Tax practice

A memo issued by the Internal Revenue Service’s Office of Chief Counsel could possibly eliminate a tax-saving strategy used by some investors with brokerage accounts.Wrap accounts charge a flat percentage fee instead of a commission, and for tax purposes, the annual fees that investors pay are often treated as miscellaneous itemized deductions. But under a provision, some taxpayers can instead opt to add the fees to the cost basis of the securities, which could reduce potential capital-gains taxes (or enhance potential losses).

The Free File Alliance has sent a letter to the Senate Finance Committee, expressing concerns about a proposed government-funded Web portal that the alliance says is aimed at eventually providing tax preparation and e-filing services.

The supplemental budget legislation signed into law on May 25 did more than just give the green light to funding for the ongoing war effort in the Middle East.

Two bills circulating on Capitol Hill are looking at different ways to generate tax revenue from the Internet.

The Federal Reserve has proposed rules to simplify the disclosure of credit-card terms to consumers.

The Internal Revenue Service announced that the commissioners of the Australian, Canadian, U.K., and U.S. tax administrations will open a second office of the Joint International Tax Shelter Information Center in London this fall.The commissioners have said that exchanging information in real-time is making a significant difference to the complex task of tracking tax avoidance and abusive cross-border transactions. In recent months, center members have identified and challenged the following fraudulent arrangements:

National Taxpayer Advocate Nina E. Olson announced that the Internal Revenue Service has awarded almost $8 million in matching grants to Low-Income Taxpayer Clinics for the 2007 grant cycle.

There’s no real question that something needs to be done about the fate of the alternative minimum tax.

The House of Representatives passed a bill to shore up oversight of home mortgage giants Fannie Mae and Freddie Mac, the federally backed businesses that have been mired in accounting scandals and restatements.Under the legislation, a new, independent regulator will be created to oversee the businesses, and a portion of their profits will be set aside for an affordable housing fund (capped at $520 million). In the first year, the money would be earmarked for victims of Hurricanes Katrina and Rita.

The Supreme Court has ruled that only the U.S. Tax Court can review refusals by the Internal Revenue Service to reduce interest payments on people who underpay their taxes.

GAO TO IRS: FORGET SOFTWARE DEVELOPMENTThe Government Accountability Office said that the Internal Revenue Service doesn't appear to be in a position to develop its own software for tax preparation anytime soon.

The popularity of S corporations has skyrocketed, with the number of businesses opting for them rising from 725,000 in 1985 to more than 3 million, according to the most recent statistics.And that growth is well-deserved, according to Richard Thompson, of the CPA and business advisory firm Sikich LLP. "S corporations have become such an important business vehicle because taxpayers understand their extreme value," he said.

The recent release of the long-awaited final regs on nonqualified deferred compensation under Code Sec. 409A did not bring a much-hoped-for extension of the effective date for full implementation of the rules. The final regs - all 209 pages of them, and the 186 pages it took to explain the changes made or not made to the proposed regs - do not extend the transition relief for compliance beyond Dec. 31, 2007.That does not leave much time for compliance, let alone formulating tax strategies that take maximum advantage of the small leeway that the final regs provide to employers. Compensation plans drafted under the proposed regulations must be compared against the final regs. Decisions on whether a plan should be terminated must be made. Final plan designs must be drafted and adopted. And then an explanation of the terms of the compliant plan must be explained (and sold) to the key executives who the plan has been adopted to keep happy in the first place.

As expected, the Treasury Department has created a new committee that will be charged with studying problems in the accounting industry.

The 2008 Low Income Taxpayer Clinic grant application process is now open.

The Internal Revenue Service Oversight Board met in early May to discuss the status of the IRS Private Debt Collection Program, as well as the budget for the IRS’s 2009 fiscal year.

The 2007 tax filing season set a number of records at the Internal Revenue Service -- highlighted by the more than 76 million electronically filed individual tax returns and more than 140 million visits to the IRS Web site.

For every achievement that the Internal Revenue Service reaches when it comes to technology, there seems to remain a disconnect with the agency’s capability of fulfilling its longer-term strategic plans.

Rankings can be very subjective, but they are still captivating. Everyone has an opinion of what they think is the best movie or song. As a Baby Boomer, I remember for years listening to a local station’s Top 500 classic rock and roll rankings to see if “In the Still of The Night,” was still ranked No 1.

Churches, charities and other tax-exempt organizations that paid the federal excise tax on long-distance or bundled telephone service qualify for this year’s one-time telephone excise tax refund, according to the Internal Revenue Service.