Legislative Alerts

• IRS Alert for U.S. Citizens and Dual Citizens Residing Outside the U.S.

  The U.S. Internal Revenue Service (IRS) understands that some U.S. citizens – including some who are also citizens of another country – residing outside the U.S. have failed to file federal U.S. income tax returns as well as Foreign Bank Account Reports (FBARs) to report their foreign financial holdings. While these individuals may be complying with tax filings and payments in their foreign countries of residence, they are not filing returns in the U.S. In certain cases they are unaware of their U.S. filing obligations and in other cases they have been misadvised on the matter.
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• Update on IRS Form 1099 and Other Payment Returns

  Any person, including a corporation, partnership, individual, estate, and trust, who engages in reportable transactions during the calendar year must file information returns to report those transactions to the IRS. Persons required to file Information Returns to the IRS generally must also furnish statements to the recipients of the income. Filers of 250 or more such returns must file these returns electronically with IRS.
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• Deducting Bonuses in the Year Accrued – Follow These Requirements!

  Internal Revenue Code (IRC) S. 461 governs the timing of deduction for certain expenses incurred by accrual method taxpayers. A common expense for which many companies provide an accrual is incentive compensation. The IRS released Revenue Ruling 2011-29 on November 9, 2011, providing guidance on how a plan should be structured in order to permit a deduction in the year the services are provided.
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• Form PF

  On October 26, 2011 the Securities and Exchange Commission (the “SEC”) voted and approved a new rule requiring investment advisors to report information about their private funds to the SEC. The rule, which implements Sections 404 and 406 of the Dodd-Frank Act, requires SEC-registered investment advisors with at least $150 million in private fund assets under management to periodically file a new reporting form (Form PF).
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• SEC Provides Disclosure Guidance Relating to Cybersecurity Risk Disclosure

  In today’s day and age, it’s hard to imagine any company that is not using the internet or internal technology to drive their business. However, companies, their boards and shareholders may not always understand the full extent of the risk that lies in that technology. Prompted by the irrefutable amount of attention to high-profile cybersecurity incidents, the Division of Corporate Finance of the Securities and Exchange Commission has focused on this issue and recently provided their views on registrants’ cyber risk disclosure obligations.
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• 2012 Retirement Plan Limitations

  As an ongoing service to our clients, Bauerle and Company, P.C. is providing this Alert to keep you abreast of the recent changes affecting employee benefit plans. The Internal Revenue Service announced on October 28 the cost-of-living adjustments applicable to the dollar limitations for pension plans and defined contribution plans for the tax year 2012. Several of the limits have changed from 2011 as noted below.
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• Treasury Issues Proposed Regulations Addressing Tax Treatment of Credit Default Swaps

  On September 15, 2011, the Treasury issued proposed regulations which would include Credit Default Swaps (“CDS”) in the definition of a Notional Principal Contract (“NPC”) under Treas. Regulation 1-446.3. The proposed regulations also confirm that swaps, including a CDS, would not fall under the Section 1256 regime and proposes significant changes to the existing NPC regulations. The proposals also provide conforming revisions to other relevant regulations.
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• IRS Announces 2011 Voluntary Compliance Program Focused on Employee vs. Independent Contractor Exposure

  On September 21, 2011, the Internal Revenue Service (IRS) unveiled a Voluntary Compliance Program (VCP) that offers relief for businesses that may have misclassified workers as independent contractors, rather than employees, and so are potentially liable for significant additional taxes, penalties, and interest.
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• Plan Sponsors Affected by Hurricane Irene Granted Additional Time to File Form 5500 and, in Certain Cases, to Fund Their Plans

  As part of Internal Revenue Service (IRS) tax relief related to individual and business taxpayers impacted by Hurricane Irene, where retirement plan sponsors – or the plan sponsor’s records necessary to complete the return – are located in the federally designated disaster areas listed in IR 2011?87 (originally published September 1, 2011 and subsequently updated to reflect new areas for relief), the sponsors will have until October 31, 2011 to file annual Form 5500 for their retirement and welfare benefit plans. This extension applies to Forms 5500 that had a due date for filing after August 26, 2011 and before October 31, 2011.
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• Proposed & Temporary Regulations Clarify Deduction Limits for Compensation Exceeding $1 Million

  The tax deduction for a public company's compensation paid to certain executives can be limited to the extent it exceeds $1 million per year. The limitation is set forth under Internal Revenue Code (IRC) Section 162(m). This limitation, however, does not apply to qualified performance based compensation.
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• IRS Provides Limited Extension of August 31, 2011 Deadline for Offshore Voluntary Disclosure Initiative

  For U.S. taxpayers not fully disclosing their offshore financial accounts on required foreign bank account reports (FBARs) for part or all of the eight years 2003-2010, the U.S. Treasury Department has adopted a new Offshore Voluntary Disclosure Initiative (OVDI) limiting penalties on such late disclosures. This has been scheduled to close on August 31, 2011, by which date all documents must be submitted by the taxpayer.
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