IRS further delays health insurance coverage information reporting for small employers. The new health reform legislation generally requires employers to report the cost of health insurance they provide to employees on their W-2 forms. Last fall, the IRS made this new reporting requirement optional for all employers for the 2011 Forms W-2. More recently, the IRS announced that the reporting requirement will continue to be voluntary for small employers at least through 2012.
New settlement offer for those voluntarily disclosing unreported offshore income. The IRS has announced a second voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. It will be available through Aug. 31, 2011. The IRS released details of the new voluntary offer, called the 2011 Offshore Voluntary Disclosure Initiative (OVDI), in the form of 53 frequently asked questions (FAQs). As with the first offer, participants have to pay back taxes and penalties but will avoid criminal prosecution. The offshore penalty is different under the new offer. The general rule is that the penalty is 25% based on amounts in foreign bank accounts, but can be as low as 12.5% or 5% for some taxpayers.
• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
• Creating easier access to Installment Agreements for more struggling small businesses; and
• Expanding a streamlined Offer in Compromise program to cover more taxpayers.
Another Appeals Court upholds IRS’s time limit on spousal relief requests. Married joint return filers are jointly and severally liable for the tax arising from their returns. Innocent spouses may request relief from this liability in certain circumstances. An IRS regulation states that a request for equitable innocent spouse relief must be no later than two years from the first collection activity against the spouse. The Tax Court had found this regulation invalidly imposed a time limit. However, the Court of Appeals for the Third Circuit has reversed the Tax Court and upheld the regulation (so has the Court of Appeals for the Seventh Circuit).
Business expenses of professional gamblers not limited. Gambling losses may be deducted only to the extent of gambling winnings, even in the case of an individual engaged in the trade or business of gambling. Previously, the Tax Court had held that losses for purposes of the limitation included both the cost of wagers and business expenses. Earlier this year, the Court overruled its prior position and now says that a professional gambler’s business expenses are not subject to the loss limitation.
Physician statement alone doesn’t establish financial disability to toll limitations period. In general, a taxpayer must file a claim for credit or refund of tax within three years after filing the return or two years after paying the tax, whichever period expires later. (Code Sec. 6511(a)) However, the statute of limitations is suspended for certain taxpayers who are unable to manage their financial affairs because of a medically determinable mental or physical impairment. A physician’s statement must be submitted to claim this relief, but a Court has made clear that the statement alone doesn’t establish that the taxpayer was financially disabled. Thus, it allowed the IRS to seek additional proof of the taxpayer’s condition.