There have been recent rulings on garnishments, tax deposits, and overtime.
Garnishments. The U.S. Court of Appeals for the Third Circuit has ruled that an employer is not liable to an employee after garnishing his wages [Bullock v. Bimbo Bakeries USA, Inc., CA3, 107 AFTR 2d 2011-939, 2/22/11].
The garnishment was instituted pursuant to an IRS Notice of Levy which ordered the company to garnish a percentage of the employee's wages to satisfy unpaid taxes. The employee believed that the IRS did not have the authority to apply a tax levy against him. He requested that the company discontinue or reduce the garnishment, which the company refused to do, absent a written directive from the IRS. In September 2009, the employee brought suit against the employer, asserting claims under Pennsylvania's criminal theft statutes, and violation of his rights under the Fourth and Fifth Amendments of the U.S. Constitution.
Under Code Sec. 6332(e), an employer that garnishes an employee's wages is immune from liability if the garnishment is in compliance with an IRS tax levy, regardless of whether the levy was validly imposed. The Third Circuit cited this statute and held that the employer was exempt from liability.
Tax deposits. A recent IRS Chief Counsel Advice (CCA) noted that taxpayers making federal tax deposits to satisfy employment tax withholding requirements have no right to apply the deposits between trust fund (i.e., employment taxes) and non-trust fund taxes (e.g., income tax, excise tax). Taxpayers are required by law to make deposits throughout the quarter; however, these remittances are not payments. In order to be a payment, the IRS must first make an assessment. The IRS cannot make an assessment until an amount is due and payable. Employment taxes required to be reported are not due and payable until the due date of the return. Any remittance made prior to the due date of the return is a deposit and not a payment. The IRS policy to apply a voluntarily tendered partial payment of tax in accordance with the taxpayer's instructions is not applicable to deposits [Chief Counsel Advice 201105034].
Overtime. The U.S. Court of Appeals for the Fourth Circuit has ruled that a school golf coach was not entitled to overtime under the Fair Labor Standards Act (FLSA), because he was a “volunteer” rather than an “employee” [Purdham v. Fairfax County School Board, CA4, Dkt. No. 10-1048, 3/10/11].
For approximately 20 years, James Purdham has worked as a safety and security assistant for the Fairfax County Public Schools. In addition to this regular full-time position, Purdham has served for 15 years as Hayfield Secondary School's golf coach. Purdham's position as a security assistant is not conditioned on his coaching activities, and he is free to relinquish his coaching duties at any time without an adverse impact on his full-time security position.
Under 29 USC 203(e)(4)(A) of the FLSA, any individual who volunteers to perform services for a public agency is exempt from coverage under the FLSA if: (i) the individual receives no compensation, or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered; and (ii) such services are not the same type of services which the individual is employed to perform for such public agency. 29 CFR 553.101(c) states that individuals will only be considered volunteers if their services are offered freely and without pressure or coercion, direct or implied, from their employer.
The school board briefly paid Purdham overtime until the Department of Labor (DOL) issued guidance (DOL Opinion Letter FLSA 2006-28, Aug. 7, 2006) which said that full-time non-exempt employees were properly deemed “volunteers” in connection with their coaching activities, and thus not eligible for overtime compensation.
In issuing its ruling, the court noted that Purdham was not pressured into the coaching position and was free to terminate that role without affecting his position as a security assistant. The court also concluded that the stipend Purdham received qualified as a “nominal fee.” The court said that Purdham likely received less than the federally-mandated minimum wage for his coaching activities. The payments were significantly less than the compensation he received from his position as a security assistant. The court also pointed out that the school board paid a fixed stipend amount regardless of an individual's time and effort. Coaches were free to spend as much, or as little, time as they chose on coaching activities.
Saturday, April 2, 2011
FLSA Anti-Retaliation Provision Protects Oral as Well as Written Complaints
The U.S. Supreme Court has ruled that the anti-retaliation provision of the Fair Labor Standards Act (FLSA) protects employees from retaliation for making either oral or written complaints about an employer's wage-hour policies [Kasten v. Saint-Gobain Performance Plastics Corp., U.S. Sup. Ct., Dkt. No. 09-834, 3/22/11].
