Daily Tax Update - April 26, 2010

IRS EXTENDS COBRA SUBSIDY ELIGIBILITY PERIOD TO MAY 31ST:  Today, the IRS said that workers who lose their jobs during April and May might qualify for a 65-percent subsidy on their COBRA health insurance premiums.

  • According to the IRS, “The Continuing Extension Act of 2010, enacted April 15, reinstated the COBRA subsidy, which had expired on March 31. As a result, workers who are involuntarily terminated from employment between Sept. 1, 2008 and May 31, 2010, may be eligible for a 65-percent subsidy of their COBRA premiums for a period of up to 15 months. In some cases, workers who had their hours reduced and later lose their jobs may also be eligible for the subsidy.
  • Employers must provide COBRA coverage to eligible individuals who pay 35 percent of the COBRA premium. Employers are reimbursed for the other 65 percent by claiming a credit for the subsidy on their payroll tax returns: Form 941, Employers QUARTERLY Federal Tax Return, Form 944, Employer’s ANNUAL Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees. Employers must maintain supporting documentation for the claimed credit.”
  • Additional information can be accessed here.

MISCELLANEOUS GUIDANCE RELEASED TODAY:

Notice 2010-35 Federal Refundable Tax Credit Subsidy Option for Certain Qualified Tax Credit Bonds and Build America Bonds addresses the new Federal refundable tax credit subsidy option (also referred to hereafter as the direct payment subsidy option) under § 6431(f) of the Internal Revenue Code (the “Code”) for certain qualified tax credit bonds and Build America Bonds under the Hiring Incentives to Restore Employment Act (the “HIRE Act”) The IRS and the Treasury Department plan to implement the refundable credit payment procedures for Direct Pay Tax Credit Bonds in order to be able to process requests for refundable credit payments with respect to interest payments due on or after September 1, 2010, to enable issuers to begin issuing these bonds for qualified purposes.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
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 - TAX PRACTICE
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