Daily Tax Update - December 1, 2006

CONGRESS EXPECTED TO ACT ON EXTENDERS PACKAGE NEXT WEEK BEFORE ADJOURNMENT: On December 5th, Congress returns for what is anticipated to be its last week in session. Congress is expected to approve a package of expiring tax cuts that includes the research and development tax credit, state sales tax deduction, and tuition deduction. The House is expected to approve the package next Tuesday followed by Senate passage on Wednesday.

  • Next week, Congress is also expected to pass a continuing resolution to fund the federal government to February 15th.

TREASURY, IRS ISSUE NOTICE ON REPORTING AND WITHHOLDING FOR AMOUNTS INCLUDIBLE IN GROSS INCOME UNDER SECTION 409A: Yesterday, the Treasury Department and the IRS issued Notice 2006-100. The notice provides guidance to employers and payers on their reporting and wage withholding requirements for calendar years 2005 and 2006 with respect to deferrals of compensation and amounts includible in gross income under IRC § 409A and certain relief from reporting deferrals that are not includible in income during those years.

  • Under the notice, employers and other payers need not report annual deferrals of compensation that are not includible in income under § 409A on Form W-2 or Form 1009-MISC for 2005 or 2006. However, amounts includible in income under § 409A for 2005 and 2006 must be reported on Form W-2 or Form 1099-MISC, as appropriate. In addition, the notice provides guidance on how to meet  income tax withholding requirements for amounts includible in income under § 409A for 2006.  The notice also provides guidance to service providers on their income tax reporting and tax payment.
  • The notice can be accessed via: http://www.irs.gov/pub/irs-drop/n-06-100.pdf.
  • For additional information, contact Anne E. Moran - amoran@steptoe.com

As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.