IRA

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storm, flooding, and landslides in Alaska. The tax relief postpones various tax filing deadlines that began on September 15, 2022.

Senators Ron Wyden (D-OR) and Mike Crapo (R-ID), Senate Finance Committee Chair and Ranking Member, have introduced S.4808, the Enhancing American Retirement Now (EARN) Act. As previously announced, the Senate Finance Committee unanimously approved the bill in June based upon an outline released at that time.

Changes in the legislative text from the June outline include:

• Individuals age 60 or older could start making higher catch-up contributions in 2025 (versus 2024).
• Employees with wages below $100,000 could make catch-up contributions on a pretax or Roth basis. Employees with wages exceeding $100,000 would still be required to be make catch-up contributions on a Roth basis.
• The option to treat employer contributions as Roth contributions would be available starting in 2023 (versus 2024).

While it is unclear whether the bill will be brought to a stand-alone vote with the Senate’s limited number of sessions for the remainder of the year, congressional observers anticipate that the EARN Act will be consolidated with the Senate Health, Education, Labor and Pensions (HELP) committee’s RISE & SHINE Act and the Securing a Strong Retirement Act of 2022, which was passed by the House of Representatives. It appears that a final bill will likely receive a vote this year after the November mid-term elections.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storms in Arizona. The tax relief postpones various tax filing deadlines that began July 17, 2022. Affected individuals and households who reside or have a business in the Salt River Pima-Maricopa Indian Community, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after July 17, 2022, and before November 15, 2022, will have until November 15, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after July 17, 2022, and before November 15, 2022.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

The IRS has provided additional guidance related to federal income tax withholding requirements for retirement plan and IRA payments. As previously shared, new Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions, may be used in 2022 and must be used starting in 2023 for any nonperiodic distributions. Updated Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, is now to be used only for periodic pension or annuity payments. The IRS has attempted to answer some of the outstanding questions regarding use of the new forms.

With regard to the use of electronic substitutes to paper Forms W-4P and W-4R, the IRS references Publications 15-A, Employer’s Supplemental Tax Guide, and 15-T, Federal Income Tax Withholding Methods, for general guidelines but does provide a few clarifications

• Payers that electronically store payee personal information and accept withholding elections through an account tied to the payee are not required to have the payee submit the information again when completing an electronic substitute to Forms W-4P and W-4R
• References to page numbers, when not applicable to the substitute form, should be replaced by appropriate references
• An electronic substitute to Form W-4R can provide a link to a web page containing marginal tax rate tables as long as certain text and instructions are provided

The IRS also indicates that when providing paper substitute forms for Forms W-4P and W-4R, payers should generally follow the same guidelines that apply for electronic substitutes, with the exception that the substitute form must include applicable instructions and worksheets rather than providing a web address.

The IRS confirms that telephonic substitutes for Forms W-4P and W-4R are permitted and intends to issue additional guidance. In the meantime, brief scripting specific to three Form W-4R scenarios are provided, and the IRS specifies the Form W-4P content that should be scripted as well.

And finally, the IRS clarifies that for payers using electronic or paper substitutes for Forms W-4P and W-4R, compliance with the updated forms must occur by the later of January 1, 2023, or 30 days after the IRS releases the final versions of the 2023 Forms W-4P and W-4R.

The Office of Management and Budget has received a final rule from the IRS titled “Electronically Filed Returns”.

The IRS released a proposed rule in July 2021 regarding electronic filing requirements for certain information returns, pursuant to the Taxpayer First Act of 2019. The proposed regulations reduce the threshold by which filers must electronically file from 250 to 100 returns for the 2022 calendar year. For filings required after calendar year 2022, the threshold will be further reduced to 10 returns.

The IRS has issued Revenue Ruling 2022-17, which contains the applicable federal rates (AFR) for September 2022. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as “72(t) payments.”

The IRS has announced the postponement of certain tax-related deadlines for victims of a water shortage and health impact from unprecedented sargassum seagrass influx on the island of St. Croix, U.S. Virgin Islands. The tax relief postpones various tax-filing deadlines that began July 15, 2022. Affected individuals and households who reside or have a business on the Island of St. Croix, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

July 19, 2022 - Representative Warren Davidson (R-OH) has introduced HR 8331, a bill that would provide for a suspension of required minimum distributions (RMDs) from retirement plans and IRAs for the 2022 calendar year.

A Proposed Rule titled “Proposed Amendment to PTE 84-14 for Plan Asset Transactions Determined by an Independent Qualified Plan Asset Manager” (QPAM) has left the Office of Management and Budget—suggesting that official release may come soon.

ERISA generally prohibits a number of transactions between a plan and a “party in interest”—including fiduciaries and those providing services to the plan—unless an exemption is granted. PTE 84-14 is a class exemption regarding certain transactions between a party in interest with respect to an employee benefit plan and an investment fund that is managed by a QPAM. An employee benefit plan includes an employee welfare benefit or pension benefit plan, a trust defined under IRC. Secs. 401(a) or 403(a), IRAs, HSAs, MSAs, and ESAs. QPAMs are independent fiduciaries that are a bank, savings and loan, insurance company, or registered investment advisor meeting certain asset/net worth thresholds. 

The Senate Finance Committee conducted a hearing today to consider the Enhancing American Retirement Now (EARN) Act. The bill was unanimously approved out of committee with one minor amendment. While text of the bill has not yet been made available, details of a summary released by the committee were previously announced. During the hearing, several other amendments were discussed and, while not included, many had broad support and could be included in the final full Senate version of the bill.