The facts. Kevin Kasten claimed that he was fired by his former employer, Saint-Gobain Performance Plastics Corp. (Saint-Gobain), because he orally complained to Saint-Gobain officials that the location of the company time clocks prevented workers from receiving credit for the time they spent donning and doffing work-related protective gear. The time clocks were located some distance from the location where the workers put on and took off the protective gear. Kasten's complaint was made through the company's internal grievance procedure.
The law. 29 USC 215(a)(3) of the FLSA prohibits an employer from discharging or discriminating against an employee because the employee “filed any complaint,” or instituted or caused to be instituted any proceeding related to the FLSA.
At issue was how to interpret the phrase “filed any complaint.” A federal district court had granted Saint-Gobain summary judgment, concluding that the FLSA's anti-retaliation provision did not cover oral complaints, and the U.S. Court of Appeals for the Seventh Circuit had affirmed the ruling.
Supreme Court ruling. The Supreme Court held that the term “filed any complaint” includes oral, as well as written, complaints. The Court believed that a narrow interpretation of the term would undermine the FLSA's basic objective, which is to prohibit “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers” (see 29 USC 202(a)). It questioned why Congress would want to limit the enforcement scheme's effectiveness by inhibiting use of the FLSA's complaint procedure by those who would find it difficult to reduce their complaints to writing, particularly the illiterate, less educated, or overworked workers who were most in need of the FLSA's help.
The Supreme Court also said that limiting the anti-retaliation provision's scope to written complaints would prevent government agencies from using hotlines, interviews, and other oral methods to receive complaints. In addition, it would discourage using informal workplace grievance procedures to secure compliance with the FLSA.
The Supreme Court said that to fall within the scope of the anti-retaliation provision, a written or oral complaint must be sufficiently clear and detailed so that a reasonable employer would understand it, in light of both content and context, as an assertion of rights protected by the statute.
The Supreme Court noted that the Secretary of Labor has consistently held the view that “filed any complaint” covers both oral and written complaints.
The case was remanded back to the Seventh Circuit for further proceedings consistent with the Supreme Court's opinion.
The facts. Kevin Kasten claimed that he was fired by his former employer, Saint-Gobain Performance Plastics Corp. (Saint-Gobain), because he orally complained to Saint-Gobain officials that the location of the company time clocks prevented workers from receiving credit for the time they spent donning and doffing work-related protective gear. The time clocks were located some distance from the location where the workers put on and took off the protective gear. Kasten's complaint was made through the company's internal grievance procedure.
The law. 29 USC 215(a)(3) of the FLSA prohibits an employer from discharging or discriminating against an employee because the employee “filed any complaint,” or instituted or caused to be instituted any proceeding related to the FLSA.
At issue was how to interpret the phrase “filed any complaint.” A federal district court had granted Saint-Gobain summary judgment, concluding that the FLSA's anti-retaliation provision did not cover oral complaints, and the U.S. Court of Appeals for the Seventh Circuit had affirmed the ruling.
Supreme Court ruling. The Supreme Court held that the term “filed any complaint” includes oral, as well as written, complaints. The Court believed that a narrow interpretation of the term would undermine the FLSA's basic objective, which is to prohibit “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers” (see 29 USC 202(a)). It questioned why Congress would want to limit the enforcement scheme's effectiveness by inhibiting use of the FLSA's complaint procedure by those who would find it difficult to reduce their complaints to writing, particularly the illiterate, less educated, or overworked workers who were most in need of the FLSA's help.
The Supreme Court also said that limiting the anti-retaliation provision's scope to written complaints would prevent government agencies from using hotlines, interviews, and other oral methods to receive complaints. In addition, it would discourage using informal workplace grievance procedures to secure compliance with the FLSA.
The Supreme Court said that to fall within the scope of the anti-retaliation provision, a written or oral complaint must be sufficiently clear and detailed so that a reasonable employer would understand it, in light of both content and context, as an assertion of rights protected by the statute.
The Supreme Court noted that the Secretary of Labor has consistently held the view that “filed any complaint” covers both oral and written complaints.
The case was remanded back to the Seventh Circuit for further proceedings consistent with the Supreme Court's opinion.
