Tax practice

A former tax return preparer has been sentenced to 151 months in prison for participating in a tax fraud scheme to hide income and assets in bogus trusts, according to the U.S. Justice Department.

TIGTA Questions IRS's Questionable Refund ProgramWASHINGTON, D.C. - A new Treasury Inspector General for Tax Administration audit has found that changes in the Internal Revenue Service's Questionable Refund Program, along with a significant technological failure, dramatically decreased the effectiveness of the program for the 2006 filing season.

U.S. Treasury Secretary Henry Paulson plans to convene a conference in the coming week that could lead to an overhaul of the corporate tax system and a cut in corporate taxes.

Have you heard the joke about the sales tax audit? No one has.There is nothing funny about a sales tax audit.

Summertime brings with it the "high season" for clients who are seriously considering purchasing vacation homes, or switching from one vacation home to another.The majority are looking to take advantage of certain tax breaks to help them carry the property. For others, tax savings are an added bonus to validate their decision. In either case, tax advisors often get a hurried call to explain the options.

IRS National Taxpayer Advocate Nina E. Olson delivered a report to Congress on her main priorities for the coming fiscal year, and at the top of the list is improving taxpayer services.

The House Ways and Means Committee voted along mainly party lines to repeal the ability of the Internal Revenue Service to enter into private debt collection contracts, with a vote of 23 to 18 on the Democratic-backed bill.Under current law, the IRS can use private debt collection companies to find and contact taxpayers who owe outstanding tax liabilities and arrange payment. The companies can keep up to 25 percent of the amount collected, and the IRS can retain another 25 percent for additional enforcement activities. The Tax Collection Responsibility Act of 2007 would repeal that authority, which critics fear could lead to abusive tax collection practices.

Former construction worker and Coast Guard employee Rhiannon O’Donnabhain is suing the Internal Revenue Service after she was disallowed from deducting $25,000 in medical expenses for her sex change operation.The IRS claims the operation was cosmetic surgery and not a medical necessity. In another case in 2005, the IRS Chief Counsel made a similar determination. However, the United States Tax Court has not ruled on any similar cases, and its decision could set a precedent.

The National Association of Tax Professionals and the IRS are warning about the latest trend in e-mail scams: fake messages purportedly from the IRS "Fraud Department" threatening taxpayers with a "tax avoidance investigation."

The United States Tax Court has decided that wages earned in Antarctica are still subject to taxation.

The Internal Revenue Service said it plans to simplify the signature process for electronically filed individual tax returns by allowing tax practitioners to avoid the need to send a paper signature document in support of their clients' e-filed returns.

The Internal Revenue Service said it has begun mailing educational letters this month to more than 650,000 small tax-exempt organizations to let them know they need to start submitting a new annual electronic notice known as an e-Postcard.Form 990-N, the electronic notice they have to send, is intended for tax-exempt organizations with gross receipts of $25,000 or less. Until the passage of the Pension Protection Act of 2006, charities of that size weren't required to submit either the Form 990 or 990-EZ.

Senate Finance Committee Chairman Max Baucus, (D-Mont.), and fellow committee member Chuck Grassley, (R-Iowa), are calling on the Internal Revenue Service to do a better job of publicizing the Saver's Credit to encourage more low-to-middle-income workers to save money for retirement.The credit applies to up to 50 percent of the first $2,000 of retirement contributions for families earning up to $50,000 a year. First created in 2001, the credit became permanent in the Pension Protection Act of 2006.

The Internal Revenue Service said it would add three more excise tax forms to the lineup of federal tax return forms and schedules that taxpayers can file electronically.The first form that will be available for e-filing is the 2290, Heavy Highway Vehicle Use Tax Return, debuting this summer. Form 720, Quarterly Federal Excise Tax Return, and Form 8849, Claim for Refund of Excise Taxes, will premiere later this year.

The White House has lowered projections for the federal budget deficit to $205 billion, from an earlier forecast of $244 billion by the Office of Management and Budget.

The IRS said it is reconsidering some of the private letter rulings its associate chief counsel’s office has issued regarding the gift tax consequences of trusts that employ distribution committees.The IRS’s chief counsel has discovered that some of the conclusions in the rulings may disagree with some prior revenue rules.

Franklin Raines, the ousted chairman of mortgage securities concern Fannie Mae, has filed suit against government regulators in order to receive a $3.9 million stock award.

CONGRESS EYES INTERNET TAXESWASHINGTON, D.C. - Two bills circulating on Capitol Hill are looking at different ways to generate tax revenue from the Internet.

Blues singer Robert Cray is singing the blues about his accountants, and taking them to court. Cray filed a suit in Los Angeles Superior Court against Chapnick, Smuckler & Associates, and its principals Jerry Chapnick and Keith Smuckler, according to CBS. He accuses the firm of cheating him, his wife, and their company, charging them with fraud, negligence, and breach of contract and fiduciary duty. The Crays claim the firm did not inform them it was drawing up to $235,000 from their credit line. They say Chapnick, Smuckler also did not check on whether the Crays were entitled to a $55,000 refund in taxes they paid in the United Kingdom. In addition, the Crays blame the firm for a $2,000 penalty on unpaid property taxes. After they engaged the firm around the end of 2001, the Crays learned the firm was not licensed to operate in the state of California. They sacked the firm in August 2006.

The IRS has certified that some models in Mazda’s 2008 line of hybrid cars qualify for the Alternative Motor Vehicle Credit.