by NFS | Jun 24, 2010 | Archives
In Notice 2010-48, the IRS provides administrative relief for sponsors of defined contribution plans, such as §401(k) plans, that were affected by the storms and other severe weather in those counties in Alabama, Connecticut, Massachusetts, Mississippi, New Jersey, Rhode Island, Tennessee, and West Virginia declared Presidential Disaster Areas during the period from March 1 through May 31, 2010.
Notice 2010-48 extends the April 30 deadline for restating affected pre-approved defined contribution plans and, if applicable, for submitting determination letters to the IRS, to July 30, 2010.
by NFS | Jun 22, 2010 | Archives
A federal tax credit that aims to spur more research and development on the best ways to treat chronic diseases will soon be available to Massachusetts’ life science companies.
Starting today, the Therapeutic Tax Credit is a two-year credit that businesses with 250 or fewer employees can apply for through the US Treasury Department.
Senator John F. Kerry said the credit will help create jobs in the life, biological, and medical sciences sectors.
Robert K. Coughlin, president and chief executive of the Massachusetts Biotechnology Council, said the tax credits could help companies create lifesaving cures.
Eligible companies can receive a 50 percent tax credit for qualifying projects, and a total of $1 billion will be allocated.
Companies have until July 21 to apply. Contact my office for more details.
by NFS | Jun 17, 2010 | Archives
WASHINGTON — The Internal Revenue Service today issued regulations outlining the administration of a 10-percent excise tax on indoor tanning services that goes into effect on July 1.
The regulations were published today in the Federal Register.
In general, providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services. The provider then pays over these amounts to the government, quarterly, along with IRS Form 720, Quarterly Federal Excise Tax Return.
The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises. The regulations also provide an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.
The IRS and Treasury Department invite comments.
Send submissions to: CC:PA:LPD:PR (REG-112841-10), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044.
Submissions may be hand-delivered to: CC:PA:LPD:PR Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-112841-10), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW; Washington, DC,
Submissions may be sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov/search/Regs/home.html#home (REG-112841-10).
by NFS | Jun 16, 2010 | Archives
Do you own a business? Have you ever thought about being disabled? Check out your odds in the NFS June Business Briefs…
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by NFS | Jun 9, 2010 | Archives
Misconceptions About the Unlimited Marital Deduction…
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by NFS | Jun 7, 2010 | Archives
Tapping retirement money is a great way to fund a startup—if it doesn’t violate tax rules.
As the credit crisis has made it tougher for small businesses to get funding, some would-be entrepreneurs have exploited a loophole that lets them finance a startup with 401(k) retirement funds without facing any taxes or penalties. Now the technique is catching the attention of the IRS, which plans to step up audits of such transactions. “We are seeing problems,” says Monika Templeman, acting director of employee plans at the IRS. “It is open to abuse.”
The transactions typically require an entrepreneur to create a new corporation, establish a 401(k) plan for it, and move existing 401(k) funds into the plan. Money from the new 401(k) is used to buy shares in the new company, and that provides the business with capital while retaining the tax advantages of the 401(k). Without such a rollover, funds withdrawn from a 401(k) are subject to income taxes. A 10 percent penalty applies if the funds are withdrawn by a person under the age of 59 1/2. Templeman says the IRS has seen questionable valuations for the new stock, and in a few cases the money was used to buy recreational vehicles and other personal assets.
While financial advisers began promoting such rollovers in the early 1990s, the credit crisis has made them more attractive. This year at least 4,000 people are likely to use the strategy, an increase over previous years, according to companies that help craft the plans. The typical transaction involves between $100,000 and $200,000 in retirement funds. Advisers charge about $5,000 for the paperwork, plus annual fees of at least $800 to run the new 401(k) plan. “When you start comparing it with a 15 to 20 percent interest rate on a loan…people are saying ‘I’d rather be my own investor,’ ” says Jeremy Ames, chief executive of Guidant Financial Group, a Seattle company that helps business owners roll over 401(k)s.
Ames and other advocates of the rollovers say their transactions are legal. That doesn’t mean the IRS will see it that way. Stephen Dobrow, president of benefits consultancy Primark Benefits, says even plans the IRS has examined may face renewed scrutiny. The IRS, he says, “can still blow up those plans even though they’ve passed on them once.”
The bottom line: Using 401(k) funds to finance startups got more popular during the recession, but some of the transactions may violate tax law.
Amy Feldman – associate editor with Bloomberg Businessweek in New York.
