for help.

Working the Fringes -- October 2007
3 Hot Non-Taxable Benefits to Consider

A respectable benefits package is pretty much a must-have for any size company these days. One good way to differentiate a company’s benefits from its competitors is to “work the fringes” — that is, provide additional fringe benefits. This article suggests three hot — and nontaxable — ones to consider.

ClientRelate Bulletin- Tax Consequences of Home Mortgage Foreclosure -- October 2007

The following is a discussion regarding the tax consequences to the homeowner as a result of a foreclosure.  The CCH has produced an explanation of the interaction between the COD provisions and exceptions under 61(a)(12) and 108 as well as the gain exclusions for principal residence under 121. 

Pension Plan Limits 2008 -- October 2007

The federal government has recently announced cost of living adjustments applicable to dollar limitations for pension plans and other items for 2008. The increase in the cost-of-living index met the statutory thresholds which triggered the increase in the indexed amounts. However, some amounts will remain unchanged for 2008. For instance, the amount of employee elective deferrals under a 401k plan remains at $15,500 and catch-up contributions for those aged 50 and over remains at $5,000 for 2008.

Congress Not Kidding Around: “Kiddie” Tax Gets Tougher -- September 2007

Legislators designed the kiddie tax to prevent taxpayers from shifting an inordinate amount of income-producing assets to their children to save on taxes. With the tightened restrictions, find out why 2007 may be the perfect year to shift highly appreciated assets to children 18 to 23 who will be subject to the kiddie tax next year.

Recent Changes Open the Door for Businesses; Section 179 Extension Deduction, Hiring Credit, and R&D Credit -- September 2007

They say when one door closes, another opens. So it often goes with tax law changes: When one savings opportunity disappears, such as the “bonus” depreciation offered in previous years, another (or several others) takes its place. As of this writing, the President has signed off on two new tax laws in as many years — the Tax Relief and Health Care Act of 2006 (TRHCA) and the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA) — that could provide several means for you to lower your company’s tax bill.

Are Vacation Homes Really Considered Investment Property? -- September 2007

Based on the Barry E. Moore and Deborah E. Moore v. Commissioner case that discussed the § 1031 exchange and focused on why a vacation home was not considered an investment property -- the following guidelines serve as potential evidence that the court will consider in support of an investment motive.

Laptop Stolen Containing Information of over 100,000 Taxpayers -- September 2007
Connecticut state officials have confirmed that a computer laptop with the names and Social Security numbers of more than 106,000 Connecticut individual taxpayers has been stolen. The computer was taken from a state employee's car on August 17th. It is said to be password protected, therefore it is highly unlikely that the information could be accessed without specific knowledge.

The Best Defense is a Good Offense -- August 2007
Because of the prevalence of litigation, asset protection - the process of arranging affairs to shield assets from potential creditors, litigation and other legal hazards - has steadily risen to prominence during the past decade. More people are realizing that, to protect their assets, the best defense is a good offense. This article suggests a variety of ways to accomplish this.

You Can't Stop the ESOP ... But is One Right for your Company? -- August 2007
The employee stock ownership plan (ESOP) has been a virtually unstoppable force on the employee benefits scene for some time now. But whether an ESOP is right for any company depends on a variety of factors. This article answers some common questions about these arrangements, which hold advantages beyond just serving as an employee benefit.

Unpacking Tax Savings with the Home-sale Exclusion -- August 2007
In this month's "Practical Perspectives," we meet Lou, a retired sound engineer. During a recent visit to his financial advisor, Lou wished aloud that there was a simple form he could fill out to complete his estate plan. Hesitantly, Lou's advisor mentioned that, in truth, there is - specifically, a Transfer on Death (TOD) account.

2007 Sales Tax Holiday Weekend Announced -- August 2007
Massachusetts shoppers will enjoy sales-tax-free shopping on August 11-12, 2007.  The bill exempts shoppers from the state’s 5 percent sales tax on purchases up to $2,500. The following do not qualify for the sales tax holiday exemption and remain subject to tax:  all motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products and any single item whose price exceeds $2,500. Governor Deval Patrick signed a tax-holiday bill on August 2, 2007, allowing for a sales tax holiday for the fourth year in a row. By doing so, the state hopes to encourage sales at a traditionally slow time of year.

401(k) Heirs: Act Fast -- July 2007

Recently, Congress implemented a new law that allows anyone who inherits a 401(k) to receive the same favorable tax treatment that had previously been reserved for spouses. It gives the taxpayer the option of withdrawing the inherited money over their expected lifetime in order to minimize the up-front tax due. Until this time, spouses have been free to transfer inherited 401(k)s to individual retirement accounts enabling them to spread out the withdrawals without penalty, while non spouse beneficiaries typically have been required to withdraw all funds from the account and pay taxes within a matter of months. Such an inheritance has also forced some survivors into a higher tax bracket, further increasing their tax burden.

409A : Get Informed Now to Avoid Penalties -- July 2007

Payments under a non-qualified deferred compensation plan that is not in compliance with IRC section 409A can result in a penalty of 20% of the compensation plus an acceleration of the tax and interest. This provision of the Internal Revenue Code is very broad and complex. Read more to learn how to avoid it...

IRS to Conduct Random Audits -- July 2007

The Internal Revenue Service has announced plans to launch a new National Research Program (NRP) reporting compliance study for individual taxpayers that will provide updated and more accurate audit selection tools to reduce the nation's tax gap. The study will begin in October of 2007 and examine approximately 13,000 randomly selected tax year 2006 individual returns from various income categories. Similar sample sizes will be used in subsequent tax years.

IRS Calculator Can Prevent Tax Overpayments -- June 2007
No one can deny the allure of a sizable income tax refund. But, generally, getting back any more than $50 indicates that you essentially gave the federal government an interest-free loan.

IRS Releases Discussion Draft of Redesigned Form 990 for Tax-Exempt Organizations -- June 20007
The Internal Revenue Service released for comment and discussion a draft Form 990 and 15 associated schedules filed by tax-exempt organizations. The revised Form 990 will be completed by all tax-exempt organizations, hospitals and medical care providers also must complete Schedule H, and many hospitals must complete schedules concerning executive compensation, related organizations, asset transfer / termination of exempt entity, governance, and tax-exempt bonds. The IRS hopes to have the form ready for use for the 2008 filing year (returns filed in 2009).

Kiddie Tax:  It's All About the Age -- June 2007
Congress recently passed a new law that will expand the reach of the "kiddie tax" and prevent many wealthy parents from taking advantage of a popular tax-saving strategy.   The tax-saving strategy involves parents or grandparents transferring or gifting appreciated shares of stocks and mutual funds to children or grandchildren in lower tax brackets.   In doing so, parents in higher tax brackets avoid paying tax at the maximum long-term capital gain tax rate (15%) upon sale.  Instead, the children in the 10% or 15% tax brackets sell the investments and pay tax at their lower long-term capital gain rate, currently set at 5%.  This strategy had been gaining considerable attention recently because of the fact that the current 5% tax rate on long-term capital gains is scheduled to be reduced to 0% in 2008.  Conversely, the 15% long-term capital gain tax rate that higher income tax payers are subject to will remain unchanged.