Each Paycheck Starts New Statute of Limitations Period for Overtime Lawsuits
The U.S. Court of Appeals for the DC Circuit has ruled that police officers may pursue their lawsuit for unpaid overtime with respect to any pay period that is not barred by the statute of limitations [Figueroa v. District of Columbia Metropolitan Police Department, CA DC, Dkt. No. 09-7133, 2/11/11].
The facts. Officers at the District of Columbia Metropolitan Police Department (MPD) sued their employer under the Fair Labor Standards Act (FLSA), alleging that MPD had failed to include in their overtime calculation additional pay ($595 per year) that they were entitled to receive under the District of Columbia Code after being promoted to detective sergeant. Following an arbitrator's ruling, the MPD agreed to give the officers lump sum payments of $595 for every year since they had been promoted to the position of detective sergeant. However, the MTD did not recalculate the officers' overtime to take into account the $595 stipend.
The law. 29 USC 216(b) of the FLSA allows employees to seek damages from their employer for overtime violations. However, 29 USC 255(a) of the FLSA bars any action for unpaid overtime if not commenced within two years of a non-willful violation and within three years of a willful violation.
The officers first became aware of the overtime miscalculation on Dec. 12, 2003. They filed a lawsuit to have their overtime recalculated to include the stipend on Nov. 5, 2007.
A federal district court ruled that the officers could not pursue their overtime claim since they filed their lawsuit more than three years after the initial overtime violation. The officers appealed the ruling. They argued that the statute of limitations begins again each time after they receive a paycheck without proper overtime compensation.
The ruling. The DC Circuit agreed with the officers. It said that the officers' lawsuit was not based on a single violation of the FLSA that occurred outside the statute of limitations, but on repeated violations, some of which fell within the limitations period. Therefore, the officers may pursue their overtime claim with respect to pay periods that occurred within two years of the date of their lawsuit for a non-willful violation, and within three years of the date of their lawsuit for a willful violation.
The DC Circuit remanded the case back to the district court for further proceedings consistent with its opinion.
The facts. Officers at the District of Columbia Metropolitan Police Department (MPD) sued their employer under the Fair Labor Standards Act (FLSA), alleging that MPD had failed to include in their overtime calculation additional pay ($595 per year) that they were entitled to receive under the District of Columbia Code after being promoted to detective sergeant. Following an arbitrator's ruling, the MPD agreed to give the officers lump sum payments of $595 for every year since they had been promoted to the position of detective sergeant. However, the MTD did not recalculate the officers' overtime to take into account the $595 stipend.
The law. 29 USC 216(b) of the FLSA allows employees to seek damages from their employer for overtime violations. However, 29 USC 255(a) of the FLSA bars any action for unpaid overtime if not commenced within two years of a non-willful violation and within three years of a willful violation.
The officers first became aware of the overtime miscalculation on Dec. 12, 2003. They filed a lawsuit to have their overtime recalculated to include the stipend on Nov. 5, 2007.
A federal district court ruled that the officers could not pursue their overtime claim since they filed their lawsuit more than three years after the initial overtime violation. The officers appealed the ruling. They argued that the statute of limitations begins again each time after they receive a paycheck without proper overtime compensation.
The ruling. The DC Circuit agreed with the officers. It said that the officers' lawsuit was not based on a single violation of the FLSA that occurred outside the statute of limitations, but on repeated violations, some of which fell within the limitations period. Therefore, the officers may pursue their overtime claim with respect to pay periods that occurred within two years of the date of their lawsuit for a non-willful violation, and within three years of the date of their lawsuit for a willful violation.
The DC Circuit remanded the case back to the district court for further proceedings consistent with its opinion.
IRS/APA Review Employer Federal Recordkeeping Requirements
The Spring 2011 edition of the SSA/IRS Reporter includes an article by the American Payroll Association (APA) on employer federal recordkeeping requirements with respect to withholding and unemployment taxes.
