Practice management

The Tax Policy Center has released a series of data tables taking a look at the effect of the major tax changes enacted since 2001.For each table, the center compares the amount of tax owed under current law with the amount that would have been paid if the law had stayed the same as it was in 2000. Estimates are computed both for dollar-income classes (for example, $40,000 to $50,000) and for percentiles of income distribution (for example, middle quintile, which includes households in the middle 20 percent of the income distribution).

Senators Chuck Grassley, R-Iowa, and Max Baucus, D-Mont., struck an agreement with House lawmakers on bipartisan, bicameral legislation to extend expired and expiring tax, health, trade, and other provisions.

The 2006 elections saw the Democrats taking control of both the House and the Senate for the first time in 12 years. The shift in the House is probably the most significant.In the House, the majority party controls the agenda: what hearings are held, what legislation gets taken up by committees. The Democratic majority is a narrow one, just as the Republican majority had been a narrow one. Many of the newly elected Democrats were chosen to appeal to moderate voters, so it is far from clear that there has been a major shift in the view of House members on tax issues. Still, control of the agenda will tend to mean that Democratic proposals, rather than Republican proposals, will emerge from the House Ways and Means Committee.

Politicking is still causing a number of popular tax breaks to be held up in Congress.With the 109th Congress scheduled to wrap up its business at the end of next week, a number of expiring tax measures still have yet to be renewed.

State revenues remain stable for the most part, but in a few places, collections in individual tax categories are not living up to expectations, according to the latest survey of state fiscal offices by the National Conference of State Legislatures.

A partner in the Washington office of law firm Venable LLP since 2003, Sam Olchyk provides general tax advice for businesses and individuals, as well as tackling federal tax issues that require representation before Congress, the Treasury Department and the Internal Revenue Service.Prior to joining the firm, Olchyk spent eight years as a tax attorney for Congress -- first as tax counsel with the Senate Finance Committee, and then as legislation counsel with the Joint Committee on Taxation, where his main responsibility was helping with the development of tax legislation affecting domestic business activity. During his time on Capitol Hill, Olchyk, who is also a CPA, worked on numerous proposals that were enacted into law, including pieces of the Job Creation and Worker Assistance Act of 2002, the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Community Renewal Tax Relief Act of 2000. In 2001, he worked on a joint committee study regarding the simplification of the federal tax laws.

Home mortgage giant Fannie Mae announced that it will reduce its earnings by $6.3 billion to correct accounting problems dating back to 2001.

Responding to criticism from Congress and taxpayer advocates, the Internal Revenue Service announced that for the upcoming tax-filing season, private sector partners in its Free File program will remove ancillary offerings -- such as refund anticipation loans -- made to taxpayers in the course of participating in the program.“We heard many legitimate concerns about the marketing of ancillary products during the last filing season,” said IRS Commissioner Mark Everson, in a statement. “This is a constructive step.”

The California Franchise Tax Board has voted unanimously to permanently offer a program allowing some low-income residents to file government-prepared tax returns, despite opposition from tax preparation software companies.

The Internal Revenue Service has allocated nearly $1 billion of tax credits to nine planned clean coal projects.The Energy Policy Act of 2005 authorized the tax credits, and, working within a number of set parameters, the IRS consulted with the Department of Energy to allocate the credit to specific projects.

The Internal Revenue Service announced new guidelines for taxpayers to follow in order to substantiate donations to charities that were made via payroll deduction.

The Internal Revenue Service modified a $103 million contract for the management of paper tax returns in November, according to a published report.According to the Washington Post, the original plan to turn over the filing, storage and retrieval activities at seven IRS centers to a contractor Dec. 1 was altered so that, for now, the outsourcing will occur at just two centers. In a statement, the IRS said the conversion was scaled back "to ensure that a sufficient number of employees with the required training and security clearances are in place to manage the files during the upcoming filing season."

The U.S. Tax Court will continue its consideration of a requirement that would push the Internal Revenue Service commissioner to publicly file answers to all small tax cases.Chief Judge John Colvin first announced the proposed change in September, noting that small tax cases comprise about half of the court’s docket. He said that petitioners in those cases are increasingly being represented by low-income taxpayer clinics, and suggested that those parties, as well as the court itself, might benefit from improved pretrial communication between all the parties involved in settling some of those cases.

Sometimes, I feel bad for Comptroller General David Walker and his staff at the Government Accountability Office.I imagine it’s the same sort of sadness most people feel for the geeky guys in high school comedies. You know, the good guys who never get the girl, but are there throughout the course of the plotline, providing some sort of insight into the inner workings of the social machination that exists all around them.

After years of sounding the fiscal imbalance bell, Comptroller General David Walker, the head of the Government Accountability Office, has committed a to-do list to paper for the 110th Congress.In a letter dated Nov. 17, Walker outlines a number of areas his federal watchdog agency, says the newly-elected politicians should consider in getting a “jump-start” on legislative planning.

If we achieve what we measure, then is it true that we become what we think about most of the time? Philip E. Humbert, Ph.D., wrote, "The human brain is a goal-seeking, problem-solving machine, and the things we think about, focus on and worry about inevitably shape our destiny."Let's take this down to the reality of a managing partner. What do you focus on and worry about? If your answer is everything, you are filling your mind with too much stuff. No one can worry about everything. However, there are a handful of things you should be worrying about when it comes to the health of your practice.

TREASURY, IRS UPDATE ANNUITIES RULES: The Treasury Department and the Internal Revenue Service issued proposed regulations addressing the tax treatment of an exchange of property for an annuity contract.The proposed regulations would apply the same rule to exchanges for both private annuities and commercial annuities, tightening a popular tax-deferral strategy.

With the Democrats winning control of the U.S. House of Representatives and Senate, the tax legislative outlook has shifted to new priorities and concerns, according to Mel Schwarz, a partner in Grant Thornton’s National Tax Office.

Business tax reform needs a bipartisan, national consensus, but is absolutely necessary for the country to remain competitive in a global economy, according to Senate Finance Committee chair Chuck Grassley, R-Iowa."I think the consensus is there that the business tax system is in desperate need of reform," he told a recent hearing on the business tax system. "But we need to start building consensus on how to do it."

The use of private annuities to shelter gain on appreciated property has come to an abrupt halt, if the Internal Revenue Service has its way.Whether the IRS can withstand pressure to withdraw or substantially amend new proposed regs before they are made final, or whether the final regs can withstand judicial challenge, remains to be seen. For now, however, effective for annuity transactions after Oct. 18, 2006 (subject to a relatively brief six-month "estate planning" exception), the division between "old rule" and "new rule" is dramatic.