Tax practice

Executive compensation has been under scrutiny on several fronts in recent years.

* STRONG RESPONSE TO STOCK OPTION, SON OF BOSS INITIATIVES: The executive stock option settlement initiative launched in February has received a strong turnout, according to the Internal Revenue Service. The initiative provided corporate executives and their companies with a means to resolve an abusive tax transaction involving the transfer of stock options to family-controlled partnerships.

A federal judge has filed paperwork alerting the Internal Revenue Service that he plans to halt their experiment in outsourcing debt collection, siding with a Texas company that claimed they had been unfairly excluded from the bidding process.

The Electronic Tax Administration Advisory Committee, the consortium that is charged with advising the Internal Revenue Service on its e-filing strategy, is exhorting the service to accelerate its previously announced plans to update its e-filing process.

A judge has ordered the Internal Revenue Service to pay more than $250,000 after determining an IRS agent disclosed confidential information during a criminal investigation.

Although the White House said it reviewed tax returns for Supreme Court nominee John G. Roberts Jr., it has stopped short of allowing investigators from the Senate Judiciary Committee to review the returns as part of the confirmation process.

Lawmakers reached an agreement, putting together $14.5 billion in energy tax breaks as part of a major energy bill years in the making. Both the House and Senate are expected to approve the bill this week.

The announcement that the Internal Revenue Service plans to audit 5,000 S corporations has drawn fire from the National Federation of Independent Business, a small-business advocacy group with over 600,000 members.

The Internal Revenue Service has begun a study to assess the reporting compliance of S corporations. The study, carried out under the National Research Program, will examine 5,000 randomly selected S corporation returns from tax years 2003 and 2004. Created in 2000, the NRP is a comprehensive effort by the IRS to measure payment, filing and reporting compliance for different types of taxes and various sets of taxpayers.

Amidst the controversy surrounding the Internal Revenue Service's recommendation to shutter nearly 70 Taxpayer Assistance Centers, the Treasury Inspector General for Tax Administration said it would monitor the services' proposal and urged it to organize TAC data.

* TAX REFORM PANEL GETS TWO-MONTH REPRIEVE: The President's Advisory Panel on Tax Reform will get an additional two months to complete its work. The White House amended the executive order creating the panel to give the group until Sept. 30, 2005, to complete its work. The original deadline was July 31, 2005.The panel will present Treasury Secretary John Snow with a report that includes revenue-neutral policy options for reforming the Internal Revenue Code. Those options are supposed to simplify federal tax laws to reduce the costs and the administrative burden of compliance, and to include at least one option that uses the federal income tax as the base for its recommended reforms.

Middle-class taxpayers who sell their first investment property are shocked when they find that a major portion of their gain on the sale is due on the alternative minimum tax.That's because most of them don't bother consulting with their accountant ahead of time, according to Stephen Wayner, vice president of Miami-based Bayview Financial Services.

Chief Counsel Advice 2000524001 recently reminded self-employed individuals of a fine point that some apparently have been missing lately. The earned income (net earnings) limitation for above-the-line medical premium deductions must be applied on a business-by-business basis for sole proprietors.This is not welcome news for the many individuals who cobble together a variety of jobs, none of which is a principal source of income but which, together, had been assumed to form a tax-advantaged way to cover a family's health insurance costs.

In a victory for accounting firm BDO Seidman, a federal appeals court judge reversed a district court decision and ruled in late June that a group of investors can't sue BDO Seidman over the sale of an illegal tax shelter, and instead must arbitrate their claim.

Taxpayers and tax professionals who filed for an extension can use e-file to file their 2004 tax returns, according to the Internal Revenue Service.

The government's Base Realignment and Closure Commission voted unanimously on Tuesday to review a Pentagon plan to move thousands of Defense Department finance and accounting jobs.

The Internal Revenue Service has experienced declines in enforcement productivity in the past, according to the Government Accountability Office.

The White House midyear budget says that an increase in tax revenues, mostly coming from relatively wealthy taxpayers, along with a good stock market performance, will drop the deficit to $333 billion this year.

Corporate officers or authorized agents can now sign employment tax forms by facsimile, including alternative signature methods such as computer software programs or mechanical devices.

Fixing the controversial alternative minimum tax has been termed a priority for the President Bush's Tax Reform Panel, according to a key White House advisor.