IRS

IRS Issues Tax Relief for California Wildfire Victims

The IRS has issued News Release CA-2018-13, announcing tax-related deadline relief for certain areas in the State of California suffering damage from recent wildfires. The relief, based on Treasury Regulation 301.7508A-1(c)(1)), applies to various tax-related acts whose deadlines can be extended due to a disaster declaration. These include completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under the above-described regulation.

The announced deadline relief currently applies to Butte, Los Angeles, and Ventura counties. For those covered by this guidance, covered tax-related deadlines falling on or after November 8, 2018, and before April 30, 2019, are extended to April 30, 2019.

The automatic relief applies to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area that is injured or killed as a result of the events is also entitled to deadline relief. Affected taxpayers who reside or have a business located outside the covered disaster areas are required to call the IRS disaster hotline at 866-562-5227 to request relief.

 


Tax-Related Deadline Relief for Hurricane Michael Victims in Alabama

The IRS has released News Release AL-2018-006 describing tax-related deadline relief for victims of Hurricane Michael in certain areas of Alabama. The news release describes the relief provided in Treasury Regulation 301.7508A-1(c)(1)) that applies to various tax-related acts whose deadlines can be extended by a disaster declaration. This includes completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under the above-described regulation.

Currently, the announced deadline relief applies to the Alabama counties of Geneva, Henry, Houston, and Mobile. Under this guidance, covered tax-related deadlines that fall on or after October 10, 2018, and before February 28, 2019, are extended to February 28, 2019.

The automatic relief applies to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who was injured or killed as a result of the events is also entitled to deadline relief. Affected taxpayers who reside or have a business located outside the covered disaster areas are required to call the IRS disaster hotline at 1-866-562-5227 to request relief.

 


2019 COLA Adjustments for IRAs and Retirement Plans

The IRS issued Notice 2018-83 containing the 2019 IRA and retirement plan limitations as adjusted for cost-of-living. The IRS contribution limit is increasing to $6,000 for 2019, and most of the income limitations associated with Roth IRA eligibility and Traditional IRA deductions increase. Several retirement plan limitations increase as well. The 401(k) deferral limit (IRC Sec. 402(g)) will be to $19,000 for 2019.

2019 IRA Contribution Limitations

  • Traditional and Roth IRA contributions: $6,000 ($5,500 for 2018)
  • Traditional and Roth IRA catch-up contributions: $1,000 (not subject to COLA adjustments)
  • IRA deductibility phase-out range for single taxpayers that are active participants in retirement plans: $64,000 to $74,000 (was $63,000 to $73,000 for 2018)
  • IRA deductibility phase-out range for married joint filing taxpayers that are active participants in retirement plans: $103,000 to $123,000 (was $101,000 to $121,000 for 2018)
  • IRA deductibility phase-out range for non-active participants who are married to active participants in retirement plans: $193,000 to $203,000 (was $189,000 to $199,000 for 2018)
  • Roth IRA income limit phase-out range for determining contribution eligibility for married joint filers: $193,000 to $203,000 (was $189,000 to $199,000 for 2018)
  • Roth IRA income limit phase-out range for determining contribution eligibility for single filers and heads-of-households: $122,000 to $137,000 (was $120,000 to $135,000 for 2018)

2019 Retirement Plan Limitations

  • Annual additions under IRC Sec. 415(c)(1)(A) for defined contribution plans: $56,000 ($55,000 for 2018)
  • Annual additions under IRC Sec. 415(b)(1)(A) for defined benefit pension plans: $225,000 ($220,000 for 2018)
  • Annual IRC Sec. 402(g) deferral limit for 401(k), 403(b) and 457(b) plans: $19,000 ($18,500 for 2018)
  • Catch-up contributions to 401(k), 403(b) and 457(b) plans: $6,000 (unchanged)
  • Annual deferral limit for SIMPLE IRA and SIMPLE 401(k) plans: $13,000 ($12,500 for 2018)
  • Catch-up contributions for SIMPLE IRA and SIMPLE 401(k) plans: $3,000 (unchanged)
  • IRC Sec. 401(a)(17) compensation cap: $280,000 ($275,000 for 2018)
  • Highly compensated employee definition income threshold: $125,000 ($120,000 for 2018)
  • Top-heavy determination key employee definition income threshold: $180,000 ($175,000 for 2018)
  • SEP plan employee income threshold for benefit eligibility: $600 (unchanged)

Social Security Taxable Wage Base

The Social Security Administration announced in mid-October that the 2019 limitation for the taxable wage base increases from $128,400 to $132,900 for 2019.

