AICPA savors success in new tax cut bill.Several provisions included in the $1.35 trillion tax cut bill passed by Congress and signed into law by President George Bush are the direct result of the work done by the AICPA AICPA See American Institute of Certified Public Accountants (AICPA). . Primary among the new legislation are the changes to the transfer tax system, which will ease administration of the laws that govern estates, gifts and generation-skipping transfers (GST GST abbr. Greenwich sidereal time GST (in Australia, New Zealand, and Canada) Goods and Services Tax ). The estate tax, once the concern of the very wealthy, has increasingly affected the moderately wealthy and is expected to continue to do so. The new law will particularly ease the transfer tax burden previously borne by estates containing small businesses, family farms and illiquid Illiquid An asset or security that cannot be converted into cash very quickly (or near prevailing market prices). Notes: A house is a good example of an illiquid asset. See also: Cash, Liquidity Illiquid In the context of finance. assets. The generation-skipping transfer exemption had become so complex it was a pitfall pit·fall n. 1. An unapparent source of trouble or danger; a hidden hazard: "potential pitfalls stemming from their optimistic inflation assumptions" New York Times. for taxpayers who failed to meet its stringent rules. Although they made good faith efforts to make timely allocations, they often paid punitive taxes for their inadvertent mistakes. The law gives the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. statutory authority to grant relief for late allocations and, because it incorporates the AICPA's proposals, greatly simplifies the labyrinth of rules that formerly entrapped unwary taxpayers. A second change allows employers to provide retirement education to employees on a tax-free basis. Currently employees availing themselves of this fringe benefit fringe benefit Any nonwage payment or benefit granted to employees by employers. Examples include pension plans, profit-sharing programs, vacation pay, and company-paid life, health, and unemployment insurance. must pay federal income taxes on it. When it becomes effective in 2002, employers may deduct the cost of such retirement education, but employees will not be taxed on it. A third piece of tax relief, affecting the marriage penalty, is one long supported by the AICPA. Though not as broad as the Institute had fought for, this provision lessens the tax burden for married couples. The law takes effect in 2006 and will phase in over five years. It increases the standard deduction The name given to a fixed amount of money that may be subtracted from the adjusted gross income of a taxpayer who does not itemize certain living expenses for Income Tax purposes. for joint filers to double the rate for single filers by 2010. "We are particularly pleased," says Gerry Padwe, AICPA vice-president-taxation, "that the new law includes the proposals, in which we played a significant role for removing potentially serious traps for the unwary regarding the generation-skipping transfer tax--proposals we have been advocating for several years. In addition, given the importance of individuals taking on more responsibility for a substantial part of their own retirement funds, we are delighted to see an AICPA-led coalition success in the new act that allows employers a tax deduction Tax deduction An expense that a taxpayer is allowed to deduct from taxable income. tax deduction See deduction. for providing retirement advice to employees without the employees' having to report that benefit as taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. ." The tax cut provisions sunset in 2010 unless a future White House and Congress act to extend them or make them permanent. In the absence of such actions, these changes will disappear on December 31, 2010, and the nation will go back to the current tax system. A summary of the legislation, prepared by the congressional joint committee on taxation, can be found on the Web at http://www.house.gov/jct/x-50-01.pdf |
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