IRS Administrative Policy Regarding Self-Correction (APRSC): rewards and risks

Article Abstract:

The IRS issued its Administrative Policy Regarding Self-Correction (APRSC) in late 1996 to replace the more limited Administrative Policy Regarding Sanctions (APRS), but qualified plan administrators will still be taking risks if they rely on the availability of such relief. The APRSC provides for relief from disqualification when the plan takes self-correction steps or the plan violations are considered insignificant. Lack of clear guidance on many issues can result in limited assurance for plan administrators that errors will not result in sanctions or disqualifications.

Tax administration and procedure, Tax administration, Taxpayer compliance

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Changes and choices: 401(k) options under the Small Business Job Protection Act

Article Abstract:

The Small Business Job Protection Act of 1996 offers a number of tax law changes that promise to benefit companies that offer 401(k) plans and may encourage other employers to use 401(k) or SIMPLE plans. The definition of highly compensated employees has been simplified, and safe harbors have been established that will allow certain plans to avoid some nondiscrimination testing. The definition of compensation has been revised to include contributions to 401(k) and cafeteria plans. The Act establishes SIMPLE plans to be used by qualifying small businesses.

Salary reduction savings plans, 401K plans

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New, lower capital gain rates apply to net unrealized appreciation in employer securities distributed from qualified plans

Article Abstract:

In-kind distributions of employer securities from qualified employee benefit plans made from May 6, 1997 to possibly Jan 1, 2001 will be taxed to recipients according to a two-step capital gains rate determination. IRS Notice 98-24 made holding period adjustments to harmonize with changes made by the Taxpayer Relief Act of 1997. Net unrealized appreciation built up in the plan and after distribution could be taxed at different rates depending upon the recipient's holding period.

Public Finance Activities, Personal Income Tax Rates, Personal income tax, Capital gains tax, Corporate distributions, Tax rates, Stock transfer

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