Income, Social Security, and Medicare Taxes
Employers must keep the following records on each of their employees for at least four years after the due date of the employee's personal income tax return (generally, April 15) for the year in which the payment was made:
* Employer Identification Number (EIN);
* Employee name, address, occupation, and Social Security number;
* Total amount and date of each payment of compensation and any amount withheld for taxes or otherwise. This should include reported tips and the fair market value of non-cash payments;
* Amount of compensation subject to withholding for federal income, Social Security, and Medicare taxes, and the amount withheld for each tax;
* Pay period covered by each payment of compensation;
* The reason(s) why the total compensation and the taxable amount for each tax are different, if that is the case;
* A copy of the employee's Form W-4;
* Beginning and ending dates of employment;
* Statements provided by employees reporting tips received;
* Information regarding wage continuation payments made to the employee by an employer or third party under an accident or health plan, including the beginning and ending dates of the period of absence from work and the amount and weekly rate of each payment (including payments made by third parties), as well as copies of the employee's Form W-4S, Request for Federal Income Tax Withholding From Sick Pay;
* Fringe benefits provided to the employee and any required substantiation;
* Requests from an employee to use the cumulative method of wage withholding;
* Adjustments or settlements of taxes;
* Copies of returns filed, including Forms 941, 943, 944, 945, W-3, Copy A of Form W-2, and any Forms W-2 sent to employees but returned as undeliverable (if employers can electronically reproduce the undeliverable W-2s, they may shred the originals); and
* Amounts and dates of tax deposits.
Unemployment Tax
Employers subject to the Federal Unemployment Tax Act (FUTA) must keep the following records for at least four years after the due date of Form 940 or the date the required FUTA tax was paid, whichever is later: (1) the total amount of employee compensation paid during the calendar year; (2) the amount of compensation subject to FUTA tax; (3) the amount of state unemployment contributions made, with separate totals for amounts paid by the employer and amounts withheld from employees' wages (currently, Alaska, New Jersey, and Pennsylvania require employee contributions); (4) all information shown on Form 940; and (5) the reason why total compensation and the taxable amounts are different, if that is the case.
Employers may be subject to large penalties for recordkeeping violations.
Income, Social Security, and Medicare Taxes
Employers must keep the following records on each of their employees for at least four years after the due date of the employee's personal income tax return (generally, April 15) for the year in which the payment was made:
* Employer Identification Number (EIN);
* Employee name, address, occupation, and Social Security number;
* Total amount and date of each payment of compensation and any amount withheld for taxes or otherwise. This should include reported tips and the fair market value of non-cash payments;
* Amount of compensation subject to withholding for federal income, Social Security, and Medicare taxes, and the amount withheld for each tax;
* Pay period covered by each payment of compensation;
* The reason(s) why the total compensation and the taxable amount for each tax are different, if that is the case;
* A copy of the employee's Form W-4;
* Beginning and ending dates of employment;
* Statements provided by employees reporting tips received;
* Information regarding wage continuation payments made to the employee by an employer or third party under an accident or health plan, including the beginning and ending dates of the period of absence from work and the amount and weekly rate of each payment (including payments made by third parties), as well as copies of the employee's Form W-4S, Request for Federal Income Tax Withholding From Sick Pay;
* Fringe benefits provided to the employee and any required substantiation;
* Requests from an employee to use the cumulative method of wage withholding;
* Adjustments or settlements of taxes;
* Copies of returns filed, including Forms 941, 943, 944, 945, W-3, Copy A of Form W-2, and any Forms W-2 sent to employees but returned as undeliverable (if employers can electronically reproduce the undeliverable W-2s, they may shred the originals); and
* Amounts and dates of tax deposits.
Unemployment Tax
Employers subject to the Federal Unemployment Tax Act (FUTA) must keep the following records for at least four years after the due date of Form 940 or the date the required FUTA tax was paid, whichever is later: (1) the total amount of employee compensation paid during the calendar year; (2) the amount of compensation subject to FUTA tax; (3) the amount of state unemployment contributions made, with separate totals for amounts paid by the employer and amounts withheld from employees' wages (currently, Alaska, New Jersey, and Pennsylvania require employee contributions); (4) all information shown on Form 940; and (5) the reason why total compensation and the taxable amounts are different, if that is the case.
Employers may be subject to large penalties for recordkeeping violations.
