Tax practice

Some taxpayers make novel arguments in attempts to be taxed at a favorable capital gains rate. Wolman v. Comm. is a Tenth Circuit Court of Appeals order and judgment affirming a Tax Court decision, and it shows how creative taxpayers can be.

Years ago, I remember watching a news vignette about a drawbridge in some frigid state that kept an operator on duty 24 hours a day.

Although the continuing thirst of states for more dollars to fuel spending increases has led to a variety of efforts to augment tax revenue, they differ widely on what they consider sufficient contact with a business to give them the authority to tax it."Nexus" is the minimum amount of contact between a taxpayer and the state that would permit taxation by the state. It arises from the Constitution's due process clause, which requires a minimum connection between a state and an entity that it seeks to tax, and the Commerce Clause, which prohibits states from unduly burdening interstate commerce.

With a Congress and an administration too fond of tax cuts and spending to solve the growing budget deficit, the tax gap has become a more convenient focus for deficit reduction. With the tax gap, the Congress can urge action by the Internal Revenue Service without having to figure out what to do itself.The IRS estimates that the tax gap is $345 billion, which, if collected, could make a significant dent in the projected annual deficit, which is now approaching $500 billion.

TIGTA SAYS TAX GAP COULD EXCEED PROJECTIONS: According to a report from the Treasury Inspector General for Tax Administration, the nation's tax gap - the annual difference between federal taxes owed and those paid - could in fact exceed the current $345 billion estimate from the Internal Revenue Service. The agency said that the IRS projection of the tax gap probably underestimated things like non- or underreporting filers. The IRS arrived at its figures following a study of 46,000 audits for the 2001 tax year.In its report, the TIGTA said, "We concluded the IRS still does not have sufficient information to completely and accurately assess the overall tax gap and voluntary compliance."

In an effort to encourage savings and more banking, the Internal Revenue Service is creating a program to allow taxpayers who use direct deposit to divide their refunds among as many as three financial accounts.

The Treasury Department and Internal Revenue Service issued final regulations for Section 199 of the tax code, which relates to domestic manufacturing deductions.

The Internal Revenue Service announced a major milestone in its corporate e-file program -- the successful e-filing of the nation's largest tax return from General Electric Corp. on May 18.

The Internal Revenue Service announced regulatory revisions that the agency hopes will remove impediments to e-file for corporations and shareholders.

Taxpayers will be able to apply for a refund of the federal excise tax on long-distance telephone service for the past three years.

The U.S. Department of the Treasury announced two initiatives aimed at simplifying the way small businesses, individual taxpayers and tax preparers file and pay their federal taxes.

The Government Accountability Office says that the performance of the Internal Revenue Service's Offers in Compromise program has been mixed, and suggests that a combination of better management information and simplification could improve it.

Several Republican members of Congress forwarded constituents' letters to the Internal Revenue Service claiming the NAACP had veered into political advocacy, a potential violation of the civil rights group's tax-exempt status.

In a pair of private letter rulings, the Internal Revenue Service said that it would allow a taxpayer to make a late election, agreeing that the taxpayer had relied on tax prep software that didn't adequately handle a tax provision.

While the extension of the reduced rates on capital gains and dividends, alternative minimum tax relief, and the continuation of enhanced Section 179 expensing have received the most publicity, there are a host of other changes in the Tax Increase Prevention and Reconciliation Act of 2005.

In a political victory for Republicans, President Bush signed the sixth tax cut in the past six years yesterday, in a Rose Garden ceremony.

Hispanics are less likely than non-Hispanics to say that they owe money to the Internal Revenue Service for 2005 (14 percent versus 22 percent) and they are more likely than non-Hispanics to report having received a refund for 2004 (73 percent versus 62 percent), according to poll results released by Hispanic market research firm Encuesta Inc.

A federal judge has sentenced Richard Hatch, who won the first season of the CBS reality show "Survivor," to 51 months in prison for tax evasion.

The Internal Revenue Service said that it plans to revoke the tax-exempt status of the 41 credit counseling agencies it has audited as part of a crackdown on the industry's practices.

Tax research and software provider RIA has upgraded its proprietary Checkpoint service to include expansion of user access to BNA content, international standards and titles from sibling Thomson company PPC.The company, headquartered here, said that, as part of the upgrade, the service will now make available more than 90 PPC auditing, tax and accounting titles, including its Guide to Public Company Audits and 1040 Deskbook materials.