Tax practice

SurePrep, known for its outsourcing services, has developed a tax preparation workflow system to help firms maintain greater control over tax preparation decisions while reducing review and correction time. SurePrep Express is a Web-based system that categorizes scanned source documents to ease processing and data entry.

The implementing states of the Streamlined Sales and Use Tax Agreement voted to create an associate membership, keeping the agreement on track toward its Oct. 1, 2005, interstate effective date.

The Internal Revenue Service is seeking applications to fill seven vacancies on the Electronic Tax Administration Advisory Committee, a 14-member panel that provides a public forum for discussion of electronic tax administration issues in support of the goal of paperlessly filing tax and information returns.

The president and vice president saved a combined $110,182 in taxes last year under the income tax cuts passed by their administration, according to an analysis of the 2004 tax returns released by the White House.

Tax preparation and related fees from H&R Block Inc.'s U.S. retail operations increased 6.4 percent to $1.9 billion through March 31, 2005, the tax prep giant reported.

Washington - The call for the nation's tax preparers to be more closely monitored for proficiency has been echoed by the National Taxpayer Advocate, as well as by a number of tax professional membership associations.

Within the new reality of date-sensitive tax legislation, practitioners must not only be attentive to sunset provisions for the many tax benefits now granted by Congress - they also need to keep a calendar marked for benefits that phase in or start on a time-delayed basis. In the latter category, one of the more extreme examples is about to hit potentially millions of businesses and tax-exempt employers.

Apparently, there's a good reason the regular 1040 is referred to as the "long" form -- it takes the average taxpayer more than a full day to prepare the form with three common schedules, according to an annual study of tax complexity.

The Internal Revenue Service needs to remedy serious weaknesses over taxpayer and Bank Secrecy Act data that leave its systems vulnerable, according to a report released by the Government Accountability Office.

With the April 15 tax filing deadline looming, the Internal Revenue Service says that e-filing, direct deposit and e-payment programs continue to move at record paces so far this year.

The Internal Revenue Service announced that as of April 1, some 52 million returns had been filed electronically, 7 percent above last year's e-filing pace. Overall, 65 percent of all returns were e-filed -- up from 60 percent for the same period last year. The service also reported that roughly 4 million returns have been filed via the Free File program -- up 44 percent from the year-ago figures. "As we get deeper into the tax filing season, the percent difference between how many people are using e-file and how many used it last year keeps going up," said IRS Commissioner Mark W. Everson. "This shapes up as a really strong year. Taxpayers who haven't filed yet should check into e-file and Free File." The IRS also said that 42 million refunds have been paid through direct deposit, up 5.7 percent for the same time last year.

Senators from both sides of the aisle and the Treasury Inspector General for Tax Administration questioned the plan by the Internal Revenue Service to cut back its walk-in and telephone Taxpayer Assistance Centers during a hearing on the 2006 IRS budget. IRS Commissioner Mark Everson discussed the agency's plan to close as many as 105 TACs and cut back its toll-free telephone service by 15 hours a week at the Senate Appropriations Subcommittee hearing. TACs are located nationwide and allow taxpayers to have face-to-face meetings with IRS employees who can assist taxpayers with tax law, tax return preparation and account inquiry resolution. "The IRS needs to balance customer service with its compliance and enforcement efforts," said Sen. Christopher Bond, R-Mo., chairman of the Transportation, Treasury and Housing and Urban Development Subcommittee. "I believe that most people who fail to comply with the tax code do so unintentionally because of its difficulty and complexity. Accurate and timely guidance from the service is imperative to ensuring taxpayer compliance." Colleen M. Kelley, president of the National Treasury Employees Union, warned that closing Taxpayer Assistance Centers will result in reduced taxpayer education and compliance at a time when the gap between taxes owed and amounts paid has increased to upwards of $298 billion.

The government is upping its enforcement measures in the wake of its success in catching tax cheats, penalizing promoters, barring unscrupulous preparers and shutting down abusive tax shelters, according to officials. At a joint Internal Revenue Service-Justice Department briefing, agency executives noted that last year, IRS Criminal Investigation referred more than 3,000 cases to the Justice Department for possible criminal prosecution, nearly a 20 percent increase over the previous year. During fiscal year 2004, the conviction rate on cases investigated by the IRS and referred to Justice was 95.4 percent. "If you're thinking about cheating on your taxes, think twice," said IRS Commissioner Mark W. Everson. "The IRS is ramping up its enforcement efforts, particularly for high-income individuals and corporations. Where we need to, we turn to the Justice Department to take people to court." The Justice Department's Tax Division's criminal enforcement priorities include prosecuting schemes that involve using trusts or other entities to conceal control over income and assets; shifting assets and income to hidden offshore accounts; claiming fictitious deductions; using frivolous justifications for not filing truthful tax returns; failing to withhold, report and pay payroll and income taxes; failing to report income; and failing to file tax returns.

