Tax Analysts published a copy of the letter from the IRS to officials at UMB Bank and the American Bankers Association in Tax Notes Today on April 8 that explained that Notice 2008-59’s list of conditions under which an employer may take back a contribution to an employee’s HSA is not an exclusive list of such situations. (2016 TNT 68-9)

If an employer has provided for contributions to be made to eligible employee’s HSAs under Section 223, a problem arises if the contribution is, in fact, in error and excessive.  IRC Section 223(d)(1)(E) provides that a taxpayer’s balance in an HSA is nonforfeitable.  Notice 2008-59 provided two conditions under which an employer could recover an erroneous payment.

In Notice 2015-86 the IRS issued guidance regarding the effect of the U.S. Supreme Court’s ruling in Obergefell v. Hodges on retirement plans and health and welfare benefit plans.

Generally the ruling notes that since the federal government was required to recognize same sex marriages that were valid at the time entered to following 2013’s decision by the United States Supreme Court in the case of United States v. Windsor there is a very limited impact of the Obergefell decision.

In ruling on a motion for reconsideration in the case of Law Office of John H. Eggertsen, P.C. v. Commissioner, 143 TC No. 13 the Tax Court addressed the interaction of provisions governing the statute of limitations for the excise tax on prohibited allocations of employer securities in an ESOP imposed by IRC §4979A.

In Announcement 2015-22 the IRS stated that it will not tax data breach victims on the value of the identity theft protection services provided by the organizations whose systems were compromised.

There have been a number of high data breech cases in the past few years, affecting major retailers like Target, insurers such as Anthem, and even the federal government’s own Office of Personnel Management.  Generally these entities and organizations have responded to the incident by offering those whose information was or may be been disclosed various identity theft protection services.

Identity theft is an increasingly significant issue in the tax arena.  As the preamble to TD 9730, discussed below:

Identity theft and refund fraud is a persistent and evolving threat to the nation's tax system. It places an enormous burden on the United States Government, with the most painful and immediate impact being on the victims whose personal information is used to commit the crime and the most pervasive impact being an erosion of public confidence in the tax system.

The tax refund fraud category of identity thieves most often make use of fictitious W-2’s to carry out the fraud.  The W-2s most often make use of the name and employer identification number of an actual employer, along with the name and social security number of a real taxpayer.  However, that taxpayer quite often has never worked for that employer or, if the taxpayer did, the amounts reported on the W-2 are not what was actually paid to the taxpayer.

In the case of Waterhouse v. United States, United States Court of Federal Claims, 116 AFTR 2d ¶2015-5080 a corporate officer and holder of a 40% interest in the company’s stock argued that he was not a responsible person under IRC §6672 because he and another officer had agreed to divide up the responsibilities. 

“While it would be nice if all tax shelters advertised as legitimate tax shelters were indeed legitimate, the fact of the matter is that not all marketed tax shelters are legitimate.”  That sentence outlines the basic problem for the taxpayers in the case of Our County Home Enterprises, Inc., et al v. Commissioner, 145 TC No. 1.

The case is yet another in a series of unsuccessful attempts by owners of closely held businesses to use a purported welfare benefit plan (promoted as “single employer plans” or “419(e) plans”) to use life insurance in such programs to provide cash and other benefits on an extremely tax advantaged basis to the owners of the businesses.

In Notice 2015-49 the IRS announced that it proposes to amend the regulations related to required minimum distributions under IRC §401(a)(9) to provide a defined benefit plan will generally not be permitted to replace any annuity being paid with a lump sum payment or other accelerated form of distribution.  The IRS plans to make these regulations effective generally as of July 9, 2015.

If an employer is required by state law to made additional payments to an employee when their final wages are not paid within a specified time period is that payment subject to federal payroll taxes and/or federal withholding?  This is the issue addressed in Chief Counsel Advice 201522004.

In the case of Tibble v. Edison Int’l, US Supreme Court No. 13-550, reversing and remanding in part 711 F.3d 1061 as revised in 729 F. 3d 1110 CA9 the United States Supreme Court looked at the period of time a plan fiduciary may be held liable for a breech of fiduciary duty related to the selection of investments made available to qualified plan participants.  The Supreme Court, in a unanimous opinion, found that the District Court and Ninth Circuit had applied too restrictive a standard in determining when the clock began running on the statute of limitations.

The Ninth Circuit affirmed the Tax Court’s finding in the case of Sewards v. Commissioner, 2015 TNT 92-13, CA9, No. 12-72985 aff’g 138 TC No. 15 (2012).  The issue in this case was whether the taxpayer could exclude a portion of his pension as disability income received under a worker’s compensation act.

The treatment of incentive stock options that have been exercised when the employer is acquired during the one year period following exercise of the options is discussed in Chief Counsel Advice 201519031.  The key issue is whether the transfer of the shares in the employer for interests in the acquiring company will constitute a disqualifying disposition.  And, as with all good tax questions, the answer is “it depends.”

The IRS has issued revisions to the Employee Plans Compliance Resolution System (“ECPRS”) in Revenue Procedure 2015-28, modifying Revenue Procedure 2013-12. 

ECPRS is a program that allows for correction of plan failures.  As the IRS outlines in the introduction to the program found in Rev. Proc. 2013-12, it is meant to allow retirement plans that are intended to comply with §§401(a), 403(a), 403(b), 408(k) or 408(p) but which have failed to meet the requirements of those provision to correct the errors that will allow the plans to continue to offer tax-favored benefits.