IRS Makes It Easier for Employers to Keep Track of Important Tax Deadlines
The IRS has a new online tool to make it easier to remember important tax return and deposit deadlines. It's called the “IRS Calendar Connector” and it doesn't cost anything to download it to a computer desktop. The calendar includes deadlines for all types of taxes, including income, employment, and excise taxes. However, employers may customize the calendar to only include deadlines for certain types of taxes. For example, a calendar that was customized to only show employment tax deadlines would display semiweekly and monthly payroll tax deposit due dates and the deadlines for filing employment tax returns. Employers may choose whether they want to see a list of deadlines by day, week, or month. The “settings” option allows users to check for updates, which will refresh in real time. The settings may also be adjusted to have the calendar start up at the time a user logs on to his or her computer. The “Calendar Connector” may be downloaded at http://www.tax.gov/irscalendarconnector/.
The IRS also has a monthly online calendar on its website (see http://www.tax.gov/calendar/), and a publication (IRS Publication 509) that has tax deadline dates.
The IRS also has a monthly online calendar on its website (see http://www.tax.gov/calendar/), and a publication (IRS Publication 509) that has tax deadline dates.
Some Payroll Tax Deadlines Extended Beyond April 15
The IRS has extended the deadline for all tax forms and payments that would normally be due on Friday, April 15, until Monday, April 18, because April 15 (Emancipation Day) is a legal holiday in the District of Columbia (see Notice 2011-17, 2011-10 IRB 540). The extended deadline means that semi-weekly depositors have until April 18 to make their federal payroll tax deposit for amounts withheld between April 9 and April 12. In addition, monthly depositors have until April 18 to deposit their March withholding taxes.
Most states with April 15 withholding tax deadlines (other than Massachusetts, New Jersey, and Wisconsin) are not extending the deadline to April 18. Here is a recap of the information that we have gathered from various states.
Alabama. A spokesperson for the Alabama Department of Revenue has stated that the March Form A-6, Alabama Department of Revenue Employer's Monthly Return of Income Tax Withheld, must be filed by April 15, even though the deadline for filing the Alabama personal income tax return has been extended to April 18.
Colorado. Monthly filers must file March Form DR 1094, Colorado Department of Revenue Income Withholding Tax Return, by April 15, even though the deadline for filing the Colorado personal income tax return has been extended to April 18 [Colorado Department of Revenue InfoEmail, Reminder: Income Tax Filing Deadline Changed for 2011, 2/16/11].
Kansas. A spokesperson for the Kansas Department of Revenue has stated that the March Form KW-5, Kansas Withholding Tax Deposit Report, must be filed by April 15, even though the deadline for filing the Kansas personal income tax return has been extended to April 18.
Maine. A spokesperson for Maine Revenue Services has stated that the deadline for making semiweekly deposits of withholding taxes for amounts withheld between April 9 and April 12 is still April 15, even though the federal deadline for making these deposits has been extended to April 18.
Massachusetts. The 2011 Tax Calendar on the Massachusetts Department of Revenue (DOR) website notes that the deadline for filing Form M-941W, Employer's Weekly Payment of Income Taxes Withheld, is April 19. This deadline is normally April 15. DOR offices will be closed on Monday, April 18, in observance of the Patriot's Day holiday.
Mississippi. March monthly and quarterly filers must file Form 89-105, Employer's Withholding Tax Return, by April 15, even though the deadline for filing the Mississippi personal income tax return has been extended to April 18 [Mississippi Department of Revenue Notice 70-10-003, 12/06/2010].
New Jersey. The New Jersey Division of Taxation has advised employers that the filing due date for withholding tax deposits and reports that are normally due on April 15 has been changed to April 18 [New Jersey Division of Taxation Notice, 11/30/10].
South Carolina. South Carolina generally follows the federal deadlines for making withholding tax payments. A spokesperson for the South Carolina Department of Revenue (SCDOR) has stated that employers should contact the SCDOR if they receive a penalty notice on a deposit that was normally due on April 15, but was remitted by April 18 in accordance with the federal guidelines.
Wisconsin. The Wisconsin Department of Revenue has advised employers that the filing due date for withholding tax deposits and reports that are normally due on April 15 has been changed to April 18. This change only affects the due date for semimonthly tax deposits [Wisconsin News for Tax Practitioners 11/18/2010 (Change in Filing Dates for Returns Due in 2011), 11/18/2010].
Most states with April 15 withholding tax deadlines (other than Massachusetts, New Jersey, and Wisconsin) are not extending the deadline to April 18. Here is a recap of the information that we have gathered from various states.