Curtail Estate Planning Disasters: Special-use Valuations Help -- May 2007

If a business owner dies suddenly, his or her family may learn — too late — of a rather chilling secret: He or she had little to no working estate plan. As a result, they may find themselves on the hook for an estate tax bill so big that it leaves them no option but to sell the company. What many families don’t know is that, when a situation like this arises, all hope isn’t necessarily lost. If a significant portion of a business owner’s estate consists of real property used in a family business or farm, the owner’s family may be able to reduce estate taxes with a special-use valuation.

3 Hot Education-Funding Tips for 2007 -- May 2007

Jeffrey and Marcene like to stay informed. Yet when endeavoring to learn about how to fund their young daughter’s college education, they were quickly overwhelmed by their options. Wisely, they sat down with their financial advisor for help narrowing down some of the hot education-funding tips of 2007. Their advisor nodded knowingly when Jeffrey and Marcene mentioned how much information they had to wade through when contemplating education funding. Fortunately, she was able to fill the couple in on three important education-funding changes that have made news in the past year or so.

Small Business and Work Opportunity Tax Act of 2007 (SBWOTA) -- May 2007

On May 25, the President signed the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA). Passed in conjunction with legislation to continue funding the war in Iraq and to raise the minimum hourly wage, the tax-related provisions are designed in part to provide benefits to small businesses likely to be hit hard by the minimum wage increase. Following are highlights of key provisions affecting businesses and individuals, as well as GO Zone incentives and other areas of tax law.

IRS Issues Final Regulations on Tough Restrictions for Non-Qualified Deferred Compensation Arrangements -- April 2007
Failure to comply with these rules can result in some very harsh consequences such as a 20% penalty on the amount of the deferred compensation.  These penalties are applied at the employee/independent contractor recipient level.  For example, something as simple and straight forward as a $100,000 deferred bonus could result in a $20,000 penalty if not structured properly.

Looking for Your Refund? -- March 2007

If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund. “Where’s My Refund?” is an interactive tool on the IRS Web site guiding taxpayers through a process that checks the status of their refund.

IRS Changes Tax Filing Deadline to April 17th -- March 2007

The IRS has extended this year’s Tax Filing Date thanks to a quintessential observance: Patriot’s Day. Also known as Emancipation Day, residents of six eastern states and the District of Columbia will have until April 17, 2007, to file their 2006 returns and pay any taxes due.

Senate Approves Fiscal Year 2008 Budget -- March 2007

On March 23rd the Senate approved a $2.9-trillion fiscal year (FY) 2008 budget proposal that would provide two years of additional relief from the alternative minimum tax (AMT) and the application of a projected $132-billion surplus in 2012 toward the permanent extension of some expiring tax credits. The resolution provides a reserve fund allowing for new tax relief and the extension of expiring provisions, but only if the cost of those measures is offset.

Recent Tax Highlights That May Affect You... -- February 2007
See our full article for expansions on recent updates, announcements, and guidance from the IRS and Treasury Department:

• Backdated and Mispriced Stock Options
• Estimated Tax Penalty for Persons Working Abroad
• Rescinding Reportable Transaction Penalty
• Rollovers to Health Savings Accounts
• Treasury Explains Administration’s 2008 Revenue Proposals
• Day Trading Losses Are Capital Losses
• Deducting Payroll Taxes on Deferred Compensation:
• Like-kind Exchange Followed by Sale
• Patent Cross-licensing Arrangements
• Tax-exempt Organizations—Tax Shelter Transaction

New Year Brings New Rollover Option for Nonspouse Qualified Plan Distributions -- February 2007

Nonspousal IRA beneficiaries can’t treat an inherited IRA as their own. However, the IRS has long agreed that they can make trustee-to-trustee transfers to another IRA if the new IRA is in the name of the decedent for the benefit of the beneficiary (see, for example, Rev. Rul. 78-406 and PLR 9737030). This gives beneficiaries the option of stretching out the IRA distributions over their lifetime if they want to maximize the tax deferral and minimize the tax impact in any one year.

10 Million Taxpayers Miss Out on Telephone Tax Refunds; IRS Urges People to Check before Filing -- February 2007
The Internal Revenue Service is urging taxpayers to check to see if they qualify for the telephone excise tax refund after more than 10 million early filers did not request the one-time refund. In the first release of this year’s weekly filing season statistics, about 30 percent of all taxpayers did not request the telephone tax refund.

New Massachusetts W-2 Filing Requirements -- February 2007
Massachusetts Directive 07-2: Requirements for Employers Filing 2006 and Subsequent Year-end Withholding Information

This Directive describes the proper formats for employers to use in filing their year-end W-2 and income tax withholding reconciliation schedules with the Department of Revenue (Department). This Directive re-establishes a requirement, suspended by Directive 97-1, that employers not filing in a machine-readable form must file the W-2 and annual reconciliation information on paper. It also changes the threshold above which employers must file in a machine-readable form.

Waiver of the 60-Day Rollover Period -- January 2007

Before 2002, taxpayers who missed the 60-day deadline for rollovers from a qualified plan or Individual Retirement Account (IRA) were out of luck. The law with respect to the 60 day rule was very rigid and the IRS didn’t have the authority to consider equities. Effective for distributions after December 31, 2001, the IRS has discretion to waive the 60 day rule under certain circumstances. Please go to www.irs.gov/ep, select “PlanParticipant/Employee,” select “Resources for Retirement Plan Participant/Employee” and see the “IRA Online Resource Guide” to find information on obtaining a waiver of the 60 day rollover requirements.

Alternative Minimum Tax 101 -- January 2007

The AMT system comes with a completely different set of rates and deduction rules. People pay it only if their AMT tax amount is higher than their traditional taxes. Translation: if you're paying the AMT, you are by definition paying higher taxes. The system created to make sure the uber-rich didn't dodge the tax bullet is under fire because it's now affecting middle-class Americans. And reforming it could mean increased tax payments for everyone.

You think you’ve moved.  Watch out.  Your old state may still try to tax you as a resident. -- January 2007

If you're planning to move or if you have homes in more than one state, watch out. States are getting ever more creative about collecting income tax from people who have any ties to their territory. Even states without income taxes are getting into the act, with sales- and use-tax audits. Upping the stakes in the residency wars: Many states' estate taxes, invisible and painless until a 2001 change in federal law, have since become real burdens because the federal estate tax credit that used to be available to offset them is now gone.

AMT Will Ensnare One-Third of Individuals by 2010, National Taxpayer Advocate Warns -- January 2007

In less than three years, one-third of individual taxpayers could be paying AMT, National Taxpayer Advocate Nina Olson predicted in her recently released annual report to Congress.  AMT reforms was just one of many recommendations in her report, including closing the tax gap and terminating private debt collection.

Simple Steps Can Prevent Tax Scams as Private Debt Collection Begins -- January 2007

As the Internal Revenue Service begins its private debt collection initiative, there are several simple steps that can provide protection against scam artists.

Scamsters try a variety of tricks to impersonate the IRS in hopes of tricking taxpayers into divulging personal or financial information or even conning people out of cash. Scam artists try to impersonate the IRS in person, by phone, by e-mail and over the Internet.

