Dec 4th 2013
CCH has issued a new Tax Briefing: IRS Clarifies NII Tax / Additional Medicare Tax in Final Regs, providing expert analysis and insight on the recently released final Net Investment Income (NII) tax and Additional Medicare Tax regulations. These much-anticipated final regulations come nearly one year after the IRS issued proposed reliance regulations and aim to clarify the 3.8 percent NII tax and 0.9 percent Additional Medicare Tax now imposed on higher income individuals. CCH, part of Wolters Kluwer is a leading global provider of tax, accounting and audit information, software and services.
Clarifications in the final NII regulations cover income, estimated taxes, real estate rental activities, regrouping under Code Sec. 469, trusts and estates, and much more. The IRS will generally allow taxpayers to rely on either the NII proposed regulations or the final regulations for tax years beginning before January 1, 2014. The final Additional Medicare Tax regulations generally track the proposed regulations with some clarifications for employers. Additionally, the IRS released proposed regulations on the calculation of NII regarding certain types of property, as well as taking a different approach to a much-criticized deemed sale rule for dispositions of active interests in partnerships and S corporations.
"Overall, the general framework of the NII tax remains unchanged, but the IRS did listen to concerns from taxpayers and practitioners relating to the administration of the NII tax," said CCH Senior Federal Tax Analyst, George Jones, JD, LLM. "In some areas, however, the IRS had little room to make changes. For example, the threshold amounts for triggering the NII tax are set by statute and are not indexed for inflation. The IRS also did not, contrary to many requests, provide a list of income or deduction items that are excluded from the calculation of NII."
For More Information
Full details on the final NII tax and Additional Medicare Tax regulations are available by visiting: Tax Briefing: IRS Clarifies NII Tax / Additional Medicare Tax in Final Regs.
A full range of recent CCH Tax Briefings covering significant developments is also available by visiting CCHGroup.com/Legislation.