Tax practice

The Internal Revenue Service has announced five director-level appointments in its Large and Mid-Size Business division, which serves corporations, subchapter S corporations and partnerships with assets greater than $10 million.

According to a new budget survey, while growing revenues should allow U.S. states to increase their 2006 revenue surpluses by nearly 25 percent, to about $57 billion, that figure will shrink in the upcoming fiscal year -- which began for most states on July 1. The conference said that by year's end, the aggregate surplus would be reduced by nearly 30 percent, shrinking to about $40 billion -- much of that drop due to the uncertainty of tax collections.

Cadence Design Systems Inc. said that it will protest the Internal Revenue Service's decision to seek $324 million in back taxes from the electronic design automation company.

Spokespeople for Senate Finance Committee Chairman Chuck Grassley, R-Iowa, are already saying that his take on an estate tax reform bill could be next on Congress's docket.

The chairman of the Ways and Means Committee, which oversees the Internal Revenue Service, has urged the agency to reconsider its contracts with Computer Sciences Corp.

The Internal Revenue Service has again selected CCH to provide sales tax information for the 2006 filing period, providing the sales tax data for use by all taxpayers who file a 1040 return.

Officials of the Canada Revenue Agency and the United States Internal Revenue Service announced progress in unraveling an abusive cross-border tax scheme.

A Republican effort to pass a bill cutting taxes on estate inheritance, by piggybacking the measure on top of a minimum wage increase, failed on the eve of the Senate's four-week summer recess.

IRS SAVES PAULSON FROM TAX HIT: The Internal Revenue Service will issue guidance clarifying the 20 percent penalty for executives who divest a deferred-compensation arrangement. The new regulations will translate into significant savings for incoming Treasury Secretary Henry Paulson. Paulson will sell off the more than $470 million that he owns in Goldman Sachs stock to comply with conflict-of-interest provisions for his new position. The guidance says that any executive divesting a deferred-compensation arrangement specifically to comply with government rules on conflicts of interest doesn't have to pay the penalty. Paulson will still have to pay regular income taxes on the deferred compensation.A spokesperson for the Treasury said that the IRS had been working on the guidance for some time, but accelerated its work in time for Paulson to be covered. The writing of the new rule hadn't been a priority because so few people are affected under the provision.

An estimated 15 million immigrants in the United States are not eligible to obtain a Social Security number. However, many of these same individuals pay taxes on income and are obligated to file tax returns.If this sounds confusing to you, then you're not alone.

One of the provisions inserted by the Conference Committee into the Tax Increase Prevention and Reconciliation Act of 2005, signed by President Bush on May 17, 2006, was a tax increase on citizens working abroad. The provision was not in either the House or Senate versions of the legislation, although Congress has considered a number of proposals related to the taxation of citizens working abroad over the years, including some Senate bills in the current Congress.It is estimated that over 4 million citizens work abroad. The U.S. Census does not count them, so we have no accurate numbers. The Treasury does try to tax them, but with questionable effectiveness. For the 1999 tax year, out of 127,667,890 returns filed, 1,350,890 had foreign addresses, but this included the APO and FPO addresses of members of the armed forces, as well as some Puerto Rico residents with offshore income. A 2004 Internal Revenue Service study reported that in 2001, fewer than 300,000 tax returns reported foreign-source-earned income.

Maintaining that there's near-universal agreement that the nation's tax code is too complex, Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee, officially opened the committee's hearings titled "Kick-off for Tax Reform: Tackling the Tax Code."

Multinational businesses operating in the country could face stricter tax-compliance rules as a result of new rules proposed by the Internal Revenue Service and the Treasury Department.

Internal Revenue Service Commissioner Mark W. Everson has been elected chairman of the Forum on Tax Administration, a panel of national tax administrators that is part of the Paris-based Organization for Economic Cooperation and Development.

Before adjourning for a five-week summer recess, the House pushed through a bill pairing a minimum wage increase with a GOP-led effort to extend cuts on estate taxes.

Tax professionals will help launch a new system allowing many individuals who owe delinquent federal taxes to apply online for a payment agreement, the Internal Revenue Service announced.

The Internal Revenue Service is examining as many as 40 companies -- investigating the appropriateness of deductions for backdated stock options, as well as the reporting of income by affected executives and the relevance of the laws governing Incentive Stock Options.

The Internal Revenue Service released formal guidance on its new tip reporting procedure, the Attributed Tip Income Program.

The Boeing Co. won't look to take a tax deduction on a $615 million settlement it paid to settle federal ethics charges.

The success of the Internal Revenue Service's e-filing program has led to the elimination of several jobs, The Philadelphia Inquirer reported this week.