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2006

Tax Relief and Health Care Act of 2006 -- December 2006
As you may know, on Dec. 20, 2006, President Bush signed into law the Tax Relief and Health Care Act of 2006. In addition to extending certain tax provisions that had expired at the end of 2005 or that had been set to expire soon, the act introduces some new rules and important tax breaks we think you’ll want to know about.

U.S. Department of Labor's Delinquent Filer Voluntary Compliance Program -- December 2006
The Delinquent Filer Voluntary Compliance (DFVC) Program is designed to encourage voluntary compliance with the annual reporting requirements under the Employee Retirement Income Security Act (ERISA). The DFVC Program gives delinquent plan administrators a way to avoid potentially higher civil penalty assessments by satisfying the program’s requirements and voluntarily paying a reduced penalty amount. To increase incentives for delinquent plan administrators to voluntarily comply with ERISA’s annual reporting requirements, the Department further reduced penalties under the DFVC program, and updated and simplified the rules governing participation in the program.

New Guidance Explains When Smartcards Qualify As Transportation Fringe Benefits -- December 2006
The IRS has issued guidelines on how employer-issued “smartcards” and debit cards can qualify as nontaxable transportation fringe benefits. Generally, employees are not required to substantiate their use of these cards. However, the IRS nixed an arrangement that provided and relied on employee certifications before the expenses were incurred.

Recent Changes to the Massachusetts Health Care Reform Law -- December 2006
The Legislature recently passed a "technical corrections bill" containing several clarifications and amendments to the Health Care Reform Law, passed in April 2006. The following article contains information about the changes that were made.

IRS Unveils Formula for Business and Exempts to Estimate Telephone Tax Refunds -- December 2006
Following up on individual safe harbor amounts for telephone tax refunds, the IRS has released a formula that businesses and exempt organizations can use to estimate their telephone tax refunds. The IRS will start refunding in January the long-distance portion of the federal telephone excise tax billed after February 28, 2003 and before August 1, 2006.

Individual Taxpayers May Pay their Tax Payments Electronically -- December 2006
In order to use EFTPS, taxpayers must set up an account by logging into www.eftps.gov and establishing an account with the IRS. It takes approximately 15 days to register and receive an ID and password to use. Payments must be made at least one day before the due date of the payment. Any previously scheduled payment can be cancelled; but must be done at least two days prior to the due date of the payment.

IRS Announces 2007 Standard Mileage Rates -- November 2006

Beginning Jan. 1, 2007, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
· 48.5 cents per mile for business miles driven;
· 20 cents per mile driven for medical or moving purposes; and
· 14 cents per mile driven in service to a charitable organization.

Permanent Tax-Exempt Status Gives a Huge Boost to 529 College-Savings Plans -- November 2006

Included in the Pension Protection Act signed by President Bush in August was a provision to give permanent tax-exempt status to the 529 college savings plans.  This is a significant development for plans intended to help pay for the ever-escalating cost of a college education.

Car and Truck Expense Deduction Reminders -- November 2006

The Internal Revenue Service reminds taxpayers to become familiar with the tax law before deducting car- and truck-related business expenses.  Overstated adjustments, deductions, exemptions and credits of all types account for more than $30 billion in unpaid taxes annually, according to the IRS. In an effort to educate taxpayers regarding their obligation to file accurate tax returns, the IRS provided a fact sheet explaining the rules for deducting car and truck expenses.

Foreign Earned Income and Housing Exclusion -- November 2006

U.S. citizens and resident aliens are generally taxed on their worldwide income regardless of where the income is earned or received. A U.S. citizen who earns income in a foreign country may also be taxed on that income by a foreign host country, thus leading to double taxation. However, a number of tax provisions provide relief from this inequity, including the foreign tax credit and deduction, the foreign earned income exclusion, and the foreign housing cost exclusion.

Tax Court Allows Day-Trip Worker Away-From-Home Expenses Based On Sleep-Or-Rest Rule -- November 2006

Recently, the IRS lost on an attempt to restrict the definition of "away from home" meals and incidental expenses to those business trips requiring more than 24 hours to complete or for which a full night's sleep or rest is needed. The Tax Court recently held that a demanding 17-hour work day that included a mid-trip four hour snooze was enough to qualify meals and incidentals at the away-from-home location for a deduction. The Tax Court also found that the day was long enough that the standard per diem rate need not be pro-rated.

Surge in Corporate Income Tax Collections Offers Opportunity for Tax Reform -- November 2006

As the House Ways and Means Committee prepares to hold a series of hearings on corporate tax reform and international competitiveness, they will be confronted by recent data that show a precipitous increase in corporate tax collections over the past two years. These increasing corporate tax receipts give lawmakers a window of opportunity to invest in tax code improvements for the long term: lowering the corporate income tax rate, broadening the tax base and integrating the corporate income tax with the individual income tax system.

Adopting the Business -- November 2006

Tax planning involves choices and a continuous reevaluation and fine-tuning of choices made. Some choices can be changed easily while others are more difficult and expensive to change. One of the most important choices involves the organizational structure in which a business will be operated. As a general rule, the initial adoption of a particular structure is relatively easy. Changing that structure is an entirely different matter, and can be very difficult and expensive to do. So, the adoption of the initial structure must be made with care.

The Elusive Loss Deduction -- November 2006

In today's economy it is not uncommon for historically profitable businesses to generate losses in spite of hard work and dedication. Competition is fierce, margins are thin and the market is generally weak. Jobs are bid at razor-thin margins and one bad estimate could create sufficient fade that the entire year is a bust. The tax laws provide for some relief in allowing the business owner to offset losses against other income. In effect, Uncle Sam is partly subsidizing the loss by reducing the tax on other taxable income. This could be by way of offsetting other current taxable income such as interest, dividends and wages or offsetting taxable income and recovering taxes paid in prior years.

Beware of Hidden Tax Costs When Buying Mutual Funds at Year End -- October 2006

Investors eager to take part in the stock market's recent run-up should watch out when investing in a mutual fund that they aren't also buying into a tax liability now that 2006 has entered its final months.

Qualified Pension Plan Contributions for 2007 -- October 2006

The IRS announced revised dollar limitations for pension plans and related amounts for calendar-year 2007.  Some amounts changed due to cost-of-living adjustments, while other changes were Code-required.  Included in this article are the contribution limits of particular importance for 2007.

Transition Relief for Section 409A -- October 2006

Section 409A was added by the American Jobs Creation Act of 2004.  Section 409A provides rather harsh penalties for failure to comply with certain requirements in connection with nonqualified deferred compensation plans.  The IRS provided guidance on December 20, 2004, under Notice 2005-1 and issued proposed regulations on October 4, 2005.  The preamble to the proposed regulations extended certain transitional guidance provided in Notice 2005-1, generally through December 31, 2006.  The proposed regulations set the effective date of the final regulations at January 1, 2007.  Although Treasury and the IRS expect to issue final regulations in 2006, the Treasury and IRS felt that this was insufficient time for taxpayers and their representatives to analyze the final regulation and come into compliance by January 1, 2007.  Accordingly, Notice 2006-79 was issued on October 4, 2006, extending the effective date for the final regulations to January 1, 2008.