Alabama. A spokesperson for the Alabama Department of Revenue has stated that the March Form A-6, Alabama Department of Revenue Employer's Monthly Return of Income Tax Withheld, must be filed by April 15, even though the deadline for filing the Alabama personal income tax return has been extended to April 18.
Colorado. Monthly filers must file March Form DR 1094, Colorado Department of Revenue Income Withholding Tax Return, by April 15, even though the deadline for filing the Colorado personal income tax return has been extended to April 18 [Colorado Department of Revenue InfoEmail, Reminder: Income Tax Filing Deadline Changed for 2011, 2/16/11].
Kansas. A spokesperson for the Kansas Department of Revenue has stated that the March Form KW-5, Kansas Withholding Tax Deposit Report, must be filed by April 15, even though the deadline for filing the Kansas personal income tax return has been extended to April 18.
Maine. A spokesperson for Maine Revenue Services has stated that the deadline for making semiweekly deposits of withholding taxes for amounts withheld between April 9 and April 12 is still April 15, even though the federal deadline for making these deposits has been extended to April 18.
Massachusetts. The 2011 Tax Calendar on the Massachusetts Department of Revenue (DOR) website notes that the deadline for filing Form M-941W, Employer's Weekly Payment of Income Taxes Withheld, is April 19. This deadline is normally April 15. DOR offices will be closed on Monday, April 18, in observance of the Patriot's Day holiday.
Mississippi. March monthly and quarterly filers must file Form 89-105, Employer's Withholding Tax Return, by April 15, even though the deadline for filing the Mississippi personal income tax return has been extended to April 18 [Mississippi Department of Revenue Notice 70-10-003, 12/06/2010].
New Jersey. The New Jersey Division of Taxation has advised employers that the filing due date for withholding tax deposits and reports that are normally due on April 15 has been changed to April 18 [New Jersey Division of Taxation Notice, 11/30/10].
South Carolina. South Carolina generally follows the federal deadlines for making withholding tax payments. A spokesperson for the South Carolina Department of Revenue (SCDOR) has stated that employers should contact the SCDOR if they receive a penalty notice on a deposit that was normally due on April 15, but was remitted by April 18 in accordance with the federal guidelines.
Wisconsin. The Wisconsin Department of Revenue has advised employers that the filing due date for withholding tax deposits and reports that are normally due on April 15 has been changed to April 18. This change only affects the due date for semimonthly tax deposits [Wisconsin News for Tax Practitioners 11/18/2010 (Change in Filing Dates for Returns Due in 2011), 11/18/2010].
Treasury Dept. and IRS Extend the Deadline for Filing Form 8939 Beyond the Previously Set April 18; Guidance to Follow with a New Deadline
WASHINGTON — The Treasury Department and the Internal Revenue Service (IRS) today announced that Form 8939 is not due on April 18, 2011, and should not be filed with the final Form 1040 of persons who died in 2010. New guidance that announces the form due date will be issued at a later date and Form 8939 will be released soon after guidance is issued.
Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, is an informational return used to establish basis for income tax purposes of property acquired from a person who died in 2010.
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. The executors of the estates of certain decedents who died in 2010 were previously required to file an information return (Form 8939) relating to large transfers at death, which was due on the date of the decedent’s final Form 1040 or a later date specified in regulations issued by the Treasury Department.
Enacted in December of last year, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. The law allows executors of the estates of decedents who died in 2010 to elect to have the rules of the estate tax not apply to the property of a decedent’s estate. This election is to be made at the time and in the manner prescribed by the Treasury Department.
Treasury and the IRS plan to issue future guidance that will provide a deadline for filing Form 8939 and for electing to have the estate tax rules not apply to the estates of persons who died in 2010. The prior deadline was April 18, which remains the deadline for filing a decedent’s final Form 1040 this filing season. The forthcoming guidance will also explain the manner in which an executor of an estate may elect to have the estate tax not apply.
A reasonable period of time for preparation and filing will be given between issuance of the guidance and the deadline for filing Form 8939 and for electing to have the estate tax rules not apply. The Form 8939 is not currently available, but will be made available soon after the guidance is issued. Both will be made available on IRS.gov.
Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, is an informational return used to establish basis for income tax purposes of property acquired from a person who died in 2010.
