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Recent developments: truck and van depreciation, automatic extensions and more.

Temporary and proposed regulations (T.D. 9069, REG-138495-02), issued July 7 2003, exclude trucks or vans that are "qualified nonpersonal use vehicles" from the depreciation limits on luxury passenger automobiles [under IRC Sec. 280F(a)].

These vehicles are defined in Temp. Regs. Sec. 1.274-5T(k). They include any vehicle which, by reason of its nature (i.e. design), is not likely to be used more than a de minimis amount for personal purposes. Temp. Regs. Sec. 1.274-5T(k)(2)(ii) lists 18 types of such vehicles.

Qualified nonpersonal use vehicles also include trucks and vans that have been specially modified, such as by installing permanent shelving and painting the vehicle to display advertising or the company's name, so that they are not likely to be used more than a de minimis amount for personal purposes [Temp. Regs. Sec. 1.274-5TK(7)].

These new regulations apply to trucks and vans placed in service after July 6, 2003.

Automatic Extensions for Information and Exempt Organization Returns

Information Returns: Temporary and proposed regulations (T.D. 9061, REG-107618-02), issued June 11, 2003, allow an automatic 30-day extension for filing Forms W-2 (series), W-2 G, W-3, 1042-S, 1098 (series), 1099 (series), 5498 (series) or 8027 with the Social Security Administration or the IRS. However, an extension request must still be made on a timely filed Form 8809, but an explanation and signature are no longer required.

An additional 30 day extension may then be requested on Form 8809, but an explanation and signature are required.

Caution: These extensions apply only to filing with the government. The filer must continue to provide copies of these information returns to the recipients by the original deadline.

Exempt Organization Returns: These regulations also allow an automatic three month extension for filing Forms 990 (series), 1041-A, 4720, 5227, 6069 or 8870 if a request is made on a timely filed Form 8868. An explanation and signature are no longer required. However, Form 8868 must show the full amount properly estimated as the organization's tentative tax for the tax year and be accompanied by the full remittance of this tax which is unpaid as of the date prescribed for filing the return.

An additional three-month extension may then be requested on Form 8868, but an explanation and signature are required.

Effective Date: These regulations apply to extensions requested for returns due after June 11, 2003.

Compliance Initiative for Nonresident Aliens and Foreign Corporations

IRS Notice 2003-38, IRB 2003-27, July 7, 2003 announced a compliance initiative fur nonresident aliens and foreign corporations that have not filed U.S. income tax returns and that may consequently be denied deductions and credits pursuant to Secs. 874(a) or 882(c)(2). Taxpayers that have waiver requests pending with the IRS under Regs. Secs. 1.874-1(b)(2) or 1.882-4(a)(3)(ii) also may participate in this initiative.

This initiative is intended to encourage nonresident aliens and foreign corporations to file income tax returns that were not timely filed in accordance with the regulations under Secs. 874(a) or 882(c)(2). The IRS will waive the filing deadlines set forth in Regs. Secs. 1.874-1(b)(1) and 1.882-4(a)(3)(i) if a taxpayer files before Sept. 16, 2003 all required U.S. income tax returns for every year for which a waiver is requested.

In addition, a taxpayer must pay the reported tax with each such return, must pay statutory interest and penalties as determined by the IRS (except the fraudulent failure to file penalty, as discussed below), and must cooperate with the IRS upon request in determining and satisfying its income tax liability for any tax year for which a waiver is requested.

To qualify for a waiver, a taxpayer must attach a statement to each late return for which a waiver is requested agreeing to cooperate with the IRS upon request in determining and satisfying the taxpayer's tax liability for that tax year. These requirements may not be satisfied by filing protective returns.

This initiative is not available where the taxpayer has previously filed a U.S. income tax return or a protective return for any tax year prior to a tax year for which a waiver is requested, or where the IRS has contacted the taxpayer concerning a failure to file U.S. income tax returns, initiated an examination or investigation of the taxpayer, or notified the taxpayer that it intends to commence an examination or investigation. Waiver's Scope: Under this initiative, the IRS will waive the filing deadlines set forth in Regs. Secs. 1.874-1(b)(1) and 1.882-4(a)(3)(i) with respect to late-filed returns. For returns filed pursuant to this initiative, the IRS also will waive the fraudulent failure to file penalty under Sec. 6651(f), but not the failure to file penalty under Sec. 6651 (a)(1). The IRS will impose other applicable penalties, as appropriate, with respect to returns filed pursuant to this initiative.

If a taxpayer that is eligible under this notice to participate in this initiative files all required returns for tax years ending in 1996 and all subsequent years for which the applicable deadline set forth in Regs. Secs. 1.874-1(b)(1) or 1.882-4(a)(3)(i) has passed, and satisfies all other requirements set forth in this notice, the IRS will not examine any potential U.S. income tax liability with respect to tax years ending before 1996.

Stuart R. Josephs, CPA, has a San Diego-based Tax Assistance Practice (TAP) that specializes in assisting practitioners in resolving their clients' tax questions and problems. Josephs, chair of the Federal Subcommittee of CalCPA's Committee on Taxation, can be reached at (619) 469-6999 or sjosephs@bdo.com.
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Title Annotation:federal tax
Author:Josephs, Stuart R.
Publication:California CPA
Geographic Code:1USA
Date:Aug 1, 2003
Words:953
Previous Article:Filing an OIC? Better make it complete.
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