Posts Tagged ‘Massachusetts’

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Massachusetts—Income Tax: Guidance Provided on NOL Carryforward for S Corporations and Their Qualified Subsidiaries

Wednesday, July 11th, 2012 by Moore McLaughlin

The Massachusetts Department of Revenue has issued a directive that discusses the Massachusetts corporate excise and personal income tax treatment of net operating loss (NOL) carryforward for tax years after December 31, 2008, for S corporations and their qualified S corporation subsidiaries (QSubs). Specifically, the directive addresses the consequences of recent statutory changes with respect to the taxation of S corporations and their QSubs.

Generally, an S corporation filing its returns for a tax year after 2008 is permitted to use a loss carryforward that was generated by its QSub. To calculate the amount of the NOL, a QSub must calculate the income or loss for each year beginning with the taxable year after the loss year, whether or not the QSub was subject to the Massachusetts tax. The loss is then reduced by the QSub’s positive income amounts in succeeding tax years for the five-year carryforward period.

Carryforward Calculation

Specific to tax years prior to January 1, 2009, in order for an S corporation to use a loss carryforward that derives from a QSub, the QSub must perform a carryforward calculation for all intervening tax years. For tax years in which the QSub is subject to Massachusetts tax on its income the loss or income that is included in the carryforward calculation is the actual Massachusetts net income amount before apportionment. For years in which the QSub is not subject to the income tax, the QSub must perform a pro forma calculation of its income or loss for that year. The carryforward amount must be reduced by the income that derives from a year after the year in which the loss was generated. The calculation must be performed for each year until the QSub is no longer treated as a separate taxable entity or until the carryforward is fully depleted. If the NOL carryforward is fully depleted by reason of the calculation, the S corporation is not entitled to use any of the QSub’s carryforward.

Pre-apportionment and Post-apportionment Carryforward Rules

There are two different rules for calculating the amount of an NOL that can be carried forward because of recent statutory changes. For the 2009 tax year an S corporation can generally use an allowable loss carryforward amount and those losses are carried forward on a pre-apportionment basis. For tax years after January 1, 2010, an S corporation may use an allowable NOL carryforward amount but it must be determined and carried forward on a post-apportionment basis. Further, the amount of the loss carryforward taken by the S corporation that is attributable to an individual entity for a prior taxable year is determined in proportion to the amount of each entity’s carryforward loss available from that prior taxable year, subject to the relevant pre-apportionment or post-apportionment rules.

Finally, the directive provides examples on how to report NOL carryforwards on a return and how to report the use of the post-apportionment losses. Directive 12-3, Massachusetts Department of Revenue, June 27, 2012.

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Posted in IRS and state tax collections, Tax Current Events and News, Tax planning

Understanding Medicare Private Fee-for-Service Plans

Tuesday, May 15th, 2012 by Moore McLaughlin

Private fee-for-service (PFFS) plans are a way to give private insurance companies access to the vast Medicare market and are part of an effort to further privatize Medicare. PFFS plans are the fastest-growing Medicare Advantage plans on the market. While the additional benefits these plans often offer may look attractive, Medicare beneficiaries should look carefully before they leap into one.

In a PFFS, Medicare pays a set amount each month to a private insurer to provide health coverage on a fee-for-service basis to Medicare beneficiaries. Unlike a health maintenance organization (HMO) or preferred provider organization (PPO), PFFS members can choose from any Medicare-approved provider as long as the provider is willing to accept the plan’s payment terms. PFFS plans differ from original Medicare in that there is no limit to the premiums or co-payments a PFFS can charge. PFFS plans may offer additional benefits, such as vision or dental, but members may have to share some of the costs with Medicare. PFFS plans may let providers charge up to 15 percent above the plan’s payment amount for services.

Although the additional benefits offered through a PFFS plan may seem advantageous, a report by the Medicare Rights Center finds that private Medicare plans actually offer many disadvantages compared to original Medicare. For example, care can be more expensive because co-payments may be higher. In addition, it may be more difficult to find a doctor who will accept the plan’s payment terms. PFFS plans have also come under scrutiny for their aggressive marketing practices. Sales agents have been accused of fraud for signing up seniors who were not aware how PFFS plans differed from original Medicare.