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. The executors of the estates of certain decedents who died in 2010 were previously required to file an information return (Form 8939) relating to large transfers at death, which was due on the date of the decedent’s final Form 1040 or a later date specified in regulations issued by the Treasury Department.
Enacted in December of last year, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. The law allows executors of the estates of decedents who died in 2010 to elect to have the rules of the estate tax not apply to the property of a decedent’s estate. This election is to be made at the time and in the manner prescribed by the Treasury Department.
Treasury and the IRS plan to issue future guidance that will provide a deadline for filing Form 8939 and for electing to have the estate tax rules not apply to the estates of persons who died in 2010. The prior deadline was April 18, which remains the deadline for filing a decedent’s final Form 1040 this filing season. The forthcoming guidance will also explain the manner in which an executor of an estate may elect to have the estate tax not apply.
A reasonable period of time for preparation and filing will be given between issuance of the guidance and the deadline for filing Form 8939 and for electing to have the estate tax rules not apply. The Form 8939 is not currently available, but will be made available soon after the guidance is issued. Both will be made available on IRS.gov.
IRS Expands and Makes Permanent Its Compliance Assurance Process (CAP) for Large Corporate Taxpayers
WASHINGTON — Internal Revenue Service officials announced today that the six-year-old Compliance Assurance Process (CAP) pilot program for large corporate taxpayers is being expanded and made permanent.
“This marks another important step in our evolving relationship with corporate taxpayers,” said IRS Commissioner Doug Shulman. “Through greater cooperation and transparency, CAP taxpayers and the IRS both benefit.”
Under CAP, participating taxpayers work collaboratively with an IRS team to identify and resolve potential tax issues before the tax return is filed each year. With the major potential tax issues largely settled before filing, taxpayers are generally subject to shorter and narrower post-filing examinations.
With the CAP program growing in popularity, it is being expanded to include two additional components. A new pre-CAP program will provide interested taxpayers with a clear roadmap of the steps required for gaining entry into CAP. A new CAP maintenance program is intended for taxpayers who have been in CAP, have fewer complex issues, and have established a track record of working cooperatively and transparently with the IRS.
“CAP is a program where the tax system is at its best -- when the taxpayer and the IRS are transparent and issues are resolved before a return is filed,” Shulman said.
Details of the permanent program, including the new pre-CAP program and CAP maintenance program, are included in a revision to the Internal Revenue Manual, a revised application and memorandums of understanding (MOU) that corporations are required to submit to participate in pre-CAP and CAP.
The CAP pilot began in 2005 with 17 taxpayers and in FY 2011 there are 140 taxpayers participating. Only taxpayers with assets of $10 million or more are eligible to participate.
For more information on the Compliance Assurance Process (CAP), visit the CAP page on IRS.gov.
“This marks another important step in our evolving relationship with corporate taxpayers,” said IRS Commissioner Doug Shulman. “Through greater cooperation and transparency, CAP taxpayers and the IRS both benefit.”
Under CAP, participating taxpayers work collaboratively with an IRS team to identify and resolve potential tax issues before the tax return is filed each year. With the major potential tax issues largely settled before filing, taxpayers are generally subject to shorter and narrower post-filing examinations.
With the CAP program growing in popularity, it is being expanded to include two additional components. A new pre-CAP program will provide interested taxpayers with a clear roadmap of the steps required for gaining entry into CAP. A new CAP maintenance program is intended for taxpayers who have been in CAP, have fewer complex issues, and have established a track record of working cooperatively and transparently with the IRS.
“CAP is a program where the tax system is at its best -- when the taxpayer and the IRS are transparent and issues are resolved before a return is filed,” Shulman said.
Details of the permanent program, including the new pre-CAP program and CAP maintenance program, are included in a revision to the Internal Revenue Manual, a revised application and memorandums of understanding (MOU) that corporations are required to submit to participate in pre-CAP and CAP.
The CAP pilot began in 2005 with 17 taxpayers and in FY 2011 there are 140 taxpayers participating. Only taxpayers with assets of $10 million or more are eligible to participate.
For more information on the Compliance Assurance Process (CAP), visit the CAP page on IRS.gov.
Six Tips for Paying Estimated Taxes
Estimated tax is a method used to pay tax on income that is not subject to withholding. You may need to pay estimated taxes during the year depending on what you do for a living and what type of income you receive.
