IRS to conform certain rules for 401(k) and 403(b) plans.

The Internal Revenue Service plans to change certain rules to conform salary reduction elections under Internal Revenue Code sections 401(k) and 403(b) plans, according to Carol Gold, acting director of the IRS Employee Plans Division. "The service is committed to providing guidance this year on conforming some of the differences between the requirements, such as how often taxpayers can make elections." said Gold.

Currently, taxpayers can make only one election per year for 403(b) plans, which are used for tax-exempt employers and. both private and public educational institutions. "Taxpayers also. have only one opportunity a year to choose the amount they wish to defer under section 403(b)," said Gold. She said the IlLS was looking at whether taxpayers who use 403(b) plans should have as many opportunities to change heir elections as do taxpayers who use 401 (k) plans.

Gold also said the IRS was considering rules to allow 403(b) participants o make elections to defer income that is not yet available. Under current rules, a taxpayer can make a 401 (k) election to defer such income. "Determining when a taxpayer actually has earned the income can cause problems for plan administrators," said Gold. She said conforming 403(b) plan rules with 401(k) rules for amounts earned but not yet available would be difficult because they take into account constructive receipt regulations that apply throughout the code. "We want to be sure that we don't affect a broader concept of taxability if we change the 403(b) rules," said Gold. In addition, guidance will be developed for applying nondiscriminaiton standards for employer-matching contributions to section 403(b) plans, said Gold.

IRS Gives Troops in Bosnia Special Tax Relief

The Internal Revenue Service has given taxpayers serving peace-keeping missions in the former Republic of Yugoslavia more time to file their tax returns. All U.S. military and support personnel and their spouses have at least 180 days after they depart from peace-keeping efforts in Bosnia and Herzegovina, Croatia and Macedonia to file their 1995 individual income tax returns.

The IRS also suspended for these taxpayers all examinations and actions to collect back taxes for years before 1995 until 180 days after they leave the peace-keeping area. All military pay for enlisted personnel is exempt from federal income tax, and up to $4,104.80 per month is exempt from federal income tax for commissioned officers.

For more information, taxpayers, spouses and others acting on behalf of taxpayers on the peace-keeping mission can call the IRS toll-free at [phone]. IRS offices in Bonn (49 228 339-2119) and Rome (39 6 46742560) also are available for more information.

FYI 

* The Internal Revenue Service has issued guidance on the withholding of tax on certain U.S. income paid to foreigners under Internal Revenue Code sections 1441 and 1442, the related tax deposit and reporting requirements under section 1461 and the related collection, refunds and credits of withheld tax under sections 1461-1463 and section 6402.

* The IRS released revenue procedure 96-32, which will assist charities involved in low-income housing obtain tax exemptions more quickly. Housing organizations file nearly 1,000 exemption applications annually. The new guidance should significantly reduce the average processing time for these applications.

* The European Commission has developed an outline of how the European Union will harmonize its tax structure in order to benefit from the single market and reduce unemployment. One measure would raise the value-added tax on goods to reduce nonwage labor taxation. Another measure would increase the capital gains tax to reduce labor costs for EU employers.