Important Federal Tax Developments for 2011

The last few years have been extremely busy in terms of education for your accountants.

During the third quarter of 2011, there were many important federal tax developments -- enough to keep the team at BCWS hopping to stay on the front lines in terms of education.

Here are highlights of some of the most important updates:

Federal taxes

President Obama unveiled a number of tax proposals and revenue raisers in September as part of his proposed American Jobs Act.

• The Act proposes to extend and enhance the 2011 employee-side payroll tax cut
• Expand tax credits for hiring military veterans
• Extend 100 percent bonus depreciation
• The Jobs act proposes NOT to extend the Bush-era tax cuts for higher income taxpayers.

 

Worker classification

The IRS unveiled the Voluntary Classification Settlement Program (VCSP) in September. The VCSP is open to employers that currently treat their workers as independent contractors and that want to prospectively treat the workers as employees. The VCSP provides a reduced penalty framework and audit protection to qualified employers.

Cell phones

• The IRS announced that employer-provided cell phones, provided primarily for noncompensatory business reasons, will not be treated as taxable compensation to employees and that personal use is nontaxable.
• Likewise, employer reimbursements to employees who use their personal cell phones for business will not be taxable.

Exempt organizations

The IRS issued final regulations to implement redesigned Form 990, Return of Organization Exempt From Income Tax. The final regulations reflect proposed regulations and provide for the elimination of the advance ruling process for new Code Sec. 501(c)(3) organizations.

Health care reform

• The Sixth Circuit Court of Appeals upheld the constitutionality of the individual coverage mandate in the Patient Protection and Affordable Care Act (PPACA).
• In Thomas More Law Center v. Obama, CA-6, June 29, 2011, the Sixth Circuit found the health care reform law was a reasonable exercise of Congress’ authority to regulate commerce.
• However, the Eleventh Circuit Court of Appeals struck down the individual mandate in the PPACA in August.
• The Eleventh Circuit found that Congress cannot require individuals to enter into contracts with insurance providers.

 

Tax collection

The IRS increased its enforcement revenue in fiscal year (FY) 2010, the Treasury Inspector General for Tax Administration (TIGTA) reported in August. FY 2010 gross collections included approximately $1.2 trillion from individual taxes, $800 billion from employment taxes and $300 billion from corporate taxes.

The information here was culled from various issues of the CCH Federal Tax Weekly. For a complete resource for all the Federal Tax Developments for 2011, click here or here.

If you have any questions about these updates, or any tax questions, please contact our office.

 

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