I wanted to bring to our readers’ attention changes to some fees for nonprofits, as the IRS updated amounts for various exempt organizations’ user fees.  While many of the fee changes will not raise eyebrows, some are noteworthy and apply to common requests such as letter rulings.  Adjustments include:

- Changed $900 to $2,250 in section 6.06(3) (Approval of qualified 501(c)(25) subsidiary)

- Changed $8,700 to $10,000 in section 6.06(4) (All other letter rulings)

- Updated user fee amounts for section 6.07 (Determinations letters and requests for group exemption letters) and section 6.08 (“Determinations Office” summary list).

Full detail can be found by linking to the IRS Bulletin.

We applaud any and all efforts to assist the recovery in Haiti, and the IRS is also doing its part to ease the burden on taxpayers and organizations that want to help.

In fact, the IRS recently announced that the Haiti earthquake is designated for “Qualified Disaster Relief,” and is making exceptions in several areas:

1. Recipients of qualified funds can exclude those payments from income on their tax returns.

2. The guidance also allows “employer-sponsored private foundations to assist victims in areas affected by the January 2010 earthquake in Haiti without affecting their tax-exempt status. These payments generally include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance.”  For more, please read the official IRS announcement.

3. The IRS is also highlighting tax tips related to Haiti donations.  They point to this as a special case that allows individuals to make cash donations to qualified charities helping in Haiti and deduct them on their 2009 tax returns, as long as the donations are made by February 28.  The below video walks through a complete picture of the opportunity and the stipulations:

Here we are in late January, and we find ourselves between year-end tax planning and the actual filing period for most individuals. CPAs and wealth planners are working together to design an ideal strategy for their clients, and there is a crucial change in 2010 that will have a significant impact on the year: the temporary repeal of the federal estate tax.

Yes, the one-year disappearing act of the federal estate tax has come to pass. Some believe that quick action will be taken to reinstate the taxes at 2009 levels (see below bullets for details). Others believe Congress will proceed cautiously in an attempt to enact more sweeping reforms. In either case, any reinstated tax may or may not be made retroactive to January 1, 2010.

Needless to say, planning under these circumstances is challenging. Indeed, the failure of Congress to either extend the 2009 estate tax rules into 2010 or enact a permanent estate tax law has created a slew of unfortunate consequences. Some important pieces of the puzzle are:

- Both the federal estate tax and the federal generation-skipping transfer tax (a separate tax on property given to grandchildren, great-grandchildren, etc.) are repealed for 2010 unless Congress enacts legislation to reinstate them, retroactive to January 1, 2010 or otherwise.

- Both taxes are scheduled to return in 2011 at levels that applied prior to 2001. That means a $1 million exemption and a top tax rate of 55% (in 2009, the exemption was $3.5 million and the top rate was 45%).

- The federal gift tax remains in effect with a $1 million lifetime exemption, and the top tax rate has dropped to 35% in 2010 (versus 45% in 2009).  However, at this point in time the maximum gift tax rate is scheduled to jump to 55% in 2011.

Along with the repeal of the federal estate tax come new rules for determining the federal income tax basis of inherited assets which, if not changed, could mean heirs will pay more capital gains tax.  Read the rest of this entry »