Tax practice

An analysis of the Internal Revenue Service's 2003 figures show that President Bush's tax cuts on investment income have had a major effect on citizens in the upper tax brackets.

Although the Internal Revenue Service is cajoling taxpayers to file their returns electronically -- in a move designed to save the Treasury billions of dollars -- at least one top IRS official copped to submitting her return on paper.

In a limited study, the Government Accountability Office said that paid tax-return preparers at 19 chain operations returned less-than-stellar service.

IRS MEMO SAYS CALIF. DOMESTIC PARTNERS MUST FILE SEPARATELY: Domestic partners in California must file their federal tax returns separately, despite a 2003 law that extended equal legal rights to registered same-sex couples in the state. A memo out of the Internal Revenue Service's Office of Chief Counsel cites case law from the 1930s and 1940s in which the Supreme Court ruled that community property laws can only be applied to husbands and wives.California is one of nine community property states and, since 1999, has extended certain legal rights of marriage to same-sex couples registered with the state. On Jan. 1, 2005, the state's Domestic Partner Rights and Responsibilities Act went into effect, providing domestic partners with the same rights as married spouses. The act removed a joint tax return provision that required partners to file separate state and federal returns. The IRS memo says that because the act does not "make an incident of marriage by the inveterate policy of the state," registered domestic partners in the state must report all of their income earned from the performance of their personal services.

The new Section 199 deduction, a boon to taxpayers who qualify, is anything but to the filers who are struggling with the new concepts, rules, exceptions and safe harbors of the legislation.The domestic production activities deduction, enacted as part of the American Jobs Creation Act of 2004,went into effect for tax years beginning after 2004 and permits taxpayers to claim a deduction from taxable income attributable to domestic production activities.

The Energy Tax Incentives Act of 2005 created a number of new tax breaks for individuals, with respect to their homes and cars, and for businesses, with respect to their commercial buildings and the construction of homes and appliances.Throughout the act, there is extensive reliance on the promulgation by the Treasury of regulations to flesh out the criteria to qualify for the new tax breaks. With the Treasury and Internal Revenue Service also having been saddled with a lot of last-minute changes affecting the 2005 tax year filing season in the Gulf Zone Opportunity Act of 2005, guidance with an impact on the 2005 tax year had to take precedence.

The National Association for the Advancement of Colored People announced that it is taking measures to challenge the Internal Revenue Service's examination of the association's tax-exempt status.

A congressional panel has scrapped President Bush's proposed budget cuts for hospitals and other Medicare providers, but preserved the president's plan to slash spending levels.

For the past couple of weeks, I've kept running across blog entries referencing a cool graphical representation of how the federal government allocates tax dollars. I finally decided to check out the chart, which has been years in the making.

On-demand sales tax calculation services provider Avalara has launched AvaRates Now -- a free, map-enhanced tool that provides accurate rates for any North American location in real-time.

Amidst all the pronouncements from the Internal Revenue Service touting the number of taxpayers flocking to electronic filing in one form or another, the Government Accountability Office has issued a report warning that the threat of a security breach remains high.

The Treasury Inspector General for Tax Administration, J. Russell George, said bad data is to blame for the Internal Revenue Services' never-realized plan to close 68 Taxpayer Assistance Centers across the country.

The Internal Revenue Service is inviting individuals to help improve the nation's tax agency by applying to be members of the Taxpayer Advocacy Panel. The panel provides a forum for citizens from each state to make suggestions regarding IRS decision-making.

A complaint has been lodged with the Government Accountability Office that could again stall the Internal Revenue Service's plan to subcontract cases to private debt collection firms.

The Internal Revenue Service is considering a proposal to loosen the privacy standards of federal income tax returns. The change could allow accountants and other tax return preparers to sell information from individual returns to marketers and data brokers, according to published reports.

Congress has begun to focus in on reforms for the nation's health care tax policy -- a move that could impact hundreds of billions of dollars a year in cherished tax breaks for individuals and employers.

The Internal Revenue Service has issued guidance describing 26 frivolous arguments that taxpayers should avoid when filing their returns.

IRS REQUESTS $10.6B BUDGET FOR 2007: The Internal Revenue Service requested a budget of $10.6 billion for the 2007 fiscal year, an increase of 1.4 percent from the current year's budget. Nearly $10.6 billion would come from direct appropriations through the Treasury Department. An additional $135 million would come from the IRS's new user fee revenue, for a total operating level of $10.7 billion.Among the IRS operations receiving more funding would be enforcement activities and taxpayer services. Enforcement has proposed funding at nearly $7 billion, a 2 percent increase from the 2006 enacted levels; taxpayer services has proposed funding at more than $3.5 billion, a 1.4 percent increase from 2006.

There's a new area of controversy at the Internal Revenue Service, and it surrounds the recently released 2005 annual report from the Taxpayer Advocate Service -the independent organization within the IRS designated as the liaison between the IRS and taxpayers with problems.While the Taxpayer Advocate is required to identify at least 20 serious problems in her annual report, particular attention has been given to one topic in this year's report: the IRS's Criminal Investigation Questionable Refund Program.

While the Roth 401(k) plan option was enacted back in 2001 and has been available since January 1 of this year, advice over whether to jump on the Roth 401(k) bandwagon remains hard to give.Detailed rules on contributions, operations and distributions for Roth 401(k) plans have been slow in coming. Proposed reliance regulations on contributions weren't released until this past December; reliance regs on distributions weren't out until January.