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Archive for William Byrnes

Court Reinstates Trump-Era Independent Contractor Test

Court Reinstates Trump-Era Independent Contractor Test

The Trump-era rule was designed to make it easier for employers to classify workers as independent contractors, rather than traditional employees, by focusing on whether workers are economically dependent upon an employer—or in business for themselves.

The Trump-era test prioritizes two key factors, including (1) the worker’s degree of control over the work performed, and (2) the worker’s opportunity for profit or loss.  Under the Biden administration, the DOL stated that prioritizing these factors for determining employment status under the FLSA undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.

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Cryptocurrency In 401(k)s: DOL Warns Retirement Plan Fiduciaries

Warning On Cryptocurrency in 401(k)s

DOL Releases Warning on Cryptocurrency in 401(k)s.  On April 11, 2022 William Byrnes Posted This Message Under Tax Notes Intelligence

The Department of Labor (DOL) issued a compliance assistance release that warns retirement plan fiduciaries about allowing participants to invest in either cryptocurrencies or products that are related to cryptocurrency.  The guidance comes in response to President Biden’s executive order that directed agencies to study the risks and benefits of cryptocurrency.  The DOL release warned that in the eyes of the DOL, cryptocurrency poses significant risks and challenges for participants, including the risk of fraud, theft and loss.  The release is clear that plan fiduciaries who allow cryptocurrency investment options should expect to be questioned about how those decisions could comply with their duties of prudence and loyalty.  Plan fiduciaries should pay close attention and carefully evaluate whether allowing crypto-related products in their investment lineup is worth the risk, given the DOL’s sweeping statements and indication that it will presume that a fiduciary who offers cryptocurrency products has acted imprudently.

For more information on the current DOL fiduciary standard and new prohibited transaction exemption, Read More.

Have a question? Contact William Byrnes.

Court Reinstates Trump-Era Independent Contractor Test

Independent Contractor Or Employee

The Trump-era rule was designed to make it easier for employers to classify workers as independent contractors, rather than traditional employees, by focusing on whether workers are economically dependent upon an employer—or in business for themselves.

The Trump-era test prioritizes two key factors, including (1) the worker’s degree of control over the work performed, and (2) the worker’s opportunity for profit or loss.  Under the Biden administration, the DOL stated that prioritizing these factors for determining employment status under the FLSA undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.

The Trump DOL rule would result in many workers’ losing FLSA protections, including minimum wage and overtime benefits.

Several business groups filed a lawsuit in federal court to challenge the Biden administration’s acts.  The court vacated the Biden administration’s acts and reinstated the Trump-era rule, determining that the DOL’s delay of the effective date for the Trump-era rule violated the Administrative Procedure Act by providing only a 19-day period for notice and comments (rather than the 30-day minimum).

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Have Your Clients Checked Their Beneficiary Designations Lately?

Have Your Clients Checked Their Beneficiary Designations Lately?

Updating a plan’s beneficiary designations might seem like a simple process–and it often is. However, it’s a process that’s often overlooked. Clients who participate in ERISA plans should be reminded that they’re required to complete their beneficiary designations in writing, using the procedures and forms established by the specific plan, in order for those designations to become effective. Often, survivors can be surprised by the beneficiary designated by the plan—and may even try to argue that the decedent’s will should govern who receives the account funds. Clients should remember that wills and state intestate laws do not govern who receives plan funds.

The only consideration will be who the account owner has designated under plan procedures. It’s important to carefully evaluate the plan’s policies, however—because some plans have exceptions in place to, for example, automatically revoke a beneficiary designation upon divorce. For more information on the importance of checking beneficiary designations and updating on major life events, Read More

William Byrnes

The New Corporate Profits Minimum Tax Proposal

Understanding The New Corporate Profits Minimum Tax Proposal

The proposal to revive the corporate alternative minimum tax, that the Tax Cuts & Jobs Act repealed, is now oriented for corporations with at least $1 billion in profits (as reported to shareholders). These corporations would need to pay at least a 15 percent minimum tax on those profits.  If enacted, the tax would be effective in tax years beginning after 2022. The tax would apply to corporate taxpayers (but not to S corporations, RICs or REITs) that satisfy certain annual minimum income requirements over a three-year period.  Income of controlled foreign corporations and non-consolidated entities would also be included—and any deductions for U.S. or foreign income taxes would be removed in calculating income.  It’s estimated that this tax would apply to about 200 corporations and raise hundreds of billions of dollars in revenue.

Like many taxes that start as a thin edge of the wedge, this one may expand to include more taxpayers and at a higher rate, over time.

For more information on the current corporate income tax structure, visit Tax Facts Online. Read More

IRS Confirms Pre 2018 Crypto Exchanges Do Not Qualify For Section 1031 Exchange Treatment

IRS Confirms Pre 2018 Crypto Exchanges Do Not Qualify For Section 1031 Exchange Treatment

New IRS guidance has confirmed that pre-2018 exchanges of Bitcoin, Ether and Litecoin do not qualify for Section 1031 exchange treatment.  Prior to 2018, taxpayers were permitted to defer capital gains taxes under Section 1031 for certain exchanges of personal property (1031 is now limited only to exchanges of real property).  The IRS’s rationale is that these were not exchanges of like-kind property and so were taxable even prior to tax reform. The IRS found that Bitcoin and Ether each had special roles in cryptocurrency trading because if taxpayers wanted to trade in other types of virtual currency, they had to first exchange the other currency into or from Bitcoin or Ether.  Therefore, exchanges between Litecoin and Bitcoin/Ether did not qualify as “like kind”.

