A 1974 ruling involving a "sign-on fee" paid to a soccer player as an inducement not to negotiate with any other club concluded that the payment was not wages subject to withholding, and cited the 1958 ruling in its reasoning.
Those principles, some aggressive taxpayers have figured, are applicable to any bonus to which they apply.
In its ruling last week, the agency said the 1958 ruling "erred in its analysis by failing to apply the [law] and regulations appropriately to the question of whether the bonus was wages. . . . Specifically, it failed to apply the correct definition of wages and to consider whether the bonus was paid in connection with establishing the employer-employee relationship. Accordingly, [the 1958 ruling] is revoked," and so is the soccer ruling.
Henceforth, "amounts an employer pays as bonuses for signing or ratifying a contract in connection with the establishment of the employer-employee relationship are wages for purposes of [payroll] and Federal income tax withholding," the new ruling says unequivocally.
However, sharp operators who have already skipped withholding on signing bonuses, based on the 1958 ruling, are home free, as apparently is anyone who can get a bonus deal done by year-end.
The new ruling "will not apply . . . to any signing bonus, sign-on fee, or similar amount paid to an employee in connection with the employee's initial employment with the employer pursuant to a sign-on agreement or other contract entered into before Jan. 12, 2005, provided the amount is paid under facts and circumstances that are substantially the same as in" the 1958 ruling, the IRS said.
Americans appear a bit more optimistic about their holiday spending than they were last year, according to a survey released last week by the Consumer Federation of America and the Credit Union National Association (CUNA).
About 17 percent said they intend to spend more this holiday season than last year, up from 15 percent who said last year that they planned to boost spending. About 32 percent said they will spend less, down from 34 percent a year ago, and the number saying they will spend much less was down even more -- to 12 percent from 16 percent. The rest, about half, said they expect their spending to be about the same as last year.
CUNA Chief Economist Bill Hampel said that "over the five years we've now been doing these surveys, our results reveal that holiday spending is an area where consumers start out with the best of intentions, but end up exceeding their budgets."
The Internal Revenue Service last week released the mileage rates that taxpayers can use in computing the costs that will be deductible in 2005 for operating an automobile (or van, pickup or panel truck) for business, charitable, medical or moving expense purposes.
The rates, which go into effect Jan. 1, are:
40.5 cents a mile for all business miles driven, up from 37.5 cents a mile in 2004.
15 cents a mile when computing deductible medical or moving expenses, up from 14 cents a mile in 2004.
14 cents a mile when giving services to a charitable organization.
The 3-cent increase in the business mileage rate was the largest one-year rise ever, the IRS said, a result primarily of higher prices for vehicles and fuel during the past year. The charitable standard mileage rate is set by law.