Personal Income Tax Commuter Deduction -- October 2006

Effective for tax years beginning on or after January 1, 2006, the Massachusetts Legislature reenacted and codified a personal income tax deduction for certain commuter expenses. This article explains the requirements that must be met for a taxpayer to qualify for the commuter deduction.

Reminder: Safe Harbor Plan Notification -- October 2006

By December 1 of each year you need to give notice to employees about your safe harbor plan.  You should be getting information from your Third Party Administrator (TPA) about giving this notice.  If you do not hear from your TPA by November 1, you should call them to review so that you do not miss the notification period.  You should retain evidence in your files of how you gave all employees notice.  The notice is required in case anyone wants to change their 401(k) elections based on the type of safe harbor plan you have.

Abandoned Property Annual Report – Due November 1st -- October 2006

For decades, the Massachusetts Abandoned Property Law has required all businesses to review their records each year to determine whether they are in possession of any unclaimed funds or any other property that belongs to someone else. If they are, that property must be turned over to the state; it does not become the property of the business.  Any debt or obligation which has gone unpaid or security that has remained undelivered for three or more years, as of the preceding June 30, must be reported and paid to the Commonwealth of Massachusetts Treasury Department, Unclaimed Property Division. An annual report, Form AP-1, is required to be filed by November 1, even if no abandoned property is held.

Nonprofits' Employee Contribution Plans -- September 2006

The failure to afford salary-reduction opportunities to eligible employees when employers are required to do so under the tax code is the top issue facing IRS agents when dealing with public schools and nonprofit organizations, an IRS official told a group of practitioners on September 7, 2006. The concept of "universal availability" under Code Sec. 403(b) requires that, if institutions make salary-reduction contributions available to some employees, they must be made available to all employees who work at least 20 hours a week.

A Primer on Hobby Loss Rules: Conducting Activities in a Business-like Manner -- September 2006

Occasionally the Tax Court reminds us of the importance of conducting a business in a business-like manner to protect a business from the hobby loss challenge. A recent example is the Mitchell case in which the Tax Court disallowed losses related to a farming activity. Read on to see what you can take away from the Mitchell case to help protect yourself from a hobby loss challenge, but first let’s go over the basic business loss rules.

Assets, Production, Deductions, and Energy: 3 hot year end tax planning areas for businesses -- September 2006

For business owners, year end is the perfect time to review the past year, as well as to assess the coming one, so you can map out some tax-saving strategies. Three specific areas you may want to look into are assets, production and energy.  All offer opportunities to lower your tax bill and put that money back to use building your bottom line. And all have been affected by recent tax law changes.

New Law Revises Tax-Exempt Organization Tax Rules -- September 2006

On August 17, the President signed the Pension Protection Act of 2006. The new law contains numerous changes to the tax law provisions affecting tax-exempt organizations. Key provisions include the following...

IRS Announces Standard Amounts for Telephone Tax Refunds -- September 2006

The Internal Revenue Service announced the standard amounts that most long-distance customers can use to figure their telephone tax refund. These amounts, which range from $30 to $60, will enable millions of individual taxpayers to request the telephone tax refund without having to dig through old phone bills.

It’s Nobody’s Business But the Family’s: The dos and don’ts of FLPs -- September 2006

A family limited partnership (FLP) can be a powerful tool for managing and transferring family wealth. In recent years, however, the IRS has taken a tough stance on FLPs in audits, questioning whether partnerships were set up for legitimate business reasons and, in many cases, denying claimed tax benefits. This article discusses the dos and don’ts of FLPs, focusing on how to prevent troubles with the IRS.

Out of State Sales and Deliveries Taxes -- August 2006
In regulation 830 CMR 64H.6.7, UCC title rules are used to determine when the sale occurs in situations involving out of state sales and deliveries and explains the sales tax treatment of such transactions.

Pension Reforms Enacted -- August 2006
On August 17, 2006, the President signed the Pension Protection Act of 2006,  the most comprehensive reform of traditional private pension plans since 1974. The primary purpose of this legislation is to tighten funding requirements for traditional defined benefit pension plans. The Act also includes requirements that affect defined contribution plans, including 401(k)s. Employees will need advice and employer plans and payroll systems will need adjustments.

Rhode Island Offers Tax Amnesty -- August 2006
The Rhode Island Division of Taxation will be offering a Tax Amnesty Program beginning on July 15, 2006 and ending on September 30, 2006. Tax amnesty is an opportunity to clear up any unpaid tax obligations relative to taxes payable to the State of Rhode Island and collected by the Tax Administrator.

New Statute Prohibits States from Taxing Nonresident Partners' Retirement Income -- August 2006
Signed into law August 3, H.R. 4019 prohibits states from taxing the retirement income of partners who are not residents of that state. The AICPA Tax Division supported this legislation in comments to Congress.

Medical Device Tax Credit -- August 2006
Effective July 8, 2006, medical device companies can claim a tax credit against their Massachusetts' tax liability for 100 percent of the user fees that they pay to the U.S. Food and Drug administration during the taxable year for pre-market approval to market new technologies developed or manufactured in the Commonwealth.

Extenders/Estate Tax Reform Sidelined -- August 2006
Before recessing, Congress failed to pass permanent estate tax reforms or to extend important expiring provisions. With the estate tax scheduled to be fully phased out in 2010 and then fully restored in 2011, estate planners and their clients need clarification. Read full article for more information on expiring individual and business related provisions and the estate tax.

Tax Benefits Increased for Disabled Veterans -- August 2006
Massachusetts Governor Mitt Romney has signed legislation that increases property tax exemptions for disabled veterans and provides financial relief for the families of servicemen and women killed or missing in action. Current property tax exemptions for veterans that range, depending on the extent of the disability, from $250 to $950 per year are increased to between $400 and $1,500. In addition, the legislation increases the reimbursement for those exemptions that the Commonwealth provides to the home communities of the veterans and their families. The lowest reimbursement of $75 is increased to $400, and the highest is increased from $775 to $1,325.

Governor Signs Sales Tax Holiday—August 12th & 13th

A recently enacted statute provides for a Massachusetts “sales tax holiday weekend,” i.e., two consecutive days during which most purchases made by individuals for personal use will not be subject to Massachusetts sales or use taxes.  The Act provides that the sales tax holiday will occur on August 12 and 13, 2006 and on those days, non-business sales at retail of single items of tangible personal property costing $2,500 or less are exempt from sales and use taxes, subject to certain exclusions. The following do not qualify for the sales tax holiday exemption and remain subject to tax:  all motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products and any single item whose price is in excess of $2,500.  The Act charges the Commissioner of Revenue with issuing instructions or forms and rules and regulations necessary to carry out the purposes of the Act. 

FASB 123(R) Shared Based Payments -- July 2006
On December 16, 2004, the FASB issued Statement 123(R) Share Based Payments. The statement requires that all equity based awards to employees be recognized in the income statement based upon their fair value. The effective date for non public entities is the first annual period that begins after December 15, 2005 (e.g. fiscal years ending December 31, 2006). The following is a brief summary of the changes that will affect your business and financial statements.

