July 31, 2011

 

IRS Aids Innocent Spouses

 

            Effective immediately, the IRS eliminated a rule that disqualified taxpayers from innocent spouse status if they failed to file for relief within two years. This will be of particular help to abused women.

 

            Agency officials said the change will apply to past as well as current cases. In its announcement, the IRS invited taxpayers who were denied relief solely because of the two year limit it changed to reapply. Wall Street Journal 7/26/11.

 

The FUTA Surtax Is Killed By Republican House

 

            Beginning July 1, the .2% federal unemployment tax surtax is no longer in effect. The temporary surtax was enacted in 1976. The surtax was part of the 6.2% gross unemployment tax rate that employers paid on the first $7,000 of wages paid annually to each employee (6% permanent tax rate, .2% temporary surtax).

 

            Ways and Means Committee Chairman, Dave Camp, applauded the fact that    Republicans have refused to entertain an extension of this “temporary” tax on jobs beyond its current June 30, 2011 expiration date.

 

            The IRS said employers would need to separately track FUTA taxable wages paid before and after July 1.

 

            The IRS is working on revising Form 940, Employer’s Annual Federal Unemployment Tax Return to take into account the elimination of the tax. The return is due January 2012.

 

            The IRS has also said they will have some mechanism in place under which an employer would not be assessed deposit penalties if it computed its unemployment tax deposits at a 6.0% rate, and legislation was enacted to retroactively reinstate the tax. Federal Taxes Weekly Alert Vol 57 #27 7/7/11.

 

All That I Need

            Just 17% of American workers believe they should accumulate at least $1 million in savings and pre-tax accounts for their ultimate retirement needs. Employee Benefit Research Institute.   

Tax Lessons from John Edwards’ Indictment

            Could two obscure taxes paid by a wealthy heiress save a former presidential candidate from prison? In June, former senator and presidential candidate John Edwards was indicted by a North Carolina grand jury on charges of violating campaign finance laws. The indictment involves more than $925,000 in payments allegedly made by two donors to conceal his mistress during the 2008 presidential campaign.

            Although the indictment does not name the donors, it say “Person C” gave about $725,000 and “Person D” gave more than $200,000 to hide the pregnant mistress. Person C has been identified as Rachel “Bunny” Mellon the 100 year old daughter of a founder of Warner Lambert pharmaceuticals and widow of philanthropist, Paul Mellon.

            It is alleged by her lawyer that Ms. Mellon intended her contribution to be a personal gift, not a campaign contribution. It is estimated that she paid $799,000 in gift and generation skipping taxes to make her $725,000 gift: Thus, Mrs. Mellon’s gift tax could help Mr. Edwards’ case that he did not violate campaign finance laws. The law is cloudy and the case is unprecedented.

            Whatever the outcome, the lesson for ordinary folks is clear. Keep good records and never lie to the government. Mrs. Mellon has not been accused of wrongdoing. Wall Street Journal 7/9-10, 2011 p. B9.

            As always, if you have any questions about these or any other matters, do not hesitate to call us.

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