Go to Top

Duly Noted

IRS Offers Penalty Relief, Then Offers More. Many taxpayers found themselves owing money to the Treasury when they completed their first tax returns covered by new rules that took effect in 2018. In response, the Internal Revenue Service in January offered some relief from penalties for failing to prepay enough of the tax bill via withholding or estimated taxes. Penalties were to be waived for taxpayers who paid at least 85 percent of the total liability, rather than the usual 90 percent. But lawmakers pressed the administration to do more, as did IRS in-house Taxpayer Advocate Nina Olson. The IRS in March granted additional relief by waiving penalties for anyone who had paid at least 80 percent of the total liability during 2018. Early filers who were penalized before the additional relief was granted can request a refund. IR-2019-55.

Greenlighting A Novel Approach To Retirement Savings And Student Loans. In a private ruling, the IRS gave a green light to an employer – identified in press reports as Abbott Laboratories – to make “matching” retirement plan contributions on behalf of employees who dedicate at least 2 percent of their compensation to repaying student loans, even if those employees do not contribute to the retirement plan. Under the proposed modification of the employer’s 401(k) plan, workers would be permitted to direct some of their income to the plan as well, but they would not be required to do so in order to receive a 5 percent contribution from the employer at the end of the plan year. The IRS ruled that the proposed change would not violate restrictions on a qualified plan making its benefits contingent on some other behavior of the employee. Although the ruling does not establish a binding precedent, it provides a road map for other employers who want to simultaneously encourage employees to save for retirement and address their educational debt. PLR 201833012.

For A Tax Expert, Ignorance Of The Law Is No Excuse. The Tax Court showed little sympathy for a California CPA who held a master’s degree in taxation but failed to correctly follow the rules governing the rental properties he owned and operated with his spouse. The IRS rejected claims by Glenn Cunningham Ballard and his wife that they qualified as real estate professionals and could thus deduct losses from their rental properties against their other income in the years 2008-2010. In a summary opinion, Judge Tamara Ashford agreed with the Service, saying the couple’s after-the-fact reconstruction of records was not reliable and that Ballard’s testimony was “incredible, uncorroborated and self-serving.” Ashford also found no reason to excuse Ballard’s “misunderstanding of the law” given his education and professional experience. Glenn Cunningham Ballard and Yu-Yuan Pu v. Commissioner of Internal Revenue, T.C. Summary Op. 2018-53.

If you enjoyed this article, be sure to check out Palisades Hudson’s books, The High Achiever’s Guide To Wealth and Looking Ahead: Life, Family, Wealth and Business After 55. Both are available in paperback and as e-books.