From the Boston Tax Institute

Originally published on Passive Activities and Other Oxymorons on June 14th, 2011.
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Boston Tax Alert 2011-30,2011-31, 2011-32


Lu Gauthier of The Boston Tax Institute has given me permission to republish his newsletter. The BTI newsletter is a regular feature of this blog now going up every Tuesday. Be sure to check out the BTI catalog for great CPE value.


On or about 06/01/11, final regulations were published governing practice before the Internal Revenue Service. The regulations generally are effective 60 days after publication in the Federal Register. Among other things, the regulations define practice to include preparing and filing documents such as tax returns and define disreputable conduct to include willfully failing to file tax returns on eletronic media, willfully preparing or signing a return without a valid PTIN, and willfully representing a taxpayer without being authorized to do so. The regulations also generally conform the standards under Circular 230 for preparing returns with the standards under section 6694. These topics will be discussed in detail in our 4 hour seminars entitled Preparer Penalties/Circular 230 which provide 4 CREDIT HOURS OF INSTRUCTION ON ETHICS. -------------------------------------------------------------------------------------------------------------

Our thanks to Patricia Ann Metzer, Attorney for the following email!

The Tax Code's deferred compensation provisions raise complex interpretative issues. The IRS pronouncements highlight the strong relationship between two of these provisions - 457 and 409A. Last year, the IRS came out with guidance (Rev. Rul. 2010-27) on unforeseeable emergency - one circumstance under which payments can be made to participants under eligible 457(b) plans before their severance from employment. Under the given conditions, an unforeseeable emergency is stated to include significant water damage to your home not covered by insurance, and funeral expenses for an adult child. The IRS adds that the same standards will apply to determine whether a distribution due to an unforeseeable emergency is permitted under a 409A nonqualified deferred compensation plan.

The approach is consistent with that taken by the IRS in 2007, when it said that concepts similar to those developed under 409A would apply to determine whether an arrangement providing severance benefits is not subject to 457, and when a benefit (not provided under an eligible 457 plan) is currently taxable because it is not subject to a substantial risk of forfeiture.

The upcoming seminar on 409A/Non-Qualified Deferred Compensation will deal with both 409A and the other Tax Code provisions you need to know about when it comes to deferred compensation. Items to be addressed include how mistakes in 409A drafting can be corrected on a timely basis without, in some cases, a toll charge. IRS correction procedures were most recently announced in Notice 2010-80.

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Our thanks to Maurice Gilbert, CPA, MST for the following email!

The New Hampshire Legislature on June 1st passed new legislation that radically changes the New Hampshire Reasonable Compensation deduction under the Business Profits tax and is sending the law to Governor Lynch for his signature. The new statute will apply to 2011 taxable periods creating 3 different standards: pre-2010 taxable periods, 2010 taxable periods and post-2010 taxable periods. The new statutory language and the various standards will be discussed in detail at our seminar entitled NH Reasonable Compensation and NH Combined Reporting on June 13 at the Chateau Restaurant in Andover. Please remember to add $17 to your registration fee for the required lunch.

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