Tax practice

Making its annual announcement, the Internal Revenue Service said that it is holding more than $2.2 billion in unclaimed refunds for about 1.8 million people who failed to file a federal income tax return for 2003.

The Internal Revenue Service announced that taxpayers are continuing to file their tax returns electronically from home computers at a record pace, up almost 7 percent from the same period last year.

The Internal Revenue Service announced that farmers and fishermen affected by the mid-February snowstorms could ask the agency to waive any estimated tax penalties.

The Tax Court has ruled that although a taxpayer spent more than 1,000 hours playing video poker in 2003, he was not a professional gambler.As part of its decision, the court implied that playing video poker might never constitute a trade or business under Section 162 of the tax code. After noting that the petitioner, a Chicago building operating engineer, never adjusted his gaming strategy even when it became apparent that he never had a winning year, the court also said that it remained unconvinced that the petitioner’s gambling activity meets the standard for being a trade or business.

Responding to extension requests, restaurants and bars will have a few extra months -- until June 30 for this year only -- to elect to participate in the Internal Revenue Service’s Attributed Tip Income Program.

In a unanimous vote, 412-0, the House said that it will require a trio of accounting regulators to provide regular updates on the work being done to reduce the complexity of financial reporting and develop principles-based accounting standards.Through 2012, either the chairmen or other designees from the Securities and Exchange Commission, the Public Company Accounting Oversight Board and the Financial Accounting Standards Board will now provide annual testimony to the House Financial Services Committee.

A Congressman wants the Treasury and the Federal Trade Commission to explore shutting down a trio of Web sites that taxpayers could easily mistake for the Internal Revenue Service’s official site.Rep. Edward J. Markey, D-Mass., chairman of the House Energy and Commerce subcommittee on telecommunications and the Internet, sent a recent letter to the agency heads, as well as IRS Commissioner Mark Everson, arguing that the disclaimers at the bottom of the sites explaining that that they are not affiliated with the government, does not do enough to provide protection to consumers.

Any given week, it seems that there are plenty of PR people out there circulating trend surveys that -- to put it kindly -- are built on somewhat a dubious foundation.

Of the nearly 2,500 missing children whose pictures have appeared in the paper versions of tax forms over the past five years, 87 have been located thanks to leads generated by taxpayers, according to a recent report from the Treasury Inspector General for Tax Administration.Since 2000, the Internal Revenue Service has partnered with the National Center for Missing and Exploited Children to help locate missing children by publishing their pictures in printed instructions and publications as part of the IRS Picture Them Home Program.

The Internal Revenue Service has launched a new Internet-based version of its popular Exempt Organizations Workshop covering tax compliance issues confronted by small and midsized tax-exempt organizations, including charities and churches.The online workshop, "Stay Exempt - Tax Basics for 501(c)(3)s," consists of five interactive modules on tax compliance topics, including maintaining tax-exempt status; unrelated business income; employment issues; handling the Form 990; and required disclosures.

More than a dozen senators have signed on to sponsor a bill that would stop the Internal Revenue Service from using private debt collectors to collect unpaid taxes.Sen. Byron Dorgan, D-N.D., and Sen. Patty Murray, D-Wash. introduced the legislation. Both objected to the plan last year.

An agent of the Treasury Inspector General for Tax Administration has been indicted on seven counts of bank fraud and related charges, according to the Justice Department.According to the indictment, between March 1999 and August 2000, Special Agent John Thomas Jr. conspired with others to fraudulently obtain more than $100,000 in loans from a trio of banks in Jacksonville, Fla. He obtained loans from each bank in the name of computer service provider Zan Tan Man Enterprises, which prosecutors say had no revenues, no experience in the computer field and no employees. If convicted on all charges, Thomas could be sentenced to a maximum term of 185 years in prison and a fine of up to $6.25 million.

The Pension Protection Act of 2006 included a provision, applicable to distributions after Dec. 31, 2006, permitting the rollover of plan assets of a deceased participant in a qualified plan to an IRA for a non-spousal beneficiary. Previously, the law had permitted such rollovers only if done by a participant during their lifetime or, if after death, only to a spousal IRA. Unfortunately, certain restrictions under the new law that are out of a taxpayer/participant's hands may actually prove to be the reason why rollovers by non-spousal beneficiaries will never catch on as a viable tax strategy.The non-spousal rollover provisions may be the latest example of a good rule that provides no incentive for change by those who control the infrastructure - in this case, the plan sponsors and administrators. Some practitioners are hoping for a technical or substantive correction eventually to fix the problem.

In response to requests from Congress, the Government Accountability Office has released a new report outlining a trio of approaches that would reduce the tax gap - while at the same time laying out the significant obstacles that any approach would face.The GAO said that simplifying the Tax Code, or passing fundamental tax reform, could potentially reduce the tax gap by billions. For the 2001 year, the Internal Revenue Service has estimated that errors in claiming tax credits and deductions contributed $32 billion to the tax gap alone. However, the report notes, "these provisions serve purposes Congress has judged to be important, and eliminating or consolidating them could be complicated."

Thanks to a seldom-observed holiday, the Internal Revenue Service announced that taxpayers will have until April 17 to file their 2006 returns and pay any taxes due.April 15 falls on a Sunday in 2007, while April 16 is Emancipation Day, a legal holiday in the District of Columbia.

Only time will tell whether the bane of the 2006 tax filing year for the Internal Revenue Service is the scam-prone telephone tax refunds, or confusion around a number of extender provisions not included on the agency’s original forms that seems destined to arrive soon.The agency urged taxpayers to check and see if they qualify for the telephone excise tax refund after more than 10 million early filers did not request the one-time refund. In the first release of the year’s weekly filing season statistics, about 30 percent of all taxpayers did not request the telephone tax refund. Nearly half of those returns -- more than 4.8 million -- were completed by a tax preparer.

The recent decision by the Financial Accounting Standards Board not to defer the effective date of FASB Interpretation No. 48, despite appeals from companies and industry groups to postpone its implementation, spotlights the radical changes in approach required of financial-statement preparers, auditors and tax advisors.FIN 48, Accounting for Uncertainty in Income Taxes, is effective for fiscal years beginning after Dec. 15, 2006. It establishes a "more-likely-than-not" threshold for the reporting of uncertain tax positions on financial statements. Under the rule, an uncertain tax position may not be recognized unless it is more likely than not that it will be sustained on its technical merits, and there is a more than 50 percent likelihood that it would be sustained if it were challenged and considered by the highest court in the particular jurisdiction.

The Internal Revenue Service has released a fact sheet explaining the 2006 alternative motor vehicle credit allowed for the 44 automobiles certified as eligible.The credit, enacted under the Energy Policy Act of 2005, provides up to $3,150 for taxpayers who purchased qualified vehicles and placed them in service during 2006.

The Internal Revenue Service and the Treasury Department announced that they will work on creating detailed LIFO guidance for automobile wholesalers, manufacturers and dealers.The accounting issue confronting the automobile industry -- which involves the proper treatment of the dollar-value, last-in, first out inventory method for pooling purposes of “crossover vehicles,” which have characteristics of both trucks and cars -- was selected for the Industry Issue Resolution Program, which provides guidance to help clarify complex tax issues

Citing a bit of wisdom from Kenny Rogers, the U.S. Tax Court ruled that tournament poker is gambling, not a sport, and thus not exempt from the Section 165(d) limitations of the tax code.In a matter brought by George and Gloria Tschetschot of Cedar Rapids, Iowa, the couple argued that Gloria’s professional tournament poker playing was not gambling, and thus was not subject to limitations on losses from gambling.