Posts Tagged ‘IRS’

No Change in Pension COLAs, But IRS Ends Strict “Use or Lose” Rule for Health FSAs

It’s the day we all been waiting for. No, not Halloween. I mean the day every year that the IRS raises the contribution levels for pension and retirement plans.

That’s today treat. Except that the IRS did not increase the amount that an employer can tax-defer into his or her 401(k) plan, 403(b) or government 457 plans. Instead, it kept the figure at $17,500–the same as 2013. Why? Because, IRS said, the consumer price index hasn’t gone up enough to warrant an inflation boost in the deferral rate.

But wait- there’s another treat from IRS today. It issued Revenue Procedure 2013-35, in which it ruled for the first time that employees with leftover money in their flexible spending accounts can carry over up to $500 into the next year. It’s no longer strictly “use-or-lose” on those accounts.

Which means employees lucky enough to have a balance in their account in December won’t have to scramble to purchase those extra sunglasses in order to make sure their balance is zero for the new year.

But the trick is that the employer has to amend its plan document to give employees the freedom to carry over money into the new plan year.

Here’s the IRS COLA announcement and Revenue Procedure 2013-35.

IRS Announces Penny Increase in Mileage Reimbursements

A Thanksgiving eve announcement from IRS will benefit taxpayers slightly in 2013 when it comes to personal automobile use for business, medical, or charitable purposes.

Starting January 1, 2013, taxpayers will be allowed to deduct 56.5 cents per mail for business miles driven, the IRS announced yesterday.

Each year the IRS announces the standard milage deduction for operating a car for business, charitable, medical or moving services.

The rate next year for medical-related driving will be 24 cents per mile, and 14 cents per mile for driving for charitable-related purposes.

As an alternative to using the standard mileage rate, the taxpayer has the option of calculating the actual costs of using his or her vehicle.

The announcement was Notice 2012-72.

IRS Won’t Play Post Office Anymore for Missing Retirement Plan Participants

Are you trying to locate a missing participant from your retirement plan? Don’t expect any help from the IRS.

The agency today issued a revenue procedure saying it is discontinuing its practice of “letter forwarding” to missing retirement participants and the like. With the advent of alternative searching resources such as the Internet, the IRS said, there’s no longer a need for its service.

Apparently the IRS–which started this practice in 1994–just got tired of the whole thing.  From now on, it will forward requests only for what it considers “humane purposes.” Helping someone realize a financial benefit–like recovering money due them from a retirement plan–isn’t one of those.

If you’re looking for somone for a specified humane purpose, such as informing them of a relative’s illness, the IRS won’t charge you for a single request. But if you are trying to reach a mass audience–50 or more–it will charge you.

Read for yourself Rev. Proc. 2012-35.

IRS Launches “Voluntary Classification Settlement Program”

As many employers know, classifying employees properly under the wage and hour laws is an exercise fraught with risk. Do it wrong, and you may quickly get the (unwelcome) attention of the Internal Revenue Service, which won’t hesitate to demand your records and come on site to conduct an audit.

But now the IRS is giving employers a way out of this cul-de-sac. It recently launched a voluntary reclassification program as an alternative to an audit. Under the program, an employer can voluntarily resolve the case by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

To be eligible, an applicant must:

  • Consistently have treated the workers in the past as nonemployees;
  • Have filed all required Forms 1099 for the workers for the previous three
  • Not currently be under audit by the IRS’
  • Not currently be under audit by the Department of Labor or a state agency
    concerning the classification of these workers.

Interested employers can apply for the program by filing Form 8952, Application for
Voluntary Classification Settlement Program, at least 60 days before they want
to begin treating the workers as employees.

Meaning of “Full Time Employee” Under Health Care Law Now Open for Public Comment

Who should be considered a “full time” employee under the health care reform law for whom an employer has to provide health insurance coverage by 2014 or pay a fine?

On that important question the U.S. Treasury Department and Internal Revenue Service would like the public’s input.

Under the Patient Protection and Affordable Care Act, employers with 50 or more full-time employees that do not offer affordable health coverage to their full-time employees would be required to pay a penalty, beginning in 2014. Notice 2011-36, issued on May 3, 2011, solicits public comments on several issues related to the play or pay provisions. In particular, the notice requests comments on possible approaches employers could use to determine who is a full-time employee.

The definitions of employer, employee and hours of service and the rules for calculating hours of service would generally conform to well-established regulatory definitions and rules applicable to employer-provided health and pension benefits, the notice states. For example, under one approach, employees would become eligible to enroll in the employer’s group health plan when they are determined to have worked a specified number of hours (e.g., 30 hours per week) during a specified period (e.g., a quarterly look-back measurement period).

In addition, the notice solicits input on how federal agencies should interpret and apply the law’s provisions limiting the ability of plans to impose a waiting period for health coverage of longer than 90 days, starting in 2014. The notice invites comments on how guidance under the 90-day provisions should be coordinated with the rules that the Treasury Department and the IRS will propose regarding the play or pay provisions.

Comments may be sent by e-mail to (include “Notice 2011-36” in the subject line). The deadline for comments is June 17, 2011.

IRS Issues FAQs on Employer-Provided Health Coverage Information Reporting Requirements

Starting in tax year 2011, employers have to report on the cost of health care they provide to their employees, under a requirement included in the health care reform law, the Patient Protection and Affordable Care Act.

But, as the IRS makes clear in recently posted frequently asked questions, there’s a transition period for employers to start these reports. In fact, no employer will have to report the cost of employer-provided health care coverage on its employees’ W-2 prior to 2013.

Find out more on this and other aspects of the reporting requirement on the IRS web site.

In Reversal, IRS Says Breast Pumps, Other Supplies Are Reimburseable Under a Health FSA

Turns out breast pumps and other supplies women use for breastfeeding are reimburseable under a health flexible spending account after all.

The IRS announced its change of position in a letter from Commissioner Douglas Shulman to Rep. Sander Levin (D-Mich.). Levin and some of his colleagues had written the IRS requesting that it review its position that the costs of breast pumps and other breastfeeding supplies do not qualify as medical care expenses reimburseable under a health FSA.

“After reviewing the matter, we have concluded that breast pumps and supplies that assist lactation are medical care under section 213(d) of the Internal Revenue Code because they are for the purpose of affecting a structure or function of the body of the lactating woman, ” the letter said.

“Therefore, if taxpayers meet the remaining requirements of section 213(a) of the Code, expenses they paid for breast pumps and supplies that assist lactation are deductible medical expenses. These expenses will qualify as medical care expenses reimburseable” under a health FSA.

Shulman said the IRS will include these conclusions in Announcement 2011-13 to be published in Internal Revene Bulletin 2011-8, and that the next revision of Publication 502, Medical and Dental Expenses, will also include this information.

The move makes sense and is consistent with a change made last year to the Fair Labor Standards Act requiring employers give women reasonable break time in order to breast feed and provide a private area for doing so.