Retirement Savings Tax Credit

Taxpayers who make contributions to IRAs and/or salary deferrals under retirement plans may qualify for an income tax credit if their income is under certain amounts. Contributions of up to $2,000 may be eligible for credits that range from 10 to 50 percent of the amount contributed. Eligibility is based on income and tax filing status as provided in the instructions for Form 8880, Credit for Qualified Retirement Savings Contributions. The applicable income limits are subject to cost-of-living adjustments as well.

The maximum income thresholds in all categories for this credit will increase for 2019. For 2019, taxpayers with adjusted gross income that exceeds $64,000 for joint filers, $48,000 for head of household, and $32,000 for all other filers will not qualify for a tax credit. See Notice 2018-83 for the specific income limitations based on tax filing status.

 


IRS Proposes Plan to Combat 402(g) Excess Contributions

The IRS announced that it would take action to combat excess elective deferrals made by participants to IRC Sec. 401(k) plans.

The announcement comes in response to a report from the Treasury Inspector General for Tax Administration, which found that the IRS could improve its oversight of 401(k) plan administrators and taxpayers to ensure excess deductions are not claimed.

The report states that excess deferral contributions were made by approximately 14,600 taxpayers in 2014. As a result, the IRS forewent $41 million in tax collections for that year. The report indicates that this was a result of plan administrators who are unfamiliar with the requirements of IRC Sec. 402(g) and of a lack of oversight of taxpayers who contribute to multiple plans.

To combat these excesses, IRS intends to provide additional educational material to plan administrators by January 15, 2020. Additionally, IRS will conduct examinations of affected individual taxpayers, with a focus on those taxpayers who participate in multiple plans, to be complete by October 15, 2020. IRS will use the results of the examinations to determine if any further action is warranted.


Tax-Related Deadline Relief for Victims of Severe Storms in Wisconsin

The IRS has issued News Release WI-2018-07 announcing tax-related deadline relief for certain Wisconsin residents who are victims of recent storms, tornadoes, straight-line winds, flooding, and landslides that took place beginning on August 17, 2018. In addition to postponement of tax return deadlines falling within dates identified in the news release, the relief includes postponement of deadlines for completing certain time-sensitive, tax-related acts specified in Treasury Regulation 301.7508A-1(c)(1).

These acts include completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under this regulation. For those who qualify, such deadlines falling on or after August 17, 2018, and on or before December 17, 2018, are postponed to December 17, 2018.

The areas identified as directly qualifying for relief are Crawford, Dane, Juneau, La Crosse, Monroe, Richland, Sauk, and Vernon counties. The relief applies specifically to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who is injured or killed as a result of the events is also entitled to deadline relief.

Affected taxpayers who reside in or have a business located outside the covered disaster area are required to call the IRS disaster hotline at 1-866-562-5227 to request relief.


Tax-Related Deadline Relief for Hurricane Michael Victims

The IRS has released a pair of news releases describing tax-related deadline relief available to victims of Hurricane Michael, including those automatically eligible for that relief. News Release FL-2018-04 describes the relief provided in Treasury Regulation 301.7508A-1(c)(1)) that applies to various tax-related acts whose deadlines can be extended by a disaster declaration. This includes completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under the above-described regulation.

Currently, the announced deadline relief applies only to the Florida counties of Bay, Franklin, Gulf, Taylor, and Wakulla. However, the IRS indicates that if the Hurricane Michael disaster declaration is broadened by the Federal Emergency Management Agency (FEMA) to include other areas of Florida or other states, the same relief will apply there. Under this guidance, covered tax-related deadlines that fall on or after October 7, 2018, and before February 28, 2019, are extended to February 28, 2019.

