Tax practice

Maybe not surprisingly, an overwhelmingly majority of taxpayers recently surveyed agreed that it is “not at all” acceptable to cheat on income taxes.The Internal Revenue Service Oversight Board cited said that 86 percent of respondents to its 2006 Taxpayer Attitude Survey, in concluding that there was strong continued taxpayer support for compliance. The percentage was down slightly from last year’s figure, but still within the margin of error.

The California Society of CPAs passed the 30,000-member threshold in late January.In a statement announcing the milestone, the society credited a continuing “trend of California CPAs flocking to CalCPA for advocacy, technical guidance and professional resources” for boosting its numbers.

The Internal Revenue Service said that it will renew contracts with two out of the three private agencies it signed to participate in a pilot program outsourcing debt collection. Conspicuously absent from that announcement was the fate of that third agency.The IRS said yesterday that it would extend the contracts of Waterloo, Iowa-based CBE Group Inc. and Arcade, N.Y.-based Pioneer Credit Recovery Inc., a unit of SLM Corp. The new contract will run through March 8, 2008.

The Internal Revenue Service announced the selection of 16 new members for its advisory council. The appointees will join 11 returning members who are in the last year of a three-year term.The council members are scheduled to meet in Washington, D.C. several times in 2007, with a public report to be provided during a meeting open to the public on Nov. 15.

Pharmaceutical giant Merck & Co. announced that it would settle a number of tax disputes with the Internal Revenue Service at a net cash cost close to $2.3 billion.

The Internal Revenue Service and the U.S. Treasury announced that they have released guidance on the estimated tax penalty for citizens or residents of the United States living and working abroad.The Tax Increase Prevention and Reconciliation Act of 2005, which was enacted in May 2006, changed the maximum amount of foreign earned income and housing costs that can be excluded from gross income -- increasing the maximum amount of foreign earned income that may be excluded from gross income to $82,400 and limiting the amount of housing costs that may be excluded or deducted.

A review of the Internal Revenue Service’s response to the flooding of its national headquarters in the summer of 2007 has found that the displacement of the office’s 2,200 employees had no measurable impact on taxpayers and tax administration.The report, from the Treasury Inspector General for Tax Administration, attributed that result to the nature of the work performed at the site, as well as the contingency plans the IRS had in place -- but did note ways to cut down on more than $4 million of salary costs associated with the natural disaster.

The latest American Institute of CPAs' Statement on Standards for Tax Services has some practitioners upset that it could hurt smaller firms that are primarily engaged in tax preparation.SSTS 9, available on the AICPA Tax Center Web site, was released a year ago in proposed form and is slated to go into effect on June 30, 2007. It "sets forth the applicable standards for members concerning the obligation to have a system of quality control for their tax practice (public practice) or function (nonpublic practice)."

Liberty Tax Service announced the acquisition of eSmartTax, the income tax preparation business of San Jose, Calif.-based C&S Technologies. Financial terms of the deal, which does not include C&S's payroll-tax-related filing services, were not disclosed.The eSmartTax acquisition will allow Liberty customers to prepare and file individual tax returns on the Internet through the company's Web site, or through the Internal Revenue Service's Free File Alliance site.

Partnership taxpayers can now use the modernized e-File platform when filing Form 1065, "U.S. Return of Partnership Income," and Form 1065-B, "U.S. Return of Income for Electing Large Partnerships."The modernized platform makes use of Extensible Markup Language, and allows users the additional benefits of transactional processing instead of batch processing, allowance for binary file attachments, elimination of the duplicate filing of international returns, and a federal/state partnership program.

KPMG LLP has announced the establishment of the Tax Governance Institute, an open forum for board members, management, stakeholders and government representatives to debate various aspects of tax oversight and management.Through video and audio Webcasts, roundtables, other events and its Web site, the institute's goal is to regularly bring together interested parties to discuss tax matters of common concern relating to the day-to-day and long-term management of corporate tax risk. The institute will soon announce regularly scheduled events. Other online features will include a library of thought leadership and relevant business news, and interactive polling to help gauge the marketplace's awareness of emerging topics.

Donor-advised funds have grown steadily over the past several years, in large part as a result of the benefits these funds bestow upon their donors, and the increased marketing of these funds by sponsoring organizations as a way of capturing donations from an expanding upper class. Some of their recent popularity, however, has been for the wrong reasons - a development that has not gone unnoticed by Congress.The Pension Protection Act of 2006 has tried to reign in some perceived abuses. As with most enforcement measures, however, the pendulum can now swing too far the other way and trap some well-meaning donors by surprise. The PPA has several dates that practitioners should watch in advising clients on donor-advised funds: Aug. 17, 2006; Feb. 13, 2007; and Aug. 17, 2007, as well as certain transition dates.

The House Ways & Means Committee will begin marking up a small business tax package today, according to committee chairman Charles Rangel, D-N.Y.

Companies don’t believe broad-based tax reform is coming anytime soon, though they do think that the change of control in Congress will have a significant impact on tax policy, according to a survey conducted by a Washington law firm.

Internal Revenue Service officials announced an initiative aimed at providing relief for rank-and-file employees affected by their companies’ issuance of backdated stock options.The program is designed for employees who may be unaware that they held backdated options -- not for corporate executives or other insiders who exercised backdated options.

A provision in the president's budget proposals could shelter 529 college-savings plans from being counted in determining federal student financial aid.

Sen. Chuck Grassley, R-Iowa, the ranking member of the Senate Finance Committee, has taken National Taxpayer Advocate Nina E. Olson to task over her recent annual report to Congress.

President Bush’s 2008 budget has tabbed $11.4 billion for the Internal Revenue Service, a direct appropriation increase of 6.3 percent from the agency’s 2007 budget.

Everyone in Washington seems to be in agreement that there needs to be a better way of closing the tax gap, but like the other problems facing the Internal Revenue Service, there’s seems to be little Beltway consensus over how to meaningfully tackle the problem.It wasn’t lost on me that the same week that the IRS released its 2008 budget proposal --complete with a number of legislative proposals, a Congressman and the National Taxpayer Advocate continued to spar over the future of one of the agency’s newer attempts to combat the tax gap -- the outsourcing of simple collection cases to private companies as part of a pilot program.

As part of the White House’s proposed $2.9 trillion budget plan for the 2008 fiscal year, President Bush announced an effort aimed at significantly tightening the tax gap.