Go Hybrid!  Get Federal Tax Credit -- July 2006

You may want to consider buying that new Ford Escape Hybrid or Toyota Prius sooner rather than later. There is a federal tax credit available for the purchase of a new, qualifying vehicle beginning in 2006. 

Tax Break for Massachusetts Commuters -- July 2006
Massachusetts Governor Mitt Romney has signed into law a $25.249 billion state budget for fiscal year 2007 that authorizes a commuter tax deduction applicable to the state's personal income tax.

Expanded 'Kiddie Tax' Impacts Savings Strategy-- July 2006
You take advantage of every break you can to save for college. But what do you do when tax-rule changes suddenly throw you a curve ball?  For families concerned about the tab of higher education, the curve-ball question is now more than hypothetical.

Property Tax Exemption for Seniors Approved -- July 2006
Massachusetts Governor Mitt Romney has signed into law the state budget for fiscal year 2007 authorizing a property tax reduction of up to 5% of the average assessed value of all Class 1 parcels within the city or town for the principal residence of qualified taxpayers.

New E-mail Scam on Electronic Federal Tax Payment System -- July 2006

The Internal Revenue Service is warning taxpayers to be on the lookout for a new e-mail scam that uses the Treasury Department's Electronic Federal Tax Payment System (EFTPS) as a hook to lure individuals into disclosing their personal information.

Plan Now for Tax Savings Later! -- June 2006

When it comes to taxes, 2006 is already off to a fast start—we have already seen one Tax Act and it looks likely that there will be more before the year’s end. All this is right on the heels of 2005, where we saw four major Tax Acts. What does all this mean to you? Despite the tax rules being in a seemingly endless state of flux, the current tax environment is about as good as it is going to get. If you wait until the tax laws settle down before doing any serious planning, you may miss out on some great opportunities to reduce your overall tax burden. Use the following ideas as a starting point to identify specific actions you can take while there is still time to take action.

Consolidate Student Loans Now To Avoid Interest Rate Hikes -- June 2006

On July 1, 2006, the interest rates on existing federal Stafford and PLUS Loans will increase nearly 2% to 7.14% and 7.94% respectively. (The Department of Education sets the rates based on the last three-month Treasury bill auction held in May). This means that borrowers currently in repayment will see their monthly payments jump considerably unless they opt for loan consolidation.

Reimbursement for Previously Paid Telephone Excise Tax -- June 2006

The charge on your phone bill doesn’t say "luxury tax" or “war tax”, but that is what the federal telephone excise tax was enacted as in 1898 to fund the Spanish-American War. Only the wealthy had telephones, the U.S. had no income tax at that time, so the government relied on excise taxes to fund the war. This tax is now repealed and over the prior three years can be refunded.

New Regulation on Sales Tax for Computer Equipment -- June 2006
Sales in Massachusetts of computer equipment, prewritten computer software, regardless of the method of delivery, and report of standard information in tangible form are generally subject to the Massachusetts sales and use tax. Taxable transfers of prewritten software include sales affected in any of following ways, regardless of the delivery method, electronic or load and leave. In the instances of licenses, leases, upgrades, and transfers of rights to use software installed on a remote server, the vendor collects sales tax from the purchaser and pays the sales tax to the Commissioner. Sales of custom software, personal and professional services, and reports of individual information are generally exempt from MA sales and use tax.

IRS Grants Tax Relief for Massachusetts Storm Flooding Victims -- June 2006

The Internal Revenue Service announced special tax relief for Massachusetts taxpayers in the Presidential Disaster Area that was struck by severe storms and flooding beginning May 12, 2006. The disaster area consists of three counties: Essex, Middlesex and Suffolk. Deadlines for affected taxpayers to file returns, pay taxes and perform other time-sensitive acts falling on or after May 12, 2006, and on or before July 25, 2006, have been postponed to July 25, 2006.

Relief for Taxpayers Affected by Storms and Flooding -- May 2006
The Department of Revenue recognizes that there has been significant hardship and disruption for many individuals and businesses in parts of Massachusetts struck by severe storms and flooding beginning May 12, 2006, and notes that Governor Romney has requested that the President declare a major disaster within the Commonwealth pursuant to federal disaster relief laws.

Tax Increase Prevention and Reconciliation Act of 2005 -- May 2006
President George W. Bush signed H.R. 4297, the Tax Increase Prevention and Reconciliation Act of 2005, into law. The new Act will generally help taxpayers, but some will be hurt. Here's a summarized description from the AICPA of some of the provisions signed by President Bush on May 17, 2006.

Federal Tax Deposit Coupons -- May 2006
The IRS is frequently asked, “Why can’t I get a blank Federal Tax Deposit (FTD) Coupon, Form 8109-B?” The answer is, under certain circumstances, blank coupons are available. However, blank coupons should be used only when absolutely necessary.

Summary of Massachusetts Letter Ruling 06-6: Manufacturing Corporation Classification -- May 2006
Any corporation that experiences any of the events listed below must reapply for manufacturing status by December 31 of the tax year in which the change occurred. Changes include: changes in its name, undergoe of a merger or consolidation, revival as a corporation after dissolving, reregistration with the Secretary of State after withdrawing from Massachusetts under G.L. c. 181, § 16, or undergo of a material change in its activities.

Deduction For Energy Efficient Commercial Property -- April 2006
A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service after December 31, 2005, and before January 1, 2008. The Act provides a deduction equal to energy-efficient commercial building property expenditures made by the taxpayer. The deduction is limited to an amount equal to $1.80 per square foot of the property for which such expenditures are made. The deduction is allowed in the year in which the property is placed in service. Read more for in order to determine your qualification for the deduction.

How to Plan for the Alternative Minimum Tax (AMT) -- April 2006

The Alternative Minimum Tax (AMT) is designed to apply to taxpayers with substantial economic income who use tax credits and other tax incentives to reduce their tax liabilities. Although Congress originally intended only the highest income taxpayers to be subject to AMT, many middle-income taxpayers are finding themselves subject to it.

How Does the Energy Policy Act of 2005 Affect You? -- April 2006

During 2006, individuals can make energy-conscious purchases that will provide tax benefits when filling out their tax returns next year. The new law provides tax credits for making your principal residence (which must be in the U.S.) more energy efficient and for buying certain energy efficient items. The law also provides credits for certain alternative motor vehicles, such as hybrids.

Statutory Changes Relating to Unrelated Business Income of Nonprofit Corporations -- April 2006

Attached is a Technical Information Release reviewing the statutory amendments contained in St. 2005, c. 163 affecting the taxation of corporations exempt from taxation under Internal Revenue Code (IRC) section 501. Pursuant to amendments to G.L. c. 63, corporations exempt from taxation under IRC § 501 will be subject to tax on their unrelated business taxable income as defined under IRC § 512. The amendments are effective for tax years beginning on or after January 1, 2006.

Where is My Refund? -- March/April 2006

To find out if the IRS received your return and whether your refund was processed and sent to you visit the “Where’s My Refund” section of the Internal Revenue Service web site. To inquire about the status of your Massachusetts personal income tax refund, visit the Massachusetts Department of Revenue Refund Status Web Site. For more information regarding how to site access and the information you will need to provide, please refer to the Full Article.

