James W. Rahmlow, The Daily Record Newswire
In order to facilitate the orderly flow of retirement plan monies between custodians, the IRS ordinarily allows amounts distributed from an IRA to not be includable in income as long as the taxpayer rolls over the funds within 60 days to another IRA or other eligible retirement plan.
In a private letter ruling, the 60-day rollover requirement for a distribution from an IRA to another retirement plan was waived due to incorrect advice given to the taxpayer by his financial advisor. In reviewing the case, the IRS found that the failure of the taxpayer to roll over the required amount was due to an incorrect computation made by the financial advisor who acknowledged the error. The IRS relied on Code Sec. 408(d)(3)(I) and Rev. Proc. 2003-16 in making their determination.
Global tax information exchange standard
On Feb. 13, the Organization for Economic Co-operation and Development presented a new unified global standard for the automatic exchange of information between tax authorities worldwide. Emphasizing consistency, the standard clarifies what financial account information needs to be exchanged, which financial institutions need to report and the different types of accounts and taxpayers covered. Additionally, the standard presents the common due diligence procedures to be followed by the financial institutions.
Canada and the United States agree to implement FATCA
In yet another development regarding the continued push for international transparency with regard to global finances, Canada and the United States have signed a Model 1 intergovernmental agreement to implement the Foreign Account Tax Compliance Act. In announcing the Canadian agreement, the U.S. Department of Treasury announced that additional agreements have been signed with Hungary, Italy and Mauritius, bringing the total number signed to 22.
The essence of the Model 1 agreement is that financial institutions in Canada will now be required to provide information on U.S. account holders to the Canadian government, which will provide the information to the IRS. Allowing for reciprocity, the United States also agrees to provide tax information to Canada on Canadian individuals and entities with U.S. accounts.
IRS issues March 2014 interest rates
In Rev. Rul. 2014-8, the IRS issued its Applicable Federal Rates and Adjusted AFRs for March 2014. These rates are used for certain prescribed purposes under the Internal Revenue Code, particularly as it relates to the imputed interest rules and original issue discount rules. Below is a summary of those rates.
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AFR
Adjusted AFR
Short-term 0.28% 0.28%
Mid-term 1.82% 1.82%
Long-term 3.31% 3.31%
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Wyden approved as new Senate Finance Committee chair
Sen. Ron Wyden, D-Ore., was approved as the new chair of the Senate Finance Committee in a Senate resolution passed unanimously on Feb. 12. Wyden assumes the position following the resignation of Max Baucus from the Senate. Wyden has indicated that an immediate priority for him will be the tax extenders, many of which expired at the end of 2013. Large on the list of extenders are the research tax credit and bonus depreciation. Wyden has indicated that once the extenders become law, he’d like to turn his attention to comprehensive tax reform.
Revised procedures to change accounting methods under final repair regulations
In Rev. Proc. 2014-16, the IRS provided revised procedures for taxpayers who choose to change their accounting methods under the final repair regulations issued in 2013 (TD 9636). While providing no surprises in Rev. Proc. 2014-16, which superseded Rev. Proc. 2012-19, the new procedure significantly streamlines and consolidates the procedures under Rev. Proc. 2012-19. It should be noted that consent to change is automatic if Rev. proc. 2014-16 is appropriately followed.
Refund season off to a good start
The IRS announced on Feb. 20 in an information release that the 2014 tax filing season is off to a good start compared to 2013. Average federal refunds are $3,211, an increase over 2013. While the overall number of returns filed for this year is down slightly, at least at this early point, over 95 percent of the returns have been filed electronically. Statistics will be filed throughout busy season, but expect electronic filing to decrease as the season progresses.
IRS smartphone app updated
On Feb. 4 the IRS announced an upgrade to its IRS2Go smartphone app. Version 4.0 adds new features available in both English and Spanish. The new app now allows taxpayers to utilize the refund tracker feature to follow their tax return through the process. The app will also provide the very latest information to help taxpayers in the preparation of their returns. Another great feature of the app is that it allows taxpayers to request their tax account or tax return transcript from IRS2Go. The transcript will be delivered via the U.S. Postal Service to the taxpayer’s address of record.
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James W. Rahmlow, CPA, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com.
