The Internal Revenue Service announced it’s extending the grace period allotted for small business owners to pay certain tax-shelter penalties – as Congress prepares to write legislation to address the issue.
The deadline was supposed to be the end of September, but Congress is looking at a bill that would change small-business responsibility regarding the tax-shelter penalties. IRS held off the penalties — until Dec. 31 — to give legislators a little extra time to pass the bill, which would create long-term protection for small-business owners from being responsible for the penalties.
What’s it mean?
Most of the penalties, some as high as $1 million, were associated with small-business pension or benefits plans. Business owners are howling because some of the plans were set up as shelters on the advice of tax experts who said they had IRS’s approval.
The main problem for small business involves so-called “listed transactions,” tax shelters the IRS now has designated as suspect. Many small-business owners bought such retirement plans, which were listed by the IRS, but are now facing fat penalties.
IRS Commissioner Doug Shulman wrote a letter to the chairmen and ranking members of the Congressional tax-writing committees, announcing the reprieve on penalties.
In that letter, Shulman also noted, “Clearly, a number of taxpayers have been caught in a penalty regime that the legislation did not intend. I understand that Congress is still considering this issue, and that a bipartisan, bicameral, bill may be in the works.”
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Tags: Doug Shulman, IRS. Internal Revenue Service, listed transactions
October 8th, 2009 at 11:31 am
Jim
In addition to being an ERISA/employee benefits lawyer, I am a Director of the Small Business Council of America. I lead the SBCA task force on the listed transaction issue and the relief legislation.
I have met with tax staff of the Senate Finance and House Ways and Means Committes regarding the need for the relief legislation. I will be meeting with them again when I am in Washington in early November.
The SBCA has been very active in seeking the needed legislative relief and I prepared a Position Paper which was presented to Congress with the SBCA’s legislative recommendations. You can read the position paper at — http://www.pensionlawyers.com/docs/SBCAArticle.pdf or see it on the SBCA website — http://www.sbca.net
If you need any additional information about our activities and/or the progress of the legislation, do not hesitate to email me or call me at 310 954-2178
Alex
October 8th, 2009 at 1:34 pm
BFD – the do-do is about to hit the fan all you business owners.
“Change You Can Believe In” – is about to destroy capitalism and free enterprise as we know it.
October 8th, 2009 at 2:48 pm
Agree with you LEU. Congress couldn’t write and think through this piece of legislation so why would anyone think they can do better with say…health care. In this instance the IRS had its hands tied by the law and are at least trying to make a fair appraisal of the situation. This law should never have been written in the first place. This is a prime example of why government should never ever interfere with enterprise/markets. Nothing works from the top down, only the bottom up but politicians refuse to believe it. They are the ultimate evaders of reality.
October 9th, 2009 at 11:14 am
Jennifer Barr, Dept of Revenue, is now giving free legal advise to small business. Jennifer.Barr@state.tn.us