These six tips from the IRS will provide you with a quick look at estimated taxes and how to pay them.
1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
2. As a general rule, you must pay estimated taxes in 2011 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return. There are special rules for farmers, fishermen, certain household employers and certain higher income taxpayers.
3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040ES, Estimated Tax for Individuals for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15.
6. Form 1040ES, Estimated Tax for Individuals, provides all you’ll need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers. The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.
For more information on estimated taxes refer to Form 1040ES and its instructions, as well as Publication 505, Tax Withholding and Estimated Tax. These forms and publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
These six tips from the IRS will provide you with a quick look at estimated taxes and how to pay them.
1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
2. As a general rule, you must pay estimated taxes in 2011 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return. There are special rules for farmers, fishermen, certain household employers and certain higher income taxpayers.
3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040ES, Estimated Tax for Individuals for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15.
6. Form 1040ES, Estimated Tax for Individuals, provides all you’ll need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers. The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.
For more information on estimated taxes refer to Form 1040ES and its instructions, as well as Publication 505, Tax Withholding and Estimated Tax. These forms and publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Friday, April 1, 2011
Read This if you Need More Time to Pay Your Taxes
Taxpayers who owe taxes may be relieved to know that there are some options for those who owe and can’t afford to pay the full amount right away.
Here are the top 10 things the IRS wants you to know if you need more time to pay your taxes.
1. Taxpayers who are unable to pay all taxes due are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less.
2. Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, temporary delay or an Offer in Compromise.
3. If you cannot pay the full amount, taxpayers should immediately call the number or write to the address on the bill they receive.
4. You may want to consider financing the full payment of your tax liability through a loan. The interest rate and fees charged by a bank or credit card company are usually lower than interest and penalties imposed by the Internal Revenue Code.
5. If you cannot pay in full immediately, you may qualify for a short amount of additional time, up to 120 days, to pay in full. No fee is charged for this type of payment arrangement and this option may minimize the amount of penalties and interest you incur.
6. You may also want to consider an installment agreement. This arrangement allows you to make monthly payments after a one-time fee of $105 is paid. If you choose to pay through a Direct Debit from your bank account, the fee is reduced to $52. Lower-income taxpayers may qualify for a reduced fee of $43.
7. To apply for an installment agreement you can use the Online Payment Agreement application available on the IRS website; file a Form 9465, Installment Agreement Request; or call the IRS at the telephone number shown on your bill.
8. In some cases, a taxpayer may qualify for an offer in compromise, an agreement between the taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.
9. Even if you set up an installment agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make the final payment.
10. It is important to respond to an IRS notice. If you do not pay your tax liability in full or make an alternative payment arrangement, the IRS is entitled to take collection action.
More information on the collection process is available at http://www.irs.gov.
Here are the top 10 things the IRS wants you to know if you need more time to pay your taxes.
1. Taxpayers who are unable to pay all taxes due are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less.
2. Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, temporary delay or an Offer in Compromise.
3. If you cannot pay the full amount, taxpayers should immediately call the number or write to the address on the bill they receive.
4. You may want to consider financing the full payment of your tax liability through a loan. The interest rate and fees charged by a bank or credit card company are usually lower than interest and penalties imposed by the Internal Revenue Code.
5. If you cannot pay in full immediately, you may qualify for a short amount of additional time, up to 120 days, to pay in full. No fee is charged for this type of payment arrangement and this option may minimize the amount of penalties and interest you incur.
6. You may also want to consider an installment agreement. This arrangement allows you to make monthly payments after a one-time fee of $105 is paid. If you choose to pay through a Direct Debit from your bank account, the fee is reduced to $52. Lower-income taxpayers may qualify for a reduced fee of $43.
7. To apply for an installment agreement you can use the Online Payment Agreement application available on the IRS website; file a Form 9465, Installment Agreement Request; or call the IRS at the telephone number shown on your bill.
8. In some cases, a taxpayer may qualify for an offer in compromise, an agreement between the taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.
9. Even if you set up an installment agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make the final payment.
10. It is important to respond to an IRS notice. If you do not pay your tax liability in full or make an alternative payment arrangement, the IRS is entitled to take collection action.
More information on the collection process is available at http://www.irs.gov.
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