Before you enroll in a PFFS plan, look closely at the monthly premium, co-payments, and the cost of extra benefits to make sure that this is a plan you can afford. You can call 1-800-MEDICARE or go to www.medicare.gov to compare plans.

Prescription drug coverage
Some PFFS plans offer prescription drug coverage. If the plan you choose has drug coverage, you must use the coverage offered by that plan. You may not enroll in a separate drug plan. If your PFFS plan does not offer prescription drug coverage, you can either switch to another plan that has drug coverage or add this coverage separately.

Switching plans
You can only switch to a different PFFS plans or back to original Medicare at certain times of the year. You can switch during the election period from November 15-December 31 or during the open enrollment period from January 1-March 31 of each year. Note that if you are switching from a PFFS plan with drug coverage to one without, the only time you can add drug coverage is during the election period from November 15-December 31.

For more information on how PFFS plans work, click here.

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Posted in Asset Protection Planning, Elderlaw/Law For Life, Estate Planning

Massachusetts—Personal Income Tax: Part B Income Tax Rate Reduced

Monday, December 19th, 2011 by Moore McLaughlin

The Massachusetts Department of Revenue has announced that for tax years after 2011 the Part B personal income tax rate will be reduced to 5.25% (previously 5.3%). The tax rate for Part B income is subject to reduction by 0.05% if the inflation-adjusted growth in baseline taxes in the fiscal year ending June 30 of the previous year exceeds 2.5% and the inflation-adjusted growth in baseline taxes for each consecutive three-month period reported by the Commissioner of Revenue between August and December of the previous year is greater than zero. There is a minimum rate of 5%.

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Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning

Beware “Living Trust” Scams

Wednesday, September 21st, 2011 by Moore McLaughlin

Around this time of year, unscrupulous companies step up their efforts to market costly living trusts to older Americans — arrangements that may actually undermine the buyer’s economic security.

According to the AARP, the Federal Trade Commission (FTC), and a number of state attorneys general, these high-pressure con artists have built an industry around older people’s fears that their estates could be eaten up by probate costs or taxes, or that the distribution of their assets could be delayed for years. The solution, they claim, is a living trust.

“What these fast-talking crooks don’t tell their clients,” AARP Volunteer Consumer Affairs Specialist Irma Swantner says, “is that the “living trust” they’re selling could become the buyer’s “living hell.”

The living trust is an estate planning device that eliminates the need for probate of the individual’s estate at his death. Assets are held in the trust and then distributed outside of probate at the time of death.

There is nothing wrong with a living trust or with trying to avoid probate. Attorneys may recommend a living trust as an estate planning device for some of their clients where it is appropriate for their particular needs. However, salespeople masquerading as professional estate planners are working the provinces trying to convince older Americans that such trusts are for everyone. Going door-to-door or using phone solicitation, they often greatly exaggerate the costs and delays of probate and are unlikely to mention that the vast majority of estates are not subject to federal or state estate taxes. Their products are “cookie-cutter” living trusts, sometimes in the form of living trust kits.

The problem is that many people don’t need a living trust, a trust from a kit may not meet a particular client’s needs, and often these companies charge more than the service is worth. In addition, according to the FTC, some companies are using the living trust concept merely as a way to gain access to consumers’ financial information and sell them other financial products, such as insurance annuities.

Among the dangers of “one-size-fits-all” living trusts, say AARP officials, is that in many cases they won’t make the grantor and spouse eligible for Medicaid reimbursement of nursing home costs. In addition some trusts improperly instruct the trustee to distribute property to beneficiaries immediately upon the death of the grantor. If creditors make a claim against the trust after asset distribution, the trustee becomes personally liable for any valid claims against the trust.

According to an AARP study published in 2000, about four million people older than 50 with less than $25,000 in annual income may have purchased costly, unnecessary, and potentially dangerous living trusts as a result of high-pressure sales tactics by firms masquerading as AARP affiliates. In fact, AARP is not associated with and does not endorse any company that markets or sells living trusts.

