Dear Friend:

 

The following is a summary of the most important tax developments that have occurred in the past three months that may affect you:

 

Detailed guidance on new law's 100% bonus depreciation allowance. The IRS has issued detailed guidance on the 2010 Tax Relief Act's 100% bonus depreciation rules for qualifying new property generally acquired and placed in service after Sept. 8, 2010 and before Jan. 1, 2012. Overall, the rules are quite generous. For example, they allow a taxpayer to elect to “step down” from 100% to 50% bonus depreciation for property placed in service in a tax year that includes Sept. 9, 2010, they permit 100% bonus depreciation for qualified restaurant property or qualified retail improvement property that also meets the definition of qualified leasehold improvement property, and they provide an escape hatch for some business car owners who would otherwise be subject to depreciation limitations.

 

New law creates a 100% write-off for heavy SUVs used entirely for business. Under the 2010 Tax Relief Act, a taxpayer that buys and places in service a new heavy SUV after Sept. 8, 2010 and before Jan. 1, 2012, and uses it 100% for business, may write off its entire cost in the placed-in-service year. A heavy SUV is one with a gross vehicle weight (GVW) rating of more than 6,000 pounds.

  

Congress passed bill repealing expanded 1099 information reporting. 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 is cleared for the President's expected signature. For payments made after Dec. 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. And for payments made after Dec. 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.

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.

  

IRS eases lien procedures. The IRS has announced new policies and programs to help taxpayers pay back taxes and avoid tax liens. Its goal is to help individuals and small businesses meet their tax obligations, without adding an unnecessary burden to taxpayers. Specifically, the IRS is:

Please call me or any one of my staff members if you have questions regarding the above developments and how they may affect you.  Thanks.

 

Phil