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Establishing A Retirement Plan? Small Business Tax Breaks

Establishing A Retirement Plan? Small Business Tax Breaks

Recent legislation has focused small business clients’ attention on retirement plans and their obligations to employees.  Some states already sponsor “auto IRAs” for workers without access to an employer-sponsored retirement plan. The Build Back Better Act would require employers who do not sponsor a retirement plan to automatically enroll employees in either an IRA or a 401(k)-type plan beginning in 2023. The “SECURE Act 2.0” also contains provisions designed to encourage more small businesses to offer retirement plans.

Small business clients who are exploring their options in advance of government action should be reminded about valuable tax incentives designed to encourage workplace retirement savings options. The SECURE Act increased the tax credit for retirement plan startup costs so that employers can receive a $250 tax credit for every non-highly compensated employee (up to a maximum of $5,000 per year). The tax credit is available for up to three years and can be applied toward the administrative costs of maintaining the plan (and to participant education). Employers can also receive a $500 tax credit per year (for up to three years) if they add an auto-enrollment feature. For new plans, both tax credits are available. For more information on these tax credits, visit Tax Facts Online. Read More

William Byrnes

IRS FAQs Updated Frequently And Without Warning

IRS FAQs Updated Frequently And Without Warning

IRS Updates Frequently Asked Question (FAQ) Process

The IRS announced updates to its processes and policies for frequently asked questions (FAQs) and has provided guidance on the rules for implementing penalties for taxpayers who rely on FAQs.  FAQs often provide important interpretive guidance for taxpayers attempting to understand how new legislation will be implemented. However, the FAQs are updated frequently and without warning.

Going forward, FAQs will be announced in a news release and posted to IRS.gov in a fact sheet.

Prior versions of the fact sheet FAQs will now be dated and maintained on IRS.gov so that taxpayers can find the version they relied upon. The IRS also released a statement clarifying that if a taxpayer relies on FAQs in good faith and that reliance is reasonable, the taxpayer has a reasonable cause defense against any accuracy-related penalties and negligence penalties if it turns out that the FAQs were not a correct interpretation of the law given the facts.  However, the law itself will continue to control in the taxpayer’s case (not the FAQs). In the wake of the COVID-19 pandemic, IRS FAQs were often the only interpretive materials available.

William Byrnes

Paying Employees In Cryptocurrency? Don’t Forget Employment Taxes

Paying Employees In Cryptocurrency

The IRS released a reminder last week for business clients who opt to pay employees in cryptocurrency.   Employers who choose to pay wages in cryptocurrency should remember that their choice of payment method is immaterial when it comes to calculating employment taxes.  Employment taxes must be paid on the fair market value of cryptocurrency paid as wages, measured using U.S. dollars on the date the employee receives the payment.  The fair market value is subject to FICA, FUTA and federal income tax withholding–and must be reported on the employee’s Form W-2.  Wages paid in cryptocurrency may also be reportable for state income tax purposes.  Employers are liable for these wages, so it’s important that small business clients who opt to pay employees in increasingly popular virtual currency be aware of their withholding and reporting obligations.  Read More

IRS Releases Regulations Allowing For Recapture Of Erroneous COVID-19 Tax Credits

IRS Releases Regulations Allowing For Recapture Of Erroneous COVID-19 Tax Credits

Early in 2020, the IRS created procedures to allow employers to quickly take advantage of the FFCRA and CARES Act tax credits.  Now, the IRS has released temporary regulations that allow the IRS to recapture any of the tax credits credited to an employer in excess of the amount that the employer was actually entitled to receive.  The regulations provide that any amount of the credits for qualified leave wages, credits for qualified health plan expenses under sections 3131(d) and 3132(d), and any amount of the employee retention credit that were erroneously paid or credited to the employer can be recaptured.  Those incorrect tax credits will be treated as underpayments of  taxes and may be administratively assessed and collected in the same manner as the taxes. The temporary regulations also provide that the calculation of any credits erroneously claimed must take into account any amounts that were advanced to the employer under the processes established in 2020.  For more information on the employee retention tax credit, visit Tax Facts Online. Read More

Have a comment? Written by William Byrnes.

$1.2 Trillion Infrastructure Act To Be Signed by Biden

$1.2 Trillion Infrastructure Act to be signed by Biden

The 2,702-page bi-partisan “Infrastructure Investment and Jobs Act of 2021” has been passed by the House and sent to Biden for signature into law. The Act contains approximately $550 billion of new project spending and carries over an additional $650 billion from previously funded projects for a total of over $1.2 trillion in infrastructure spending that will begin in 2021 and most end in 2026.

But the Infrastructure Act 2021 contains many energy provisions and excise taxes as well as fees that will impact all segments of the energy industry. These provisions include billions of dollars for the industry for expenditure and incentives for carbon capture; clean hydrogen R&D; nuclear; among others. By example, $500,000,000 is provided for clean hydrogen technology R&D (see page 1550 at section 40314). The excise taxes and fees include the extensions of the highway-related taxes, superfund excise taxes, and customs user fees.

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Biden Administration Moving To Modify Tax Systems

Biden Administration Moving To Modify Tax Systems

(Tax Increase Alert Reposted)

Biden Administration Moving Full Steam Ahead To Modify The United States And International Tax Systems

The Biden administration, the OECD, and the European Union are moving full steam ahead with proposals that will modify the U.S. and international tax systems, significantly impacting clients’ after-tax investment returns and business income. We dig into the administration’s domestic and global tax proposals, including that a U.S. corporation may be required to pay a minimum tax amount to each foreign country where it has clients or investments. Are your clients preparing to adjust their portfolio of investments to maintain their after-tax annual investment returns? 

Biden’s Tax Proposals: Two Surprises for Clients Impacting Last Year and 2021

President Biden’s tax proposals contain two major tax surprises.

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