The automatic relief applies to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who was injured or killed as a result of the events is also entitled to deadline relief. Affected taxpayers who reside or have a business located outside the covered disaster areas are required to call the IRS disaster hotline at 1-866-562-5227 to request relief.

The second guidance item, News Release IR-2018-199, specifically addresses tax returns, including business income tax return filing deadlines and tax payments; the same extended deadline applies.

 


IRS Releases 2019 Form 1099-QA for Reporting ABLE Account Distributions

The IRS has released 2019 Form 1099-QA, Distributions From ABLE Accounts. This form is used to report information pertaining to distributions from savings accounts of certain special-needs individuals, accounts created by the Achieving a Better Life Experience (ABLE) Act.

ABLE accounts are intended to allow tax-advantaged saving for future expenses of special-needs individuals.  Annual contributions up to the federal gift tax maximum (currently $15,000) can be made to an ABLE account.  And, while no federal tax deduction is granted for contributions, qualifying distributions (including earnings) are tax-free, much like the IRC Section 529 state-sponsored education savings accounts after which ABLE accounts are modeled.

As a result of tax reform legislation enacted in 2017, certain 529 plan assets can be rolled over to ABLE accounts, and limited additional ABLE contributions may be made with earnings of a special-needs individual for whom an account was established.


IRS Program Letter Outlines TEGE Initiatives for 2019

The IRS has released a Program Letter communication, in which the agency shares plans for 2019 initiatives of its Tax Exempt/Government Entities (TEGE) division.

These initiatives will include continuing guidance on the Tax Cuts and Jobs Act, tax reform legislation enacted in December of 2017, some of whose effects are still being fleshed-out.

The communication also states that TEGE will be focused on compliance efforts that are cost-effective and limited in their intrusiveness when possible, including “educational efforts, soft letter compliance reviews, compliance checks, and correspondence or field examinations.” The letter further notes that TEGE will continue to refine its examination strategies to focus on the highest priority compliance areas.

More information on the TEGE division’s plans and accomplishments can be found in the Program Letter.

 


Hurricane Florence Tax Deadline Relief Expanded to South Carolina

The IRS has issued News Release SC-2018-01, in which the Service announces that an extension of time to file certain returns and complete certain time-sensitive tax-related acts has been expanded to include parts of South Carolina. The counties included in this relief at this time include Chesterfield, Dillon, Horry, Marion and Marlboro.

Treasury Regulation 301.7508A-1(c)(1)) describes various deadlines that can be extended following a disaster declaration. These include such things as completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under this regulation. Under this IRS guidance for South Carolina, covered tax-related deadlines that fall on or after September 8, 2018, and on or before January 31, 2019, are extended to January 31, 2019.

The relief applies specifically to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who was injured or killed as a result of the events is also entitled to relief. Affected taxpayers who reside, or have a business located outside the covered disaster areas are required to call the IRS disaster hotline at 866-562-5227 to request relief.


DOL Sends “Open MEP” Proposal to Office of Management and Budget

The Department of Labor this week sent a proposed rule to the Office of Management and Budget to increase access to multiple employer retirement plans. The proposal comes in response to an executive order issued by President Trump on August 31, 2018.

The executive order directed the Departments of the Treasury and the Labor to issue regulations which expand access to retirement plans. Among other things, the executive order instructed the Department of Labor to consider regulations which would increase access to multiple employer plans (MEPs) by easing restrictions on which businesses may join together to create MEPs. The new arrangements have been referred to as “Association Retirement Plans.”

The Office of Management and Budget will review the proposal before publishing it. After the proposed rule becomes public, there will be a public comment period.

The proposed rule for Association Retirement Plans is expected to allow small businesses to pool their resources to offer defined contribution plans for their employees and loosen existing restrictions that employer participants in the plans have specific business relationships, such as common ownership. The goal of permitting these arrangements is to encourage more Americans to save for retirement, according to the executive order. The proposal will not address the “one bad apple rule”, under which all participating employers may be held accountable for the failures of other employers. This rule derives from Treasury Regulations, and any changes must be proposed by the Department of the Treasury.