The Internal Revenue Service is accepting applications for joining its Taxpayer Advocacy Panel. The TAP provides a forum for citizens from each state to make suggestions regarding IRS decision-making, and works to identify and prioritize taxpayer issues. "We are committed to working with taxpayers to improve the customer-service focus of the IRS," said Nina Olson, IRS National Taxpayer Advocate, in a statement. "Working with taxpayers directly helps us identify issues that may not be on the IRS radar screen. We can also hear their concerns about issues the IRS is already addressing." TAP applicants must be U.S. citizens and be able to commit 300 to 500 hours during the year to the panel. In addition, they must be current with their tax obligations and pass a criminal background check. The application is available at www.improveirs.org, or by calling (888) 912-1227. Applications must be received by the TAP office by April 29.

* SUPREME COURT REQUIRES TAX COURT TO INCLUDE TRIAL JUDGES' REPORTS ON APPEAL: The Supreme Court ruled in a 7-2 decision that the Tax Court may not exclude from the record on appeal Rule 183(b) reports submitted by special trial judges.The Tax Court's chief judge appoints special trial judges to hear certain cases, but the ultimate decision, when tax deficiencies are greater than $50,000, is reserved for the court itself. Tax Court Rule 183(b) directs the special trial judge to submit a report to the chief judge, who assigns the case to a judge of the court. The Tax Court judge is to give due regard to the report and presume that findings of fact contained in the report are correct. The Tax Court judge may then adopt the report "or may modify it or reject it in whole or in part."

The American Jobs Creation Act of 2004 enacted Code Sec. 409A, which requires the current inclusion in income of deferred compensation that does not meet the new, more stringent requirements of Code Sec. 409A.

The Winter 2004-2005 Statistics of Income Bulletin, a quarterly compilation of information on various topics from federal tax returns and other documents, has been released by the Internal Revenue Service. For tax years 1995 to 2001, corporation aggregate pretax book income -- the amount reported to shareholders -- peaked at $853.7 billion in 1999, falling to $221.3 billion in 2001. Aggregate tax net income peaked in 1997 at $607.5 billion, declining to $270.8 billion in 2001. In all years but 2001, aggregate pretax book income exceeded tax net income, reaching a maximum dollar difference of $318.4 billion in 1999. Preliminary data also show that taxpayers filed 130.6 million individual income tax returns for 2003. Adjusted gross income totaled $6.2 trillion, while taxable income was $4.2 trillion, and total income tax was $750 billion. The largest component of AGI was salaries and wages, totaling nearly $4.7 trillion. A total of $261.4 billion in business net income was reported on 14.4 million returns.

Gary Barnett, the embattled football coach at the University of Colorado, whose program has been investigated for sexual assault and recruiting violations over the past several years, now has Uncle Sam to contend with. The Internal Revenue Service has begun an investigation into two summer football camps that Barnett operates for boys ages eight to 13. Although university officials and the IRS declined to reveal what the investigation has centered on, Barnett's lawyer told the Rocky Mountain News that he thinks the probe is related to media reports that focused on allegations of questionable accounting and lax oversight of camp expenditures. Barnett said that he was cooperating and was "anxious for the truth to get out." The IRS probe follows a report by a Colorado grand jury that criticized how Barnett's football camps tracked money, alleging that the procedures amounted to a "slush fund" for the coaches. The grand jury convened about a year ago to delve into allegations that the CU program freely used sex and alcohol to procure potential recruits.In 2001, three women charged that they had been sexually assaulted by CU football players. Those charges quickly morphed into a series of investigations by the police, prosecutors and the grand jury.

The General Accountability Office and the Internal Revenue Service have added their own muscle to a Public Company Accounting Oversight Board proposal that would restrict the ability of accountants to provide tax services to audit clients.

E-file, direct deposit and e-payment programs are running at record paces so far this year, according to the Internal Revenue Service. Through March 25, 49 million returns were filed electronically, a 7 percent increase from last year. Overall, 64 percent of all returns were e-filed, up from 62 percent for the same period last year. While this percentage will decline as April 15 approaches, the IRS still expects to have more than half of all individual tax returns filed electronically for the first time. "This shapes up as a really strong year," said IRS Commissioner Mark W. Everson. "Taxpayers who haven't filed yet should check into e-file and Free File." Also, record numbers of individuals are now paying their taxes with credit cards. So far this year, almost half a million taxpayers have paid their taxes with a credit card, up from 324,000 at the same time last year.