The Federal Trade Commission also reminds consumers of the “Cooling-Off Rule,” which provides that if you buy a living trust in your home or somewhere other than the seller’s permanent place of business (say, at a hotel seminar), the seller must give you a written statement of your right to cancel the deal within three business days.

To help older adults and families make better decisions about annuities, the Healthcare and Elder Law Programs Corporation (H.E.L.P.) has created a Web site, annuitytruth.org.

Or, better yet, seek the advice of a qualified elder law attorney, such as Jill E. Sugarman, before signing anything. You can contact Jill at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

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Posted in Asset Protection Planning, Elderlaw/Law For Life, Estate Planning, Tax planning

Massachusetts Enacts 2011 Sales Tax Holiday and Provides Guidelines

Monday, August 8th, 2011 by Moore McLaughlin

On August 1, 2011, Massachusetts Governor Deval Patrick signed legislation, establishing a sales tax holiday on August 13 and 14, 2011. The bill provides that the state sales tax will not be imposed on nonbusiness sales at retail of tangible personal property with a purchase price of $2,500 or less. Telecommunications, tobacco products subject to the cigarette excise tax, gas, steam electricity, motor vehicles, motorboats, and meals will be excluded. Transfer of possession of or payment in full for the property shall occur on one of those days, and prior sales or layaway sales are ineligible. The Department of Revenue has issued guidelines implementing the 2011 sales tax holiday. (applicable to sales on 08/13/2011 and 08/14/2011)

Qualifying purchases. The sales tax exemption applies to sales of tangible personal property for personal use only. Purchases exempt from sales tax are also exempt from use tax. Therefore, eligible items of tangible personal property purchased on the Massachusetts sales tax holiday from out-of-state retailers for use in Massachusetts are exempt from Massachusetts use tax.

Nonexempt sales. The sales tax holiday does not apply to sales of motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products, and any single item costing in excess of $2,500.

“Motor vehicle” means a motorized, self-propelled vehicle which is constructed and designed for transportation or travel over a land surface, including low-speed vehicles and limited use vehicles, but not including motorized bicycles. It also means snow vehicle and recreation vehicle. Rentals of motor vehicles are also not eligible for the holiday.

Motorboats, including jet skis, are not exempt under the sales tax holiday. Generally, the sales tax holiday will apply to purchases of canoes, kayaks, rowboats, and other types of watercraft with no mechanical propulsion, provided that the sales price is $2,500 or less.

“Meals” are any food or beverage, or both, prepared for human consumption and provided by a restaurant, where the food or beverages is intended for consumption on or off the restaurant premises, and includes food or beverages sold on a “take out” or “to go” basis, whether or not they are packaged or wrapped and whether or not they are taken from the premises of the restaurant.

Gas for purposes of the holiday refers to natural gas. Sales of gasoline are not subject to the sales tax.

“Telecommunications services” are any transmission of messages or information by electronic or similar means, between or among points by wire, cable, fiber optics, laser, microwave, radio, satellite or similar facilities but not including cable television. Sales of prepaid calling arrangements and cards are not eligible for the sales tax holiday. Telecommunications equipment, such as a telephone or cell phone purchased for nonbusiness use, is eligible for the sales tax holiday

Tobacco products include cigarettes, cigars and smoking and smokeless tobacco. Layaway sales do not qualify for the exemption even if the last required payment or payments necessary to complete the transaction are made on August 13 or 14, 2011. Sales of the excluded items remain taxable.

Specific rules. The Department provided specific rules to be applied by retailers in administering the Massachusetts sales tax holiday exemption.

Threshold: Generally, sales or use tax is due on the entire sales price of a single item worth more than $2,500. The sales price is not reduced by the threshold amount. However, since there is no sales tax on any article of clothing worth less than $175, only the increment of the sales price of the article of clothing over $175 is subject to tax.

Multiple items on one invoice: Separate invoices do not have to be prepared when a customer purchases multiple items during the sales tax holiday. As long as each item is priced $2,500 or less, there is no upper limit on the tax-free amount each customer may purchase.

Bundled transactions: When several items are offered for sale at a single price, the entire package is exempt if the sales price of the package is $2,500 or less. Items that are priced separately and are to be sold separately qualify for the sales tax holiday exemption if the price of each item is $2,500 or less.