Taxpayers Beware of Widespread Phishing Schemes Involving the IRS -- March 2006

Electronic fraud relating to the Internal Revenue Service (IRS) has been escalating in number and sophistication since December 2005. Phishing, as it is called, is the act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft. The current phishing scheme attempts to convince the users that they are receiving an email from the Internal Revenue Service (IRS).

Medicare Prescription Drug Program Changes -- March 2006

As you know, starting January 1, 2006, the new Medicare prescription drug plan went into effect. People with Medicare can enroll in one of the Medicare prescription drug plans through May 15, 2006. If you have existing prescription drug coverage, you can choose to join a Medicare prescription drug plan at a later date, enrollment dates will occur between November 15 and December 31of each calendar year.

Transfers of Prewritten Computer Software -- March 2006

Effective April 1, 2006 , prewritten software sold to a customer in Massachusetts or purchased for use in Massachusetts shall be deemed a transfer of tangible personal property subject to the sales or use tax regardless of the method of delivery, including transfers by electronic means such as the Internet or “load and leave.”

Where is My Refund? -- March 2006

To find out if the IRS received your return and whether your refund was processed and sent to you visit the “Where’s My Refund” section of the Internal Revenue Service web site. To inquire about the status of your Massachusetts personal income tax refund, visit the Massachusetts Department of Revenue Refund Status Web Site. For more information regarding how to site access and the information you will need to provide, please refer to the Full Article.

Patriot's Day Holiday Gives Taxpayers Extra Day to File -- March 2006

Taxpayers served by the Andover, Massachusetts Processing Center will have an additional day to file and pay because April 17 is a state holiday (Patriot's Day) in Massachusetts . The April 18 deadline will apply to individuals in Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont, and the District of Columbia.

Overlooked Business Tax Deductions -- February 2006

Many business taxpayers fail to deduct otherwise eligible business expenses or fail to fully deduct qualifying business expenses. As a result, millions of dollars are overpaid to the Internal Revenue Service every year. Below is a listing of commonly missed deductions or deductions that you may not be fully utilizing. You may wish to carefully examine your records to determine if you may be missing any of these deductions.

Property Tax Exemption Forms 3-ABC are due by March 1, 2006 -- February 2006

Property Tax Exemption Forms 3-ABC are due by March 1, 2006 for all Massachusetts tax exempt organizations that hold real or personal property. The forms are to be filed with the assessor's office for the city or town in which the property is located. The form must be accompanied by the organization's most recently filed Attorney General Form PC (which also includes the IRS 990 and audited financial statements).

Hurricane Relief for Business and Individuals: Suspension of Personal Casualty and Theft Loss Limitations -- February 2006

If you or your business has been affected in any way as a result of Hurricanes Rita, Wilma or Katrina, you may be eligible for a number of tax benefits through the Gulf Opportunity Zone Act of 2005 and the Katrina Emergency Tax Relief Act of 2005. The so-called “Go Zones” are in five states: Alabama, Florida, Louisiana, Mississippi, and Texas. The Hurricane Relief Acts are very extensive, so we have decided to highlight some of the more common examples of these acts to provide you with information we feel will benefit you, the first being personal casualty and theft loss.

Proper Documentation is Necessary for Gambling Loss Deduction -- February 2006

Taxpayers can deduct gambling losses only to the extent of gambling gains. The courts have ruled that this limitation applies even if the taxpayer is in the trade or business of gambling. There is no distinction between professional gamblers and occasional, amateur gamblers when it comes to the deductibility of gambling losses. The losses need not be from the same type of gambling to offset winnings.

S Corporation Election Filing -- February 2006

A corporation elects to operate as an S corporation by filing Form 2553 (Election by a Small Business Corporation). Once made, the S election remains in effect until it is voluntarily or involuntarily terminated [IRC Sec. 1362(c)]. Changes in ownership of S corporation stock have no effect on the S election, so long as all of the stock is owned by individuals or other entities eligible to be S shareholders. The deadline for filing the Form 2553 differs depending on whether the corporation is already in existence (i.e., operating as a C corporation) or newly formed.

Online AMT Assistant -- January 2006
The Internal Revenue Service is providing a new online tool, the AMT Assistant, to help individual taxpayers determine whether they are potentially subject to the alternative minimum tax (AMT). The AMT Assistant automates the AMT Worksheet of the 1040 Instructions. Access the Worksheet to see if you should fill in Form 6251-Line 45. Taxpayers who file paper returns will benefit the most from the AMT Assistant because e-file software generally computes AMT liability automatically.

Tax Reform? Wait 'Til Next Year -- January 2006
Bush administration leaders vow to fight on for comprehensive tax reform two months after the President's Advisory Panel on Federal Tax Reform issued its final report. However, delays and Hurricane Katrina killed any momentum for legislation, according to Washington lobbyists, while the collapse of Social Security reform left the administration risk-adverse to another failed policy effort.

E-Filing Requirements for 2005 -- January 2006
Please keep Massachusetts and IRS requirements in mind as you file 2005 Corporate, Partnership and Trust income tax returns. It is important that these requirements are followed as there will be penalties imposed for failing to file electronically. For 2005 State and Federal requirements that apply to filing and paying most 2005 business tax returns refer to the Full Article.

Tax Consequences of Paid Time Off Donation Policy -- January 2006

The IRS recently ruled on an employee leave donation program. The ruling dealt with a plan where an employee can chose to donate leave to charity under the program. The value of any leave surrendered will be gross income for the employee and treated as wages for purposes of income tax withholding and employment taxes. Employees who do not participate in the PTO Donation Policy will not have gross income merely because they have the ability to participate in it.

IRS Provides Protection to Heavy Equipment Dealers For Use of Replacement Cost for Parts - January 2006
The Internal Revenue Service issued guidance that provides heavy equipment dealers with a safe harbor that allows them to approximate the cost of the equipment parts inventory using the replacement cost method of accounting.  The guidance was developed as part of the Industry Issue Resolution (IIR) program. The IIR program, launched by the IRS in 2001, tackles issues submitted by taxpayers, associations and other groups representing businesses. The objective is to work cooperatively to resolve frequently disputed or burdensome tax issues.

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2005

Standard Mileage Rates -- December 2005

The Internal Revenue Service recently issued the 2006 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Congress this year also approved special rates in connection with miles driven in service of charities providing Hurricane Katrina relief.

Hefty Tax Savings Available for “Heavy” SUVs, Pickups, and Vans -- December 2005

As we have previously written, businesses can claim substantial tax deductions for heavy (over 6,000 pounds gross vehicle weight) SUVs and other vehicles used in business. For heavy SUVs, businesses can deduct up to $25,000 of the SUV’s cost in the year it is purchased resulting in a substantial first year tax deduction. Also, the rules that limit the amount of annual depreciation allowed on passenger automobiles do not apply to heavy SUVs. The remaining cost of the vehicle can be written off over five years.

