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Week of October 16, 2009 • Issue No. 054
This Week in the iNews:
▲ ESTATE TAX UPDATE
▲ IRS ISSUES GUIDANCE ON 2009 REQUIRED MINIMUM DISTRIBUTION WAIVER
▲ FIGHTING FRAUD – WITH THE RED FLAGS RULE
▲Estate Tax Update
From the desk of John Mack, CPA, MBA
President Barack Obama and congressional Democrats are united behind an effort to block a scheduled year-end repeal of the estate tax. But prospects are blurred by division between the House and the Senate over the contours of a restored tax, as well as Capitol Hill’s focus on health care.
“Health care has become such a consuming passion, this has dropped to the second tier”, a senior Democrat tax aide said about keeping the estate tax in place. It currently has an exemption of $3,500,000 and a top tax rate of 45%.
It is scheduled to drop to zero in 2010, and return at pre-Bush levels in 2011 with an exemption of $1 million and a top tax rate of 55%.
Further complicating matters is that the central players on estate-tax policy also have key roles in the health-care debate. The majority agree with the President that the 2009 estate tax – a $3.5 million inheritance tax exclusion and a 45% rate should be locked in permanently. It is also potentially possible that these could be indexed for inflation.
Only time will tell when this important piece of legislation will be enacted.
The Internal Revenue Service recently provided guidance for retirement plan administrators, plan participants and retirees regarding recent legislation affecting required minimum distributions. The Worker, Retiree, and Employer Recovery Act of 2008 waives required minimum distributions for 2009 from certain retirement plans.
Generally, a required minimum distribution is
the smallest annual amount that must be withdrawn from an IRA or an
employer’s plan beginning with the year the account owner reaches age
70½. The 2008 law waives required minimum distributions for 2009 for
IRAs and defined contribution plans, such as 401(k) and allows certain
amounts distributed as 2009 required minimum distributions to be
rolled over into an IRA or another retirement plan.
IRS Notice 2009-82 provides relief for people who have already
received a 2009 required minimum distribution this year. Individuals
generally have until the later of Nov. 30, 2009, or 60 days after the
date the distribution was received, to roll over the distribution.
The notice also provides guidance for retirement plan sponsors. It contains two sample plan amendments that plan sponsors may adopt or use to amend their plans to either stop or continue 2009 required minimum distributions. Both sample amendments provide that participants and beneficiaries can choose to receive or not to receive 2009 required minimum distributions. Also, both sample amendments allow the employer to offer direct rollover options of certain 2009 required minimum distributions.
Plan sponsors may need to tailor the sample amendment to their plan’s particular terms and administration procedures and must adopt the amendment no later than the last day of the first plan year beginning on or after Jan. 1, 2011 (Jan. 1, 2012 for governmental plans).
▲ Fighting Fraud - With the Red Flags Rule
from the desk of Marty Grausam, CPA, CFE, CISA
Are You and Your Business Complying With the Red Flags Rule?
The Red Flags Rule requires many businesses and organizations to implement a written Identity Theft Prevention Program designed to detect the warning signs – or “red flags” – of identity theft in their day-to-day operations. Are you covered by the Red Flags Rule?
First, you must find out if the rule applies to your business or organization;
Then, you should get practical tips on spotting the red flags of identity theft, taking steps to prevent the crime, and mitigating the damage it inflicts; and
Finally, you need to learn how to put in place your written Identity Theft Prevention Program.
The Federal Trade Commission’s (FTC) “Red Flags” Rule is designed to protect personally identifiable information from data thieves. Among others, the Red Flags Rule applies to any business or individual that provides a product or service for which payment is received after the product or service is delivered. The FTC will begin enforcement of the Rule effective November 1, 2009.
Penalties for noncompliance can be sought by the FTC for both monetary civil penalties and injunctive relief for violations of the Red Flags Rule.
Currently, the laws sets $3,500 as the maximum civil penalty per violation and injunctive relief will require the party being sued to comply with the law in the future, and require certain actions ensuring compliance with both the Rule and the court order.
Contact Marty Grausam at 616-774-9004 or mgrausam@pmcpa.com to discuss how Prangley Marks, llp can work with you to be in compliance, and to help minimize future potential identity theft and your business losses to your business.