Coupons and discounts: If a store coupon or discount reduces the sales price of an article, the discounted sales price determines whether the sales price is within the sales tax holiday threshold. If the purchaser bought both an eligible property and a taxable property and the coupon or discount applies to the total amount paid by the purchaser, the seller allocates the discount on a pro rata basis to each article sold.

Exchanges: In case of an even exchange of an eligible item purchased during the sales tax holiday no tax is due even if the exchange is made after the sales tax holiday.

Special orders: Special order items are eligible for the sales tax holiday exemption provided they are ordered and paid in full on the sales tax holiday weekend and the cost of each item is $2,500 or less even if the items are delivered at a later date. A prior special order purchase with a deposit made before August 13, 2011 will not qualify for the sales tax holiday exemption even if the customer pays the entire remaining balance due on August 13 or 14, 2011.

Rain checks: Eligible property bought with the use of a rain check during the sales tax holiday weekend qualifies for the exemption regardless of when the rain check was issued. Issuance of a rain check during the sales tax holiday weekend will not qualify otherwise eligible property for the sales tax holiday exemption if the property is actually purchased after the sales tax holiday.

Rentals: Generally, rentals for 30 days or less of eligible tangible personal property are eligible for the sales tax holiday even if the rental period covers days before or after the holiday provided payment in full is made during the sales tax holiday weekend.

Rebates: A rebate is generally treated as a cash discount and is excluded from the sales price. So, the discounted sales price determines whether the sales price is within the sales tax holiday threshold. If the customer receives a rebate after the sale by mailing a coupon to the manufacturer, the full purchase price of the property determines whether the sales price is within the sales tax holiday price threshold and tax must be charged on the full purchase price if it is over $2,500. If the customer receives a cash discount from the vendor upon the purchase of tangible property and a manufacturer’s rebate after the sale, only the cash discount given by the vendor is excluded from the sales price for purposes of the sales tax holiday exemption.

Internet sales: An eligible property ordered over the Internet is exempt if it is ordered and paid for on August 13 or 14, 2011, Eastern Daylight Time, even if the property is delivered after the sales tax holiday period.

Splitting items normally sold together: Articles normally sold as a single unit cannot be priced separately and sold as individual items in order to qualify for the sales tax holiday exemption.

Returns: Under the law, sales tax may only be refunded if returns are made within 90 days of the sale. During the 90-day period after August 13 or 14, 2011, a retailer may not credit a retail customer who returns an item that could have qualified for the sales tax holiday exemption, unless the customer provides a receipt or invoice showing the tax was paid or the seller’s records show that tax was paid.

Erroneously collected taxes: Customers who were erroneously charged sales tax for an exempt purchase may obtain a tax refund from the vendor. The vendor that has remitted erroneously collected tax to the Department may file an abatement application within three years with satisfactory evidence that the vendor credited or refunded the tax to the purchaser.

Retailers’ responsibilities. All Massachusetts businesses normally making taxable sales of tangible personal property on August 13 and 14, 2011 and out-of-state retailers registered to collect Massachusetts sales and use taxes must participate in the sales tax holiday. Any sales or use tax erroneously collected by a retailer during the sales tax holiday must be remitted to the Department. Retailers must keep normal business records showing the date of sale, items purchased and selling price. Purchasers paying for tangible personal property with business credit cards or checks must be charged tax on the items purchased. Normal business records showing the date of sale, items purchased, and selling price must be kept by the retailer/vendor. However, a separate certification from the purchaser on transactions of $1,000 or more will not be required for the 2011 sales tax holiday.

Penalties. Retailers that back-date sales occurring after August 14, 2011 or that forward-date sales that occurred before August 13, 2011 in order to make them appear to qualify for the sales tax holiday may be subject to the tax evasion penalties of Mass. Gen. L. § 73 , including a felony conviction, a fine of not more than $100,000 or $500,000 in the case of a corporation, or by imprisonment for not more than five years, or both, and may also be required to pay the costs of prosecution.