Non Discrimination Requirements -- December 2005

Whether medical plans are subject to any nondiscrimination rules under the Internal Revenue Code depends on how they are funded. Fully insured plans generally can discriminate as to eligibility, contributions, benefits, and so on without triggering adverse tax consequences to the participants or employer. However, to receive special tax treatment, self-insured medical expense reimbursement plans must comply with the nondiscrimination rules in Regulation 1.105-11. In addition to the nondiscrimination rules for self-insured plans, read the full article for nondiscrimination rules that may apply to any medical plan.

Federal and Massachusetts Energy Tax Incentives For Individual Taxpayers -- December 2005

The Federal Energy Tax Incentive Act of 2005 (Energy Act) and similar new Massachusetts provisions provide several new energy credits for individuals. The credit for non business energy property and the residential energy efficient property credit apply to purchases of energy property installed at a taxpayer’s principal residence. These federal provisions are effective for tax years 2006 and 2007.

Expect Changes on your December, 31, 2005 Financial Statements -- December 2005
Under FASB Interpretation 46(R) also known as FIN46, most clients effective for years ending after 12/15/2005 are going to be required to consolidate a number of entities that have not been consolidated in the past. This will include outside real estate, equipment leasing, management companies, and other entities that owners of companies are used to seeing as separate entities. The statements that you will be getting from CPA firms on 12/31/2005 will show consolidated financial information that includes these entities for the first time. These new consolidated financial statements will look significantly different than the financial statements you received last year.

Massachusetts Capital Gains Update -- December 8, 2005

Governor Mitt Romney has signed legislation canceling retroactive tax hikes on capital gains realized between January and May of 2002 and has authorized rebates of higher capital gains taxes paid between May and December of 2002. The Department of Revenue stopped issuing preliminary tax bills for 2002 capital gains as of December 2, 2005 in response to the state's Supreme Judicial Court decision that declared the effective date of the statute unconstitutional.

A Trap for the Unwary - A Whole New Meaning: The Perils of Section 409A -- Nov/Dec 2005
Non qualified deferred compensation plans offer flexibility and tax savings for employer and
employee—but they also pose the possibility of income acceleration and stiff penalties and interest.

Form 5500 Filing Requirements - Welfare Benefit Plans ("Insurance Plans") -- November 2005

Employers sponsoring welfare benefit plans (“insurance plans" i.e. health etc.) may be failing to comply with Form 5500 filing requirements.  Failure to file penalties is generally assessed on a per day basis and can grow quite large quite rapidly. 

Pension Plan Limits for Individuals -- November 2005
The Internal Revenue Service recently announced cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2006. Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. It also requires that the IRS commissioner annually adjust these limits for cost of living increases.  Many of the pension plan limitations will change for 2006. For most of the limitations, the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  Please reference the Full Article to view 2006 Pension Plan Limits for Individuals.  

Amnesty Available in States Which Are Members of SSUTA -- November 2005
Amnesty is available in all states participating as full members or associate members of the Streamlined Sales and Use Tax Agreement (see States offering amnesty). Full and associate member states will provide amnesty for uncollected or unpaid sales or use taxes to a seller who registers to pay or collect and remit applicable sales or use taxes on sales made to purchasers in the state. 

IRS Warns of Email Scam About Tax Refunds

The IRS issued a consumer alert about an internet scam in which consumers receive an e-mail informing them of a tax refund. The scheme is an attempt to trick email recipients into discolsing their personal and financial data.

New Deferred Comp Regulations Set Tight Deadlines and Possible Tax Penalties for Employees and Plan Participants -- October 2005

Deadlines are rapidly approaching for employers and employees in connection with nonqualified deferred compensation. Code Sec. 409A was enacted in the American Jobs Creation of 2004 to tighten the limits on nonqualified deferred compensation plans. The regulations address key provisions of Code Sec. 409A: the scope of Code Sec. 409A, possible accelerated taxable income, the timing of initial deferral elections, the timing of benefits, and subsequent elections to defer benefits.

IRS Puts Limits on Waivers of 60 Day IRA Rollover Deadline -- October 2005

Six new letter rulings help explain when the IRS will waive the 60 day time period for eligible rollover distributions from individual retirement accounts (IRAs). IRAs rolled over into new IRAs in 60 days will not be included in income as distribution. In three cases, the IRS refused to waive the deadline, because it considered the taxpayers’ reasons for failing to make a timely transfers within their control.

Income Tax Withholding Requirements Would Include Performers -- October 2005

The Massachusetts DOR has proposed amending the regulation that provides the requirements for employers and others to withhold tax on behalf of individuals to include payers of performers or performing entities. Effective for tax years beginning on or after January 1, 2006, a performing entity would have to determine how much of the aggregate income and MA income tax withholding reported by the withholding agent on federal Form 1099-MISC or federal form 1042-S is attributable to each member.

Settlement of Credit Card Account Resulted in Tax and Penalties -- October 2005

If you have ever disputed an erroneous charge on your credit card statement, make sure you put your correspondence in writing and retain the records of your communication. In a recent tax case, the taxpayer learned the hard way about the tax implications of failing to do so.

Katrina Emergency Tax Relief Act of 2005 -- October 2005

As you probably know, Congress recently passed the Katrina Emergency Tax Relief Act of 2005 (KETRA). Besides providing tax breaks for individuals and businesses adversely affected by this devastating storm, KETRA contains a number of provisions that are more broadly applicable, specifically with respect to charitable giving. The following is a summary of the Act’s key provisions. Feeley & Driscoll offers this information to help you understand how KETRA may affect you or someone you know, and how you might take advantage of it to reduce your tax liability.

Massachusetts Legislators Look to Simplify the Mass Pike Tax Refund -- September 2005

Motorists and Commercial motor carriers who use the Massachusetts Turnpike for more than 100 miles weekly are eligible to receive a reimbursement on fuel excise tax paid that corresponds to turnpike use. Thousands of turnpike travelers are eligible for this refund on part of the state gas tax they pay, but the rebate program is so obscure and cumbersome that only 357 drivers applied for it last fiscal year.

The Pros and Cons of Irrevocable Life Insurance Trusts -- September 2005

Many people assume that you need to be very wealthy before you start worrying about estate taxes. But if you own a life insurance policy with a large death benefit, your estate may be subject to considerable estate taxes. Using an irrevocable life insurance trust, you can move life insurance benefits out of your estate and reduce your estate tax exposure. This means your heirs can inherit more.

Too Much Income for a Roth IRA: Starting in January 2006 There is Another Alternative -- September 2005

Roth 401(K) will be available in 2006, allowing individual to designate all or a portion of their 401(k) contribution into a Roth. This option will also be available to 403(b) participants. Prior to this law change, contributions to a 401(k) were tax deductible when made and taxable when withdrawn.

Standard Mileage Rates Increased for Final Four Months of 2005 -- September 2005

The IRS has increased the mileage rate for the business use of a car, to 48.5 cents per mile, effective September 1, from the 40.5 cents per mile set back on November 17, 2004 (Rev. Proc. 2004-64).  This 20% increase pales in comparison to the 60% increase in the retail price of a gallon of gasoline (regular grade) from $1.91 to today's $2.89. 

Energy Tax Incentives Act of 2005 -- August 2005

Congress recently passed the Energy Tax Incentives Act of 2005. This legislation provides more than $14 billion in tax breaks, primarily for businesses in the energy sector. The Act also provides some incentives for individuals and businesses to make certain energy conservation or alternative energy expenditures.

