Tax practice

The Internal Revenue Service today issued the 2007 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

It took some time and an issue as seemingly innocuous as Katrina tax relief for the Internal Revenue Service to get dragged into a public relations skirmish this election season.The trouble start a couple of weeks ago, when Commissioner Mark Everson made an announcement that the IRS will postpone collection activities against taxpayers in the hardest-hit areas struck by Hurricane Katrina until 2007. That’s essentially buys those taxpayers a couple more months -- through the holidays -- after a one-year filing extension expired Oct. 16.

A federal report says that the Internal Revenue Service needs to put a better system in place to evaluate the results of the private debt collection program it implemented this fall.The Government Accountability Office looked at a trio of issues, including whether the IRS addressed critical success factors before limited implementation, whether the IRS will assess lessons learned before fuller implementation, and finally, whether the IRS’s planned study will help determine if using private contractors is the best use of federal funds.

The Internal Revenue Service is pushing back the printing schedule for a number of its tax products, including several versions of the 1040 and 1099 forms.Earlier this month, the IRS warned the Senate Finance Committee tax staff that delays in enacting a number of expiring tax breaks could have an adverse impact on tax administration -- affecting outside contracts with vendors to get the forms and instructions printed, and possibly eventually having a negative impact on collections.

In recent interviews, Internal Revenue Service Commissioner Mark Everson has said that the agency will postpone initiating collection activities against taxpayers in areas struck by Hurricane Katrina until next year.

In response to a senator’s inquiry, the Government Accountability Office will review the operations of the Securities and Exchange Commission’s enforcement division and compliance department.

In a press conference timed to coincide with the 20th anniversary of President Reagan’s signing the last major tax reform act into law, former Sen. Bill Bradley, D-N.J., and Sen. Ron Wyden, D-Ore., issued a call for another tax reform push.Wyden has introduced his Fair Flat Tax Act in the Senate, which includes provisions to lower tax rates and broaden the overall tax base. The legislation would allow taxpayers to file their returns on a simplified, single-page 1040 form; collapse individual tax brackets from the current six down to just three; and set a single, flat corporate rate. The bill would also end the alternative minimum tax and contains a unique provision to provide a refundable 10-percent tax credit for every taxpayer’s state and local taxes -- a benefit for taxpayers who don’t itemize.

A federal panel is recommending changes to governmental accounting that would require the cost of future Social Security and Medicare payments to be accounted for year-by-year as workers accumulate entitlements.

Beginning in January, Link2Gov will be able to process credit card payments related to federal business tax Forms 941 and 940 for an expanded number of filing years -- 1997 through present balance due.

The Treasury Department and the Internal Revenue Service issued proposed regulations addressing the tax treatment of an exchange of property for an annuity contract.

The Internal Revenue Service announced that the appeals arbitration process is no longer a pilot program but part of business as usual at the agency.

The chairman of the Joint Economic Committee is asking the Internal Revenue Service to refrain from taxing online gamers.

Individuals who owe delinquent federal income taxes will now be able to apply online for a payment agreement, the Internal Revenue Service announced.

SURVEYED TACS ARE RIGHT 75 PERCENT OF THE TIME: Using one of dozens of scenarios, undercover government auditors were mostly satisfied with the levels of assistance that they received at several of the Internal Revenue Service's Taxpayer Assistance Centers. A report from the office of the Treasury Inspector General for Tax Administration details the results of auditor visits to more than 70 TACs during the 2006 filing season. Using 47 standard scenarios, the auditors made anonymous visits to 50 TACs asking 200 tax law questions. Later, an additional 10 scenarios relating to the Katrina Emergency Tax Relief Act of 2005 were developed and another 20 visits to additional TACs were made to ask 80 questions.The report found that TAC workers:

A Senate panel’s review of interactions between imprisoned former lobbyist Jack Abramoff and a number of tax-exempt organizations had lead the committee to question the groups’ tax status and a portion of the federal Tax Code dealing with unrelated business income taxes.

Statistics show that more than 50 percent of marriages in the United States end in divorce.The process of a divorce can create tremendous animosity between the parties, and this can lead to difficult financial issues for those affected by the split. There are many complex federal tax issues that need to be planned for, or they will create tremendous pitfalls. The Internal Revenue Code also contains several provisions that provide specific guidance for divorce-related transactions.

Year-end tax planning opportunities abound this year. They do so not only because it has been a particularly active year for tax legislation, but also because of other significant tax developments taking place in 2006, as well as changes from pre-2006 tax legislation that have a particular impact this year and next.Traditional year-end tax strategies should not be abandoned. Income should either be accelerated or postponed between 2006 and 2007, depending upon the anticipated tax brackets for each client. Similarly, deductions and credits should be manipulated to lower income either in the more favorable year or, in some cases, in both years, before midnight, Dec. 31, 2006, has come and gone.

The Tax Foundation has released the 2007 edition of its guide comparing the business tax climate between states.

Koch Industries Inc. has filed a lawsuit, claiming that the Internal Revenue Service used improper accounting to calculate taxes for a 1998 New Mexico highway project.

Congress left town without passing a number of tax breaks that expired at the end of 2005 -- among them the option to deduct state and local sales taxes in place of state income tax, a deduction for college tuition and fees, the deduction for school teachers, and a research and development credit for business.Although the breaks themselves are not controversial, and leaders of the Senate Finance Committee pushed for their enactment before Congress adjourned, the breaks became mired in political infighting when they were attached to “trifecta” legislation that would have included an increase for the minimum wage and a slash in estate tax rates.