Tax practice

National Taxpayer Advocate Nina E. Olson released her latest report to Congress, again stressing the need for legislators to make simplification of the tax system a reality.

It was just two months ago that Internal Revenue Service Commissioner Mark W. Everson touted his agency's enforcement results for the 2005 fiscal year.

Corporate tax payments hitting an all-time high last month helped offset record federal spending.

The Internal Revenue Service sent out 17.7 million 1040 tax packages during the first of January to taxpayers who have previously filed paper returns. The number of paper tax booklets being mailed to Americans continues to decline as more people opt for electronic filing.

TAX OVERHAUL MAY BE ANOTHER YEAR AWAY: Reports from inside the White House are that President Bush's administration may wait until 2007 to begin pushing a proposal to overhaul the tax code.A proposal was originally planned as a key part of President Bush's second-term agenda, but Republican sources have said that any push would have problems gaining traction in a mid-term election cycle. The Treasury is currently reviewing the recommendations issued by the President's Advisory Panel for Tax Reform before submitting a plan to the president.

As the Internal Revenue Service moves towards its goal of 80 percent e-filing for individuals, it is placing more emphasis on the e-filing of corporate returns.In 2005, over 200,000 corporations voluntarily e-filed, and beginning in 2006, many corporations will be required to file electronically. Recently issued regulations require corporations with assets of $50 million or more that file over 250 returns each year to file Forms 1120 and 1120S electronically, starting with tax periods ending on or after Dec. 31, 2005.

The start of a New Year is a traditional time to take stock of the events of the past year to better prepare for what's coming. Taking inventory as it relates to tax law can produce many dividends.2005 proved to be no exception in getting prepared for 2006. Looking forward to 2006, here is a "Top 10" list of 2005 tax events that will have an impact on what will happen to many taxpayers in 2006.

In violation of a longstanding court order, the Internal Revenue Service has stopped providing detailed statistics about how the agency enforces the nation's tax laws, according to a motion filed in the United States District Court for the Western District of Washington.The legal challenge was brought by Susan B. Long, a professor of management information and decision sciences at Syracuse University's Martin J.Whitman School of Management.

Treasury Secretary John Snow predicted that Congress would probably extend a number of tax cuts when it returns in session, according to reports.

The Treasury Department and the Internal Revenue Service have issued final regulations regarding Sections 401(k) and 401(m) related to designated Roth IRA contributions.

Lois G. Lerner has been named director of the Exempt Organizations Division of the Internal Revenue Service. In this position, she will be responsible for administering and enforcing the tax laws that apply to more than 1.8 million organizations recognized by the IRS as exempt from tax.

Americans avoided paying taxes on a record $1 trillion in income in 2003, according to a new federal government report.

The Internal Revenue Service announced the release of the fall 2005 issue of the Statistics of Income Bulletin.

The Congressional Budget Office recently released its long-term budget outlook. The report doesn't offer specifics in terms of a solution to the country's increasing debt burdens, but does point out a number of reasons why the current system won't be able to solve itself.

GAO SAYS CHALLENGES REMAIN IN IRS FINANCIAL CONTROLS: While the Internal Revenue Service has made "great strides" in addressing financial management challenges and internal control deficiencies, a report from the Government Accountability Office stated that the service still faces substantial hurdles in that area.Citing audits of the IRS's 2004 and 2005 financials, the GAO report said that the service had to rely heavily on "resource-intensive compensating processes to prepare its financials," as a result of its inability to maintain effective internal controls.

When Congress managed to agree on a budget resolution this year with $70 billion set aside for tax breaks, it seemed to assure smooth passage for extending President Bush's expiring tax breaks by avoiding risk of a Senate filibuster. In reality, however, the legislation is proving to be very difficult.First, there are more expiring provisions than the $70 billion will protect, so the tax writing committees have been struggling with what to leave in and what to leave out. Then, as deficits started swelling again following Hurricane Katrina, Congress decided that they should not use the full $70 billion, but no more than $60 billion, leaving space for even fewer provisions.

There is a clear link between Sarbanes-Oxley Section 404 compliance work and dramatically higher profiles for senior tax executives, particularly with audit committees and boards of directors, according to a survey of senior tax executives conducted by KPMG.Some 57 percent of respondents to the KPMG survey said that they believed both their role and stature had grown with peer groups over the past year, while 58 percent and 42 percent of respondents reported greater visibility and prominence before audit committees and boards of directors, respectively. That heightened attention has also resulted in support from top management for additional tax department resources, as nearly all (92 percent) respondents indicated plans to add staff over the next 12 months.

Until now, individual taxpayers who were unable to meet the April 15 tax return filing deadline could file a Form 4868 and receive an automatic four-month filing extension until August 15. And if August 15 didn't provide enough time to get the tax return completed, taxpayers could provide a good reason for the delay on a Form 2688 and request another extension for two months until October 15.Effective for tax returns due after Jan. 1, 2006, the kinder, gentler, more cost-effective Internal Revenue Service has done away with the second extension request and changed the initial automatic extension period from four months to six. Not only will this action remove the need for taxpayers to come up with a reason for requesting the extra two months to file tax returns, it will cut back on lots of paperwork and processing time.

Public companies, for better or worse, have completed the first year of compliance with the Sarbanes-Oxley Act. Now is a good time for CPAs in industry and their external auditors to reflect on the Year One experience, identify lessons learned, and change their compliance strategies accordingly.For example, many companies only cleared the Year One Sarbanes-Oxley hurdle via an "all hands on deck" approach. Sarbanes-Oxley compliance, however, is not a one-time event; it is an ongoing requirement. So this tack is too disruptive to be allowed to continue.

The Ohio Department of Taxation will begin accepting tax amnesty applications on Dec. 15.