SEVERANCE PAY CAN BE TAXED
Washington, D.C. -- The U.S. Supreme Court decided in favor of the Obama administration in a dispute over taxes on severance compensation, overturning a lower court decision that could have forced the IRS to refund more than $1 billion. The court ruled that payments to laid-off workers are subject to Social Security and Medicare taxes under the Federal Insurance Contributions Act. It was a victory for the Internal Revenue Service, which has been fighting more than 2,400 refund claims from companies and their ex-employees.
VIRTUAL CURRENCY COUNTS AS PROPERTY FOR TAX PURPOSES
Washington, D.C. -- The Internal Revenue Service issued a notice in late March stating that virtual currencies, such as Bitcoin, should be treated as property for federal tax purposes and that the general rules for property transactions should be applied.
In some environments, virtual currency operates like "real" currency such as the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance. However, the IRS pointed out, virtual currencies like Bitcoin do not enjoy legal tender status in any jurisdiction.
General tax principles that apply to property transactions apply to transactions using virtual currency. This means that wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a W-2 Form, and are subject to federal income tax withholding and payroll taxes. Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
WAYS AND MEANS CHAIRMAN WON'T SEEK RE-ELECTION
Washington, D.C. -- House Ways and Means Committee Chair Dave Camp, R-Mich., has announced he will not seek re-election after his term ends this year.
Camp has been a member of the House of Representatives since 1991. He has been focusing in recent years on tax reform since taking over the chairmanship of the tax-writing committee when control of the House went to Republicans in 2010, working closely with Senate Finance Committee Chairman Max Baucus, D-Mont., who recently retired from the Senate to become ambassador to China.
In February, Camp released a draft version of his tax reform proposals. However, his term as chairman of the Ways and Means Committee was scheduled to end this year.
IRS PROVIDES GUIDANCE FOR VICTIMS OF DOMESTIC VIOLENCE
Washington, D.C. -- The Internal Revenue Service is providing guidance for 2014 that will allow taxpayers who are the victims of domestic violence to satisfy a joint filing requirement with a married-filing-separate return in order for them to obtain the Affordable Care Act's premium tax credit.
Notice 2014-23 provides guidance on the circumstances in which a victim of domestic abuse who is married within the meaning of Section 7703 of the Tax Code and is unable to file a joint tax return may claim a premium tax credit under Section 36B.
Eligible individuals who purchase coverage under a qualified health plan through an insurance exchange are allowed a premium tax credit. An individual must be an applicable taxpayer, but for victims of domestic abuse, the IRS noted that contacting a spouse for purposes of filing a joint tax return may pose a risk of injury or trauma or, if the spouse is subject to a restraining order, it may be legally prohibited.
Section 7703(b) allows certain married individuals to be considered not married for purposes of the Tax Code, but does not apply to many individuals who are victims of domestic abuse. For example, the abuse may have occurred in the last six months of the taxable year, the victim may not have the financial means to furnish over half the cost of a household, or the victim may not have a dependent child. Hence the new guidance.
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