IRS INTEREST RATES UNCHANGED FOR THE FIRST QUARTER OF 2005: Interest rates for calculating the amount owed on refunds and deficiencies will remain unchanged for the calendar quarter beginning Jan. 1, 2005, the Internal Revenue Service said.The rates will remain at 5 percent for overpayments (4 percent for corporations); 5 percent for underpayments; 7 percent for large corporate underpayments; and 2.5 percent for the portion of a corporate overpayment exceeding $10,000. The rates are computed from the federal short-term rate based on daily compounding determined during October 2004.
Under the Internal Revenue Code, the rate of interest is determined quarterly. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points, and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus half a percentage point.
SIMPLIFIED TAX DEPOSIT RULES FOR SMALL BUSINESSES: The Internal Revenue Service will increase the minimum threshold for Federal Unemployment Tax Act deposits, a move that will impact over 4 million small businesses.
Under new rules effective Jan. 1, 2005, employers are required to make a quarterly deposit for unemployment taxes if the accumulated tax exceeds $500. The current threshold, established in 1970, is $100.
"The new rules will help cut paperwork for millions of small businesses," said Commissioner Mark W. Everson. "The IRS Office of Taxpayer Burden is continually reviewing what other steps we might take to save money and time for businesses."
The maximum amount that the IRS collects from employers per employee is $56 per year, if the employer made timely state unemployment tax payments. The current $100 threshold requires most employers with two or more employees to make at least one tax deposit per year. Raising the requirement to $500 will eliminate the requirement to make up to four FUTA deposits yearly for employers with eight employees or less.
IRS ISSUES FINAL SCHEDULE M-3 INSTRUCTIONS: The Internal Revenue Service has issued final instructions for Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More.
The IRS had released a draft version of the form, which is to be used by certain corporate taxpayers, for public comment earlier this year, as part of efforts to increase the transparency of corporate tax return filings.
The new form will help identify taxpayers that may have engaged in aggressive transactions and should therefore be audited, according to Greg Jenner, acting Treasury assistant secretary of tax policy.
Schedule M-3 is effective for any taxable year ending on or after Dec. 31, 2004. Generally, Schedule M-3 must be filed by large and midsized business taxpayers - corporations with total assets of $10 million or more. However, a corporation is only required to complete certain sections of Schedule M-3 in the first taxable year that it is required to file the schedule.
TAX ANALYSTS TAPS OLSON AND LANGDON FOR BOARD: Publisher Tax Analysts has tapped former Treasury official Pamela F. Olson and former Internal Revenue Service director Larry Langdon for seats on its board.
Olson, currently a partner at the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, previously served for nearly two years as assistant Treasury secretary for tax policy, providing the Treasury secretary with policy analysis and recommendations concerning all aspects of federal taxation, including legislative proposals, regulatory guidance and tax treaties. She was the first woman ever to hold that post.
Langdon, now a partner and director of the global tax practice at Mayer, Brown, Rowe & Maw LLP, served from December 1999 to May 2003 as the first commissioner of the Internal Revenue Service's Large and Midsize Business Division, which is responsible for corporate and partnership taxpayers. While at the IRS, he oversaw a workforce of 6,200 with an annual budget of more than $680 million.
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