IRS EXTENDS DEFERRED-COMP DEADLINEAfter repeated pleas from tax practitioners, lawyers and others, the Treasury Department and the Internal Revenue Service announced that they would extend the final deadline for compliance with new rules on nonqualified deferred-compensation plans for a year, until Dec. 31, 2008.
The regulations, which provide guidance under Section 409A regarding the requirements for deferral elections and payment timing in deferred-comp plans, were in response to legislation enacted in 2004. Section 409A has been effective since Jan. 1, 2005, but the IRS did not release the final regulations until April of this year, with an original deadline of Dec. 31, 2007, which many felt was far too early, given the complexity of the plans and the amendments that companies may have to make to them.
The IRS noted that it plans to follow up Notice 2007-86, which extends the deadline, with guidance regarding a correction program as soon as possible.
CELL USE CAN BE EXCLUDED FROM WAGES
Employers are able to exclude the value of an employee's use of an employer-provided cell phone from the employee's gross income if the employee keeps careful records distinguishing business and personal calls, according to a recently released letter from an Internal Revenue Service official.
"If the employee uses the telephone exclusively for business, the value of all use is excluded from the employee's income (as a working condition fringe benefit)," wrote Lynne Camillo, a branch chief with the IRS, to Rep. Dennis Moore, D-Kan., in response to a constituent letter.
The employee must keep a record of each call and its business purpose. If the employee receives a monthly itemized statement, the employee should identify each call as personal or business. If the employee does not use the cell phone to make personal calls, or has only minimal use of the cell phone, business use of the phone is not taxable to the employee.
However, the employer must include the value of any personal use of the cell phone in the employee's wages, Camillo added.
IRS WANTS POKER WINNINGS
The Internal Revenue Service reiterated its demand for casinos and other poker tournament sponsors to begin reporting winnings of more than $5,000 after March 4, 2008.
The IRS and the Treasury Department originally issued guidance on Sept. 4 about the requirement, but the service is seeking to publicize it further. For tournaments completed during 2007 and before March 4, 2008, the sponsors are not required to report the winnings to the IRS or to withhold tax. Beginning March 4, however, all tournament sponsors need to report winnings of over $5,000, usually on a Form W-2G.
Tournament sponsors who comply with the reporting requirement don't need to withhold taxes on the winnings. If the sponsor does not report the winnings, though, the IRS will enforce the reporting requirement and require the sponsor to pay any tax that should have been withheld from the winner. The withholding amount is normally 25 percent.
Tournament winners must provide their taxpayer identification number or Social Security number to the tournament sponsor. If they don't, the sponsor must withhold 28 percent of the winnings. Taxpayers must also report their winnings on their own to the IRS, as they have been required to do in prior years.
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