NSAlert March 1, 2005 In This Issue: IRS Revises Form 941 Modification of Check the Box Treasury and IRS Issue Guidance on Life Insurance and Annuity Contracts Signature No Longer Needed on Corporate Extension Forms
IRS REVISES FORM 941 The IRS has revised Form 941 for 2005. According to the IRS, the redesigned form features an improved layout, plain language instructions, simplified deposit reporting and paid preparer identification. The form is also scannable, which is expected to reduce transcription errors. You can download the new form from the Forms and Publications section of the IRS web site (www.irs.gov) or obtain printed copies and instructions by calling the IRS at 1-800-829-3676. MODIFICATION OF CHECK THE BOX The Treasury is set to publish final regulations (T.D. 9183) that clarify that qualified REIT subsidiaries, qualified subchapter S subsidiaries, and single owner eligible entities that are disregarded as entities separate from their owners are treated as separate entities for purposes of any Federal tax liability for which the entity is liable. The new regulations do not address whether a disregarded entity is subject to federal tax. The new regulations take effect April 1, 2005. TREASURY AND IRS ISSUE GUIDANCE ON LIFE INSURANCE AND ANNUITY CONTRACTS The Treasury Department and the Internal Revenue Service finalized a regulation that would limit the use of life insurance and annuity contracts as a way to avoid current taxation of investment earnings. The regulation, together with other guidance previously issued, will prevent taxpayers from turning otherwise taxable investments in hedge funds and other entities into tax-deferred or tax-free investments by purchasing the investments through a life insurance or annuity contract. Life insurance and annuity contracts receive favorable tax treatment in recognition of the importance of protecting loved ones against the potentially devastating financial consequences of death or the risk of exhausting savings while in retirement. The final regulation, together with other guidance previously issued, provides guidance that will help taxpayers purchasing a life insurance or annuity contract to be secure in the knowledge that the contract complies with the tax laws. This regulation is part of the effort to modernize the rules for these contracts in recognition of the developments that
have occurred in the financial markets in recent years. A copy of the new regulation, which takes effect March 1, 2005 for most transactions, is available on the NSA web site at www.nsacct.org. SIGNATURE NO LONGER NEEDED ON CORPORATE EXTENSION FORMS The IRS has announced that a signature is on longer needed on Form 7004, Application for Automatic Extension of Time to File Corporate Income Tax Return.