Guidance Provided for Nonresident Contractors -- August 2005
In order to secure payment of Massachusetts sales and use tax on any tangible personal property used in carrying out a construction contract, nonresident contractors that undertake a construction contract in the state must provide the Department of Revenue with a deposit or surety bond in an amount equal to 5% of the total amount to be paid under the contract.

IRS Launches Study of S Corporation Reporting Compliance -- August 2005
On July 25th, the Internal Revenue Service officials announced the launch of a study to assess the reporting compliance of S corporations. The results of the NRP study will be used to more accurately gauge the extent to which the income, deductions and credits from S corporations are properly reported on returns filed by the flow through corporations and their shareholders.

IRS Issues New Rules Regarding Donating Vehicles to Charity -- August 2005
The IRS has issued guidance concerning the new rules for the deductibility and substantiation requirements relating to charitable contributions of vehicles. Beginning January 1, 2005, the deduction for the contribution of a vehicle in excess of $500 is limited to the actual sales price of the vehicle when it is sold by the charity.

Important Notice Requirement by IRS Circular 230 -- August 2005
F&D would like to bring to your attention the legal ramifications of new IRS Circular 230, effective on June 21, 2005. The Circular was issued by the United States Government and sets forth new rules that all tax practitioners, including certified public accountants, must follow in providing written statements about certain federal tax issues.

Complying With the FTC's New Disposal Rule for Consumer Information -- July 2005
The Federal Trade Commission (FTC) estimates that nearly one in ten Americans have experienced identity theft. To help stem the tide of the growing identity theft crisis, the FTC has issued the “Disposal Rule.” Effective June 1, 2005, employees’ personal information and other consumer information must now be destroyed prior to disposal to prevent identity theft.

Get a $2,000 Tax Deduction for Buying a Hybrid in 2005 -- July 2005
The Internal Revenue Service has certified certain model year 2006 Hybrid Vehicles as being eligible for the clean-burning fuel deduction. This certification means that taxpayers who purchase new hybrid vehicles during calendar year 2005 may claim a tax deduction of up to $2000 on Form 1040.

The Massachusetts Sales Tax Holiday - August 13-14, 2005 -- July 2005
The Massachusetts Senate has approved legislation that would establish a Massachusetts "sales tax holiday," for two days on August 13 and 14th, 2005. This would allow certain purchases made by individuals for personal use to be free of Massachusetts sales or use taxes. If approved by the Governor, all non-business sales at retail of single items of tangible personal property costing $2,500 or less will be exempt from sales and use taxes.

Mid-Year Tax Planning Strategies for Individuals and Businesses -- July 2005
As you probably know, two major tax laws were enacted at the end of 2004. You may be familiar with some of the new tax rules, but now is a good time to see if there were any goodies for you, and, if so, what you need to be doing to take advantage of them. In addition to changes made by the new laws, other planning actions may be beneficial. While the end of 2005 seems a long way off, it’s always a good idea to take a look at your tax situation while there is still time to take action. Some planning ideas need to be implemented before year-end to be effective for this year.

Cafeteria Plans/Flexible Spending Arrangements (FSA) Allowed to Have a Grace Period After Year End -- July 2005
Previously, a cafeteria plan could not provide for deferred compensation, by permitting participants to use contributions for one plan year to purchase a benefit that will be provided in the next plan year. This rule, commonly referred to as the "use-it-or-lose-it" rule, required that unused contributions or benefits remaining at the end of the plan year be "forfeited." The IRS has modified this rule to allow a cafeteria plan to be amended to provide a grace period immediately following the end of each plan year.

Charitable Giving Strategies -- June 2005
Charitable giving provides you with an opportunity to make a donation to benefit the mission of organizations that are important to you. The growth in national charitable giving is on the increase, which has created many different strategies for charitable giving. Because charitable giving is not a tax- motivated transaction, it is important to combine your charitable giving goals with the maximum tax savings. Depending on your goals, different vehicles will fit better. The following is a brief explanation of when different vehicles should be used.

Quantifying the Benefits of Making Those Extra Retirement Account Catch-up Contributions -- June 2005
Individual taxpayers who will be age 50 or older as of December 31, 2005 should not overlook the benefit of making "catch-up" contributions to employer sponsored plans or traditional and Roth IRAs. The additional amount of retirement funds which you can accumulate may surprise you.

Insurance Commissioner Bowler Approves 3% Workers' Compensation Rate Cut -- June 2005
Massachusetts Insurance Commissioner Julianne M. Bowler on May 19, 2005 approved a 3% overall average rate reduction in the 2005 Workers' compensation rate case. The new rate takes effect September 2005. Access the Full Article for a link to the press release.

MA Sales Tax Exemptions On Direct Mail Advertising Material -- June 2005
As a result of the outcome of the Bloomingdale case, various direct mail advertising materials sent to customers are exempt from sales and use tax effective August 9, 2004. However, the legislature clarified specifically to exclude the following: "mail order catalogs, department store catalogs, telephone directories, or similarly printed advertising books, booklets or circulars greater than 6 pages in total length" from the exemption.

Appreciating the Power of Depreciation through Cost Segregation -- June 2005
Does your company own the building in which it's based, or does it own other real property? One way to increase cash flow from property is to depreciate it over a shorter life than the IRS's prescribed term. Property can be classified as either five or seven- year personal property, 15-year land improvements, or 39-year real property under the Modified Accelerated Cost Recovery System (MACRS).

The Massachusetts Sales Tax Holiday -- June 2005
The State Legislature has introduced a bill to make August 13, 2005 a sales tax holiday. If passed, this law is likely to work similar to last year's sales tax holiday. We will keep you informed of this legislation. In the mean time, you might consider holding off on some large purchases that don't exceed $2,500.

Bankruptcy Abuse, Prevention and Consumer Protection Act of 2005 – May 2005
On April 20, 2005 President Bush signed into law the Bankruptcy Abuse, Prevention and Consumer Protection Act of 2005. This act was originally introduced in the Clinton administration and has died many times and now has been enacted and contains sweeping bankruptcy reform. Only a few provisions of the new act will impact ordinary estate or assets protection planning. However, where it does affect planning, the effect is quite dramatic.

Submission of W-4 to IRS No Longer Required – May 2005
Temporary and proposed regulations, issued by the Treasury Department, eliminate the requirement that employers send copies of potentially questionable Forms W-4, Employee's Withholding Allowance Certificate, to the IRS. The new regulations take effect on April 14, 2005.

Special Planning Needed for Transfers to a Non-Citizen Spouse – May 2005
In general, our gift and estate tax laws allow unlimited tax-free transfers between spouses. The catch is that the transferee spouse (the one receiving the property) must be a U.S. citizen. This so called "Marital Deduction" views the married couple as one economic unit applying the theory that only transfers outside the unit (i.e., to children) should be subject to a transfer tax. Transfers involving a non-citizen spouse (even permanent residents) require special planning to preserve family wealth.

Dividends from Foreign Subsidiaries – May 2005
The American Jobs Creation Act provides for an 85% dividends received deduction for certain dividends from controlled foreign corporation