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Posted in IRS and state tax collections, Tax Current Events and News, Tax planning

Massachusetts Enacts 2012 Budget Act

Wednesday, July 13th, 2011 by Moore McLaughlin

On July 11, 2011, Governor Deval Patrick signed the 2012 budget act, which postpones the Statement of Financial Accounting Standards 109 (FAS 109) deduction allowed certain corporations by a year, shortens the tax audit process, allows a deduction related to human organ donation, provides for recalculation of the dairy tax credit or trigger price in certain circumstances, and establishes a life sciences tax incentive program. It also provides certain sales tax exemption and revises certain administrative provisions.

Income tax. Life sciences tax incentive program: Effective as of January 1, 2009, a life sciences tax incentive program is established. The Life Sciences Center, in consultation with the Department of Revenue may authorize incentives not exceeding $25 million annually. Effective for tax years beginning on or after January 1, 2012, a taxpayer who commits to the creation of a minimum of 50 net new permanent full-time positions in Massachusetts is allowed, to the extent authorized by the life sciences tax incentive program, a refundable jobs credit against personal and corporate income taxes.

FAS 109 deduction: The implementation of the deduction allowed to limit the impact of combined reporting on the financial statements of some publicly traded corporation is delayed to 2013. The deduction was to be prorated over the 7-year period beginning with the combined group’s taxable year that begins 2012.

Organ donation related expenses: Effective for taxable years beginning on or after January 1, 2012, a resident individual who donates an organ to another person for human organ transplantation may claim a deduction in an amount equal to the travel expenses, lodging expenses and lost wages not to exceed $10,000 that the individual incurred in donating his or her organ. Human organ means all or part of human bone marrow, liver, pancreas, kidney, intestine or lung.

Daily farmer tax credit program: Effective July 1, 2011, the law requires that the regulations for the implementation, administration, and enforcement of the daily farmer tax credit program must provide that when the board of food and agriculture determines that an error has been made in calculating the trigger price or in reporting or collecting data used in the calculation of the trigger price or the tax credit, the Commissioner must recalculate said trigger price or tax credit.

Sales tax. Effective July 1, 2011, a sales tax exemption is provided for sales of physician-prescribed, medically necessary breast pumps.

Property tax. A person required to file a true list of taxable personal property may not be prevented from inspecting or receiving a copy of his or her submission.

Cigarette tax. Applicable to stamps purchased on or after January 1, 2012, a higher amount that a stamper may withhold as compensation in case of encrypted stamps purchased is provided. A stamper who has complied with cigarette tax law may withhold from each payment to be made by that stamper for such stamps as compensation the following amounts: (1) for encrypted stamps purchased and not returned for an abatement, $12 per roll of 1,200 stamps; and (2) in each fiscal year, $600 per roll of 30,000 encrypted stamps for the first 50 rolls purchased and $200 per each additional roll of 30,000 encrypted stamps purchased. Current law only provides for non-encrypted stamps purchases, which is $1.85 for each 600 stamps purchased.

Administrative provisions. Interests on deficiency assessments: Applicable to interest accruing on deficiency assessments where the audit resulting in the deficiency assessment commences after July 1, 2011, the tax audit cycle is shortened by reducing some interest penalties charged businesses if the Department takes more than 18 months to perform an audit provided the taxpayer meets certain conditions.

Abatement and assessment periods: Applicable to requests for refund or applications for abatement filed with the Commissioner on or after July 1, 2011, the statutes of limitations for assessment and abatements are revised. However, the change will not apply with respect to tax periods where the statute of limitations for refund or abatement, as applicable, had expired prior to July 1, 2011.

A request for a refund or credit of an overpayment of any tax where a required return has not been timely filed must be made by filing the overdue return within three years from the due date of the return, taking into account any extension of time for filing the return, or within two years of the date that the tax was paid, whichever is later. A request for a refund or credit of an overpayment of any tax where no return is required must be made by the taxpayer within two years from the time the tax was paid. A request for a refund or credit of an overpayment of tax where the required return was timely filed must be made within the period permitted for abatement for that return. Where a refund or credit results from an abatement, the amount of the refund or credit must be limited to the amount paid or deemed paid within three years of the date that the application for abatement is filed, taking into account any extension of time for filing the return. Previously, a request for a refund or credit of an overpayment of any tax where a required return has not been timely filed must be made by filing the overdue return within three years from the due date of the return, without regard to extension of time for filing the return, or within two years of the date that the tax was paid, whichever is later.

