Interim guidance on equitable innocent spouse relief
Article Abstract:
The IRS introduced Notice 98-61 as interim guidance on equitable innocent spouse relief under Secs 6015(f) or 66(c). According to Sec 6015, relief from joint and several liability for tax, interest and penalties is available under specific circumstances. Eligibility for relief is possible if seven conditions are satisfied. Taxpayers applying for relief will be given relief in one of four circumstances: the liability indicated on a joint return was not paid when the return for that year was reported, the individual is divorced or legally separated from the spouse, the individual was not aware and had no way of being informed that payment of the tax due would not be made, and the individual would suffer if relief were not permitted. Meanwhile, the reformed Sec 66(c) includes a similar equitable relief provision for community property circumstances. The Notice takes effect after Dec 6, 1998.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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Shrink the FICA tax on nonqualified plan benefits
Article Abstract:
Final regulations under Sec 3121(v)(2) provide clarifications on payment of the Federal Insurance Contributions Act (FICA). In particular, these regulations discuss precisely who is responsible for FICA tax on nonqualified plan benefits, how the tax is to be paid, and when it is to be paid. Among the issues touched on by the final regulations are the amount deferred, income and reasonable rate of interest, timing of inclusion, and withholding rules. Employers may find daunting the task of determining their FICA tax liability for nonqualified deferred compensation. The foremost part of their task is to assess the structure of the plans to see if they can be treated as nonqualified plans under Sec 3121(v)(2). They can creatively organize their plan to minimize their FICA tax liability. withholding of FICA tax is also possible for certain nonqualified plans.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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'Usual' exemptions and deductions trigger AMT liability
Article Abstract:
The Tax Court has ruled that middle-class taxpayers without any tax preference items are subject to the alternative minimum tax. The ruling arose out of the decision in the Klaassen case in which the defendants were parents of 10 dependent children. Their AGI for 1994 amounted to $83,000 while their itemized deductions was $19,500. They also deducted another $29,400 for 12 personal exemptions and had a taxable income of $34,100. They estimated their income tax to be $5,111 but neglected to calculate their tax liability using the AMT system. However, the IRS assessed them another $1,085 due to the AMT. The IRS noted that there were mistakes in the deductions that the couple claimed which pushed their taxable income to $68,832.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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