Tax practice

As their colleagues float talks of $100 gas-rebate checks for taxpayers, the heads of the Senate Finance Committee have asked the Internal Revenue Service to provide tax and financial information on the nation's largest oil and gas companies.

The Internal Revenue Service announced agreements with 33 states and Puerto Rico to begin sharing information to ensure that money services businesses are complying with laws to report unusual cash transactions and other suspicious activities.

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 $345 billion estimate from Internal Revenue Service.

The Internal Revenue Service announced that the recently completed 2006 filing season set a series of records, highlighted by 70 million tax returns being filed electronically this year and home computer usage jumping 18 percent.

The Internal Revenue Service won its first court case against the questionable tax shelters known as "Son of Boss" on a procedural point.

Government and software industry officials proclaimed this year's filing season a success, with numbers up in nearly every category.

The Internal Revenue Service said that the roughly 400 taxpayers who mailed their returns late because of incorrect information in Cleveland's major newspaper will not be penalized by the federal government.

Taxpayers used the Internal Revenue Service Web site at record levels as the filing deadline approached, the agency said.

The Internal Revenue Service has appointed Kathy Petronchak as chief of staff succeeding incumbent Evelyn Petschek, who will depart the service effective June 7.

Anti-virus software provider Symantec said that the Internal Revenue Service is seeking roughly $1 billion in additional taxes, with the majority of that figure coming from Veritas Software Corp. -- a business that Symantex acquired in July.

In the glut of stories that came out around Tax Day, one in particular stood out.

Like most politicians, President Bush and Vice President Dick Cheney released the details of their federal income tax returns late last week.

After two years as director of the Internal Revenue Service Office of Professional Responsibility, Cono R. Namorato returned to Washington-based law firm Caplin & Drysdale as a partner.

With the slightly later Tax Day now past, the Internal Revenue Service is still accepting extension requests, for a six-month reprieve, through E-file.

The Senate Finance Committee didn't like what it found in investigating ancillary offers often made as part of using the Internal Revenue Service's Free File online tax return preparation services.

IRS SELECTS FIRMS FOR COLLECTION EFFORT: The Internal Revenue Service awarded contracts to a trio of firms to participate in the first phase of its private debt collection initiative. A total of 33 firms took part in the bidding process.The selected firms are The CBE Group Inc., of Waterloo, Iowa; Linebarger Goggan Blair & Sampson LLP, of Austin, Texas; and Pioneer Credit Recovery Inc., of Arcade, N.Y.

An Ohio CPA can thank his inability to properly separate his accounting business from his financial planning business for a win in U.S. Tax Court that saved him thousands in additional tax."It was an uphill battle against overwhelming odds, but victory always makes it worthwhile," said Ron Lykins, a metropolitan Columbus, Ohio, CPA.

The new domestic production activities deduction (a.k.a., the manufacturing deduction) has generated many unresolved questions. In fact, the problem areas are so significant that individuals and businesses have reported delayed filing of 2005 returns until they get more guidance from the Internal Revenue Service.To say that proper application of the deduction is a "hot" issue may be an understatement, considering the IRS's own estimates of its impact. In requesting comments on the most recent version of Form 8903, Domestic Production Activities Deduction, the IRS estimated that over 17 million individuals and businesses will be affected, and that each taxpayer will average 31 hours and 54 minutes on the form.

The Internal Revenue Service's 2005 IRS Data Book is now available on the agency's Web site.One of the agency's priorities, an increase in enforcement, is documented in this year's book. During the 2005 fiscal year, the IRS completed more than 1.2 million audits of individuals, up almost 21 percent from the previous year's figure of just over a million.

Tax prep giant H&R Block Inc. announced that its first-quarter tax preparation and related fees rose 3.7 percent from a year earlier, to a total of $1.98 billion.