Beware of new pension distribution rules
Article Abstract:
The Unemployment Compensation Amendments of 1992 is intended to benefit the unemployed but will ironically be financed by those who may themselves be out of work in the future. A tax provision included in the bill requires that 20% of an employee's pension payout be withheld if it is to be distributed on a lump-sum basis. The withheld amount must then be paid to the IRS by the employer. However, if the taxpayers deposit the entire vested amount theyreceived to any qualified pension plan within 60 days of distribution, they will not be required to pay tax but will only be compelled to contribute the 20% which can be refunded when filing federal income tax return. This requirement can be avoided either by requesting the trustee to deposit the entire lump-sum distribution directly into any qualified pension plan or by temporarily leaving the pension funds in the former employer's pension plan.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1992
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New rules for home mortgages
Article Abstract:
The IRS has issued a Revenue Procedure in 1992 that provides guidelines for the tax deductibility of points accrued from the payment of home equity loans or home mortgages. A general requirement is that points should be financed and subtracted against the duaration of the loan, using a pro rata scheme. Consistent with regulations of the Tax Court the IRS further stipulates that the amount charged to taxpayers be paid directly to the lenders. The five general conditions for which points are considered tax deductible are retained from the old Revenue Procedure but are the result of a restructuring that aims to ease the said requirements. The Revenue Procedure further adds that the new rules do not extend to point payments associated with non-deductible mortgage interest.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1992
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