Any person aggrieved by the assessment of a tax, other than taxes assessed under the laws on taxation of legacies and successions or on taxation or transfers of certain estates, may apply in writing to the Commissioner for an abatement at any time within three years from the date of filing the return, within two years from the date the tax was assessed or deemed to be assessed or within one year from the date that the tax was paid, whichever is later.

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Posted in Current Events, Estate Planning, IRS and state tax collections, Tax Current Events and News, Tax planning

Cohabiting Seniors: Protect Your Rights

Tuesday, June 28th, 2011 by Moore McLaughlin

More and more seniors are living together without getting married. According to U.S. Census data, the number of cohabiting seniors nearly doubled between 1989 and 2000. For some seniors, marriage isn’t financially worth it‚ they don’t want to lose their former spouses’ military, pension, or Social Security benefits. Other seniors don’t want to have to pay their partners’ medical expenses or deal with the objections of children worried about their inheritance.

There are risks to cohabiting without marriage, however. You have no rights with regard to your partner’s health care decisions. In addition, you may be considered “common law” married by a court after you die, possibly causing a dispute between your partner and your children. If you and your partner plan to live together without getting married, you can take a number of steps to ensure that you are protected and your wishes are followed.

  • Sign a cohabitation agreement. If you live in a state that recognizes common law marriage or even if you don’t (some courts have recognized the rights of unmarried partners who lived together in non-common law states), you may want to enter into a cohabitation agreement with your partner. The agreement can state your intentions not to marry or to make any claims against each other. It can also specify the division of household expenses and what will happen to your house in the case of death or breakup. You should consult a lawyer for assistance in drawing up an agreement.
  • Provide access to health care decision making. If you are not married, you have no right to participate in your partner’s health care decisions or even, in some circumstances, to visit your partner at the hospital. To avoid this situation, you need several documents. You can sign a Health Insurance Portability and Accountability Act (HIPAA) medical release to allow each other access to the other’s medical information. In addition, you should have a health care proxy and/or a durable power of attorney for health care, naming your partner as your agent to make health care decisions. For more information on medical directives, contact attorney Jill E. Sugarman at 401-421-5115 or by e-mail at JSugarman@McLaughlinQuinn.com.
  • Sign a durable power of attorney. A power of attorney allows your partner, or whomever you appoint, to make financial decisions for you if you become incapacitated. Without a power of attorney, the court will have to appoint a conservator or guardian to make those decisions and the judge may not choose the person you would prefer.
  • Update your will. Your will should be clear about what happens to your possessions when you die, including your house and its contents. It is particularly important to specify what will happen to your house if it is owned by only one partner.
  • Think about the tax consequences of gifts. Married couples can leave each other as much as they want without paying estate taxes; unmarried couples cannot. If you want to leave money to your partner, consult an estate planning attorney or tax expert to find ways to limit estate taxes. For more on estate planning, contact attorney Jill E. Sugarman at 401-421-5115 or by e-mail at JSugarman@McLaughlinQuinn.com.
  • Look into registering as domestic partners. Some cities and states have domestic partnership laws, which may allow unmarried couples to take advantage of their partners’ health insurance or to participate in health care decisions.
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Posted in Asset Protection Planning, Elderlaw/Law For Life, Estate Planning

Congress passes bill repealing expanded 1099 information reporting requirements

Wednesday, April 6th, 2011 by Moore McLaughlin

On April 5, the Senate by a vote of 87-12 approved H.R. 4, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.” The measure, which retroactively repeals expanded Form 1099 information reporting rules added by recent legislation, was passed by the House on March 3 by a vote of 314-112. Thus, H.R. 4 (the Act) is cleared for the President’s expected signature.

Here are highlights of the tax changes in the Act.

