Tax practice

Rep. Barney Frank said that wage inequality among U.S. workers is his No. 1 priority as he prepares to take over chairmanship of the House Financial Services Committee this week.In a speech at the National Press Club, Frank, D-Mass., said that he will hold hearings about wages over the next two years in an attempt to address the gap between economic growth and workers' wages.

Two unmarried taxpayers can exclude gain from the sale of their home -- even though they fail the two-year ownership and use tests of the tax code -- because the primary reason for the sale was an unexpected pregnancy.In a Dec. 29 letter responding to a ruling request, the Internal Revenue Service said that a pregnancy meets the “unforeseen circumstances” exclusion outlined in Section 121(a)(c)(2) of the code.

The Internal Revenue Service recently issued a notice outlining how individuals and businesses can obtain refunds and credits on their 2006 returns of the long-distance telephone excise tax.

For taxpayers with income at or below certain levels, the Internal Revenue Service announced that user fees for payment-installment agreements will hold steady in 2007.

After four months, the Securities and Exchange Commission has already revisited its rule on disclosing executive compensation.In a statement issued Dec. 22, SEC Chairman Christopher Cox said that the new requirements will make it easier for companies to prepare statements and for investors to understand the cost of stock options.

With the Tax Relief and Health Care Act of 2006 now signed into law, the Internal Revenue Service has rolled out guidance to help taxpayers filing in 2007 claim the extended deductions and other tax advantages contained in the act.

For a government agency with such a bad rap in popular culture, the Internal Revenue Service performed well in a recent survey asking taxpayers to comment on customer service levels.

The thoroughness of Internal Revenue Service enforcement efforts for the nation’s largest corporations, measured by the number of hours devoted to each audit, has substantially declined since Fiscal 2002, according to data obtained by the Transactional Records Access Clearinghouse.

The Internal Revenue Service is lifting a moratorium on determination letter applications for conversions from traditional defined benefit pension plans to so-called cash balance plans.

As expected, President Bush signed a massive bill that would extend expiring tax, health and trade legislation.

Once again Congress has amazed me in how it handles tax legislation. It should come as no surprise because I have been reporting on tax legislation for over 30 years, but Congress still makes it much more difficult for taxpayers, practitioners, and tax prep software providers than it has to be. Congress, rather than passing the “Tax Relief and Health Care Act of 2006” just before it adjourned last week, could have done so at the beginning of 2006. But in reported attempts to pass other unrelated legislation, the tax provisions supported by both sides of the aisle were tacked onto controversial legislation. When those proved unsuccessful, the tax provisions eventually were separated from any controversial legislation and the “Tax Relief and Health Care Act of 2006” was passed last week. Here is explanation of the ramifications of the delay by Senator Baucus on the floor of the Senate: “Congress's delay in extending these tax provisions caused uncertainty. And the delay until now will have real consequences for taxpayers. Just this week, I received a report of the contingency plan at the IRS for the 2007 filing season. The IRS identified about 60 tax forms and products that will be affected by this delay. “The Form 1040 has already gone to the printer. That happened back in November. More than 120 million taxpayers use that form. The IRS will not reprint those forms. “The IRS expects taxpayer confusion. The IRS expects more phone calls to the IRS with questions. The IRS expects delays in filing. The IRS expects incorrect returns. And the IRS expects more amended returns. “Further, the IRS will need at least six weeks to reprogram its systems to accommodate the changes. It is simply too late for the IRS to implement the 2007 filing season on time. This means delays in starting to process and issue refunds. And it means money. It may cost the IRS millions in additional costs because of our delay. And the cost to taxpayers could be even greater. “In September, I brought a display of the draft Form 1040 for next year. Already, the classroom teachers' deduction and the college tuition deduction were gone. Millions of families that normally take those deductions, and other popular incentives like the state sales tax deduction, will wonder why those lines no longer appear on the Form 1040. And, unless taxpayers are willing to get on the Internet and search, they may never know that we extended these incentives in the nick of time.” Tax prep software providers will face similar problems in rushing modifications to the programs for the 2006 tax year. This reminded me of tax legislation that came down many years ago right after Christmas. Tax practitioners had only to end of the year to advise some of their clients of what to do to take advantage of a tax benefit added by the legislation. This time of the year is hard enough for those with a vested interest in the tax season, whether it be the IRS, tax practitioners, tax prep software providers, or taxpayers, Congress seems to have no qualms about making it more difficult, expensive, and frustrating for those interested parties or adding greatly to the possibility that taxpayers will not take advantages of tax benefits because they aren’t listed on tax returns where they are supposed to be and could easily have been put. Will Congress act any differently in the future? I think you know my answer based on 30-plus years of observation.

