News and miscellaneous legal topics – 2009

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Listed below are various legal items, with emphasis on Missouri and federal taxes, previously available on this site as an RSS ("rich site summary") feed by pointing your RSS reader to http://www.carnahanlaw.com/rss/rss.xml xlm logo (copy this link and paste it as the RSS feed in your news/RSS reader).

The IRS posted podcasts and text scripts on a variety of topics to its web site at http://www.irs.gov/newsroom/article/0,,id=179391,00.html new 3/25/09

FDIC Consumer News Winter 2008/2009 – Special Edition: Managing Your Money in Good Times and Bad. Spending Less; Good Ways to Get Started Cutting Back; Saving More; 7 Tips on Putting Your Dollars to Work … for You !; Make the Most of Your FDIC Guarantee; Protecting Against Fraud; When the Economy Cools Down, Financial Scams Heat Up; Borrowing Wisely; You Can Get a Good Loan: Ways to Make It Happen; Your Credit Score: It Pays to Aim High; When Payments Are a Problem; President Announces Aid for Millions of Distressed Mortgage Borrowers; When a Debt Collector Calls; Take Charge of Your Credit Cards; How to Learn More; Sources of Help and Information on Managing Your Money http://www.fdic.gov/consumers/consumer/news/cnwin0809/index.html new 3/14/09

The IRS released the 2009 allowable living expense standards on March 1, 2009. http://www.irs.gov/businesses/small/article/0,,id=204719,00.html new 3/9/09

IRS decides not to renew private debt collection contracts. The IRS determined that the work is best done by IRS employees who have more flexibility handling cases, which is particularly important with many taxpayers currently facing economic hardship. Shulman also noted that the IRS anticipates hiring over 1,000 new collection personnel in FY 2009. These new employees would give the IRS the flexibility to make assignments based on the areas of greatest need rather than filtering which cases can be worked using contractor resources. IR-2009-19, March 5, 2009 http://www.irs.gov/newsroom/article/0,,id=205021,00.html new 3/7/09

The IRS posted information to its web site on the COBRA Health Insurance Continuation Premium Subsidy established by The American Recovery and Reinvestment Act of 2009 http://www.irs.gov/newsroom/article/0,,id=204505,00.html, and FAQs for employers at http://www.irs.gov/newsroom/article/0,,id=204708,00.html new 3/2/09

The House Ways and Means Oversight Subcommittee will hold a hearing on assistance available from the Internal Revenue Service (IRS) to taxpayers experiencing economic difficulties. The National Taxpayer Advocate, an independent official appointed to address taxpayer problems (established in Public Law 104-168), indicates that more action may be warranted to address the problems of struggling taxpayers. person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7576 new 2/26/09

Potential problems using retirement funds to acquire a business. Just released is an October 1, 2008 Tax Exempt and Government Entities Division of the Internal Revenue Service Memorandum. new 2/24/09

Recently, personnel in our examination and determination letter functions have identified a retirement plan design that appears to operate primarily to transact in employer stock, resulting in the avoidance of taxes otherwise applicable to distributions from tax-deferred accumulation accounts.

Although we do not believe that the form of all of these transactions may be challenged as non-compliant per se, issues such as those described within this memorandum should be developed on a case-by-case basis.

EXECUTIVE SUMMARY

A version of a qualified plan is being marketed as a means for prospective business owners to access accumulated tax-deferred retirement funds, without paying applicable distribution taxes, in order to cover new business start-up costs. For purposes of this memorandum, these arrangements are known as Rollovers as Business Startups, or ROBS. While ROBS would otherwise serve legitimate tax and business planning needs, they are questionable in that they may serve solely to enable one individual's exchange of tax-deferred assets for currently available funds, by using a qualified plan and its investment in employer stock as a medium. This may avoid distribution taxes otherwise assessable on this exchange. Although a variety of business activity has been examined, an attribute common to this design is the assignment of newly created enterprise stock into a qualified plan as consideration for these transferred funds, the valuation of which may be Questionable.

Some provisions of the American Recovery and Reinvestment Act of 2009 new 2/21/09

IRS web page with information on the American Recovery and Reinvestment Act of 2009 new 2/20/09

HR 436 was proposed on January 9, 2009. It would eliminate valuation discounts related to the transfer of entity interests (other than entities that are actively traded) to the extent the entity holds nonbusiness assets, treating it as a transfer of the appropriate portion of the entity’s underlying nonbusiness assets. Real estate is treated as a nonbusiness asset, unless used in the active conduct of a real estate trade or business in which the transferor materially participates and with respect to which the transferor meets the requirements of Code Sec. 469(c)(7)(B)(ii) (i.e., the taxpayer materially participates in more than 750 hours of services in real property trades or business during the taxable year). The proposed effective date is the date of enactment. Some (but not all) tax benefits of family limited partnership and defective trust may be curtailed and expedited consummation of these transactions may be beneficial. new 1/30/09

State courts hold economic exploitation of state's economy without physical presence meets "nexus" requirement. new 1/21/09

IRS Commissioner Doug Shulman announced 5 specific steps to offer leniency to taxpayers owing taxes http://www.irs.gov/newsroom/article/0,,id=202244,00.html:

  1. giving tax assistors greater authority to suspend collection actions in certain circumstances, such as a recent job loss, relying solely on Social Security benefits, or is facing steep, unexpected medical costs (tax debt is not extinguished, but collection activity will be deferred);
  2. taxpayers missing an installment agreement payment will not automatically have their agreement suspended (no guidance provided if more than 1 payment could be skipped);
  3. broadened eligibility for its "offer in compromise" program for some taxpayers who appear to have enough equity in their home to cover their tax debt. The IRS established a special unit to review specific cases;
  4. Taxpayers missing a payment under an existing offer-in-compromise agreement can work with IRS officials to avoid defaulting on that agreement; and
  5. The IRS will speed levy releases for taxpayers in financial hardship new 1/8/09

Missouri minimum wage increases from $6.65 to $7.05 on January 1, 2009. new 1/1/09

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