Original information reporting rules. Before amendment by the Small Business Jobs Act of 2010 (P.L. 111-240) and the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), Code Sec. 6041 generally required payments totaling at least $600 in a single calendar year to a single recipient to be reported to IRS. Reporting on Form 1099 was required only when the payor was considered to be engaged in a trade or business and has made the payment in connection with that trade or business. The type of payment that most commonly triggered the reporting requirement was payment for services.

There were a number of exemptions from Code Sec. 6041 ‘s reporting requirements under prior law, notably including payments to corporations (which were exempt under Reg. § 1.6041-3(p)(1)).

Pre-Act law—changes made by 2010 legislation. Beginning in 2012, Sec. 9006 of PPACA added payments of amounts in consideration for any type of property and gross proceeds—i.e., it added payments for goods or other property—to the list of payments subject to information reporting.

Sec. 9006 of PPACA further provided that, beginning in 2012, payments to non-tax-exempt corporations—which had previously been exempt from the reporting requirement—would be subject to information reporting.

Additionally, for payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide an information return to the service provider and IRS.

New law. For payments made after December 31, 2011, the Act repeals the provisions in Sec. 9006 that impose a reporting requirement for payments to corporations and payments for goods or other property. (Code Sec. 6041(a), Code Sec. 6041(i), and Code Sec. 6041(j), as amended by Act Sec. 2) And for payments made after December 31, 2010, the Act also repeals application of the information reporting requirements to recipients of rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting property. (Code Sec. 6041(h), as repealed by Act Sec. 3)

In other words, under the Act, the information reporting rules effectively revert to the way they read before enactment of PPACA and the Small Business Jobs Act of 2010.

Revenue offset. The Act provides an offset for the lost revenue from repealing the new information reporting provisions, estimated at $21.9 billion. It increases the amount of “excess advance payments” of the premium assistance credit (enacted as part of the 2010 health care reform legislation to help lower-income individuals acquire affordable health insurance coverage) that a taxpayer must repay under Code Sec. 36B(f)(2) for tax years ending after December 31, 2013. The credit is available for a taxpayer who does not receive health insurance through his employer (or his spouse’s employer) and whose income falls between 100% and 400% of the federal poverty line (FPL), based on the most recently filed tax return.

Under pre-Act law, if the taxpayer’s income increases such that the credit exceeds that to which his current income level actually entitles him to, but his income is still under 500% of FPL, he had to repay some credit amounts. The limit on amounts he had to repay were capped and ranged from $600 to $3,500.

New law. Under the Act, for tax years ending after December 31, 2013, the repayment caps are increased for taxpayers with household income of at least 200% but less than 400% of FPL, and full repayment is required for taxpayers whose incomes exceed 400% of FPL. (Code Sec. 36B(f)(2)(B)(i), as amended by Act Sec. 4)

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Posted in Asset Protection Planning, IRS and state tax collections, Tax Current Events and News, Tax planning

Responsibility for a Deceased Relative’s Debts

Friday, April 1st, 2011 by Moore McLaughlin

The loss of a loved one is tough to begin with, but if the loved one left debts behind, it can be even tougher. Family members generally should not have to pay for a decedent’s debts, but it is important to know your rights because collection agencies may target the decedent’s relatives.

Usually the loved one’s estate is responsible for paying any debts. If the estate does not have enough money, the debts will go unpaid. The debt collectors may not collect payment from relatives (unless they were co-signers or guarantors). However, if you are the spouse of the decedent, you may have responsibility for any debts that were jointly held. Depending on state law, some assets — such as a house or car — may be exempt from debt collection. You should talk to an attorney to determine your responsibility, if any.

If a debt collector contacts you, give the collector the contact information for the personal representative (also called the “executor”) who is handling the estate. It is the personal representative’s responsibility to make sure all bills are paid. Whatever you do, do not give any personal information to debt collectors. Scam artists sometimes pose as debt collectors to prey on relatives.

If a debt collector won’t stop contacting you, send a certified letter to the collector saying you do not want to be contacted again. Once the collector receives the letter, the collector can contact you only to tell you that there will be no further contact or to inform you of a lawsuit. Report any problems with debt collectors to your state’s attorney general or to the Federal Trade Commission.

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Posted in Asset Protection Planning, Elderlaw/Law For Life, Estate Planning, Financial workout, Tax planning

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