Though revenues from the U.S. Government rose 12 percent over fiscal 2006, to $2.4 trillion, the future costs for social insurance programs such as Medicare and Social Security will be trillions more than initially projected.

Tax research and products provider RIA, a Thomson business, has upgraded its proprietary Checkpoint service, adding a research tool that can be used for tax and auditing simultaneously.The "bridge" comes in the form of RIA sister company PPC's e-Practice Aids, Microsoft Word and Excel versions of all of the editable practice aids in the related PPC Guide, including those from WG&L, and materials from the Securities and Exchange Commission.PPC's e-Practice Aids work with paperless engagement software or with Word and Excel."One thing we heard from our customers, tax people were saying 'There was a reason we work in taxes, because we didn't want to do auditing'" said Ron Burkett, RIA's director of product management, in response to Sarbanes-Oxley. "It helps them bridge over to something they may not be that familiar with."Checkpoint is featuring a series of other enhancements as well, including a customized home page capability, which allows users to customize their research platform by selecting from a list of predefined views including accounting and auditing; corporate finance; tax; and estate and retirement planning, and decide their significance. In addition, users can create their own home page by selecting the content panes based on content they subscribe to that best fits their research needs. For more information about Checkpoint, visit http://ria.thomson.com or call (800)-950-1216.

Five Treasury nominees were sworn in this week, including a new assistant secretary for tax policy, whose appointment has been held up by a senator for nearly five full months.Last week, Sen. Max Baucus, D-Mont., the ranking member of the Senate Finance Committee, agreed to release his block on Eric Solomon’s nomination. After approving the appointment of Treasury Secretary Henry Paulson in July, Baucus said that he would refuse to allow the committee to vote on any other nominations until he was satisfied with the agency’s plans to close the tax gap -- the difference between taxes paid and taxes owed in the country, which his estimates put at some $300 billion annually.

The Internal Revenue Service announced that it will now sell individual income tax return statistics by zip code -- charging $25 per state, or $500 for the entire nation.In previous years, the data, based on addresses shown on the returns when filed with IRS, had been made available for free. Zip code tables for both the 2002 and 2004 tax years are available for purchase.

The Treasury Inspector General for Tax Administration has released a report to Congress, outlining a trio of priority objectives for the upcoming year. The report highlights the office’s audit and investigative work conducted between April 1 and Sept. 30 of this year. During those six months, TIGTA reports that it has completed 118 audits, and in the process, identifying more than $258 million in total cost savings and $1.4 billion in increased or protected revenue.

Retroactive beneficial tax legislation, such as the just-passed “Tax Relief and Health Care Act,” is always welcome.The legislation, which President Bush is expected to sign shortly, contains numerous tax provisions, including a slew of tax benefit extenders, energy tax incentives, health savings account changes, tax administration modifications and technical corrections to earlier tax legislation.

Aside from identifying a number of nuances in last year’s tax law changes and interpreting the effects of congressional leadership turnover, a new tax guide should help midsized business owners monitor a series of federal tax trends for 2007.Published by national CPA firm RSM McGladrey, the “2006 Tax Planning Guide” includes a Top 10 list of tax-planning strategies for midsized companies and issues owners should watch for on the horizon.

There’s no question that the Free File program, the Internal Revenue Service’s partnership with the manufacturers of tax prep software, is a win-win deal on many fronts for both parties.In exchange for the manufacturers in the Free File Coalition making free filing offers to taxpayers on the basis of such factors as income (in 2007, taxpayers making less than $52,000 a year get access), the IRS has agreed not to offer taxpayers its own free alternative. The program, which includes participation from electronic prep heavyweights Intuit and H&R Block, is now in its fifth year.

Got a question for the Internal Revenue Service that needs answering? Why not ask your local stakeholder liaison? Who’s that? They are IRS employees who are attempting to establish a relationship with those representing small business and self-employed taxpayers. The liaisons provide very specific information about the policies, practices, and procedures followed by the IRS.Take for example the Issue Management Resolution System (IMRS), a stakeholder liaison initiative intended to capture, develop, resolve, and respond to significant national and local stakeholder issues. Under the program, practititioners’ notify IRS of concerns about IRS policies, practices, and procedures, and IRS researches the issues to bring about resolution.