Tax research

Efforts to rid the European Union of the massive confusion caused by having its enterprises dealing with 27 different corporate tax systems could now come into effect as early as 2010.

The Internal Revenue Service is preparing to redesign its Form 990, “Return of Organization Exempt From Income Tax,” according to published reports.

In recent hearings before the House Ways and Means Subcommittee on Select Revenue Measures, both the American Institute of CPAs and the New York State Society of CPAs called for the repeal of the oft-debated alternative minimum tax.

Lacerte users want respect from their tax software vendor. And if they don’t get it soon, they’re going to look at alternatives.

The Treasury Inspector General for Tax Administration has released preliminary data for the tax-filing season on returns received and processed as of March 10.

A federal jury has found a Florida tax preparer guilty on 50 charges of preparing fraudulent individual and trust income tax returns, impeding the enforcement of tax laws, and criminal contempt.Louis Wayne Ratfield, of Lake Worth, Fla., was originally indicted on 56 counts for a tax fraud scheme that prosecutors said involved hidding income and assets in bogus trusts. According to the indictment, Ratfield’s scheme caused a tax loss to the federal government of more than $6.4 million.

The Internal Revenue Service has issued for public comment draft versions of revised Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, and related schedules, including Schedule M-3, new for 2007.Taxpayers with $10 million or more in total reportable assts filing Form 1120-F for tax years ending on or after Dec. 31, 2007, will be required to file Schedule M-3. Three other new schedules for Form 1120-F include: · Schedule H, Deductions Allocated to Effectively Connected Income Under Regulations Section 1.861-8; · Schedule I, Interest Expense Allocated Under Regulations Section 1.882-5; and, · Schedule P, List of Foreign Partner Interest in Partnerships. The new schedules will provide for increased disclosure of information regarding such items as allocable interest expense and home office deductions, as well as effectively and non-effectively connected income that is included in Form K-1 reported by a partnership to a foreign corporate partner and that is reportable by the partner on Form 1120-F. The new schedules also provide a consistent reporting format for all taxpayers. In addition, Schedules M-1 and M-2, previously included in Form 1120-F, are now separate forms. Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return is used by corporations with assets under $10 million. Schedule M-2, Analysis of Unappropriated Retained Earnings per Books, is used by corporations of all asset sizes. The draft form and schedules are available on www.IRS.gov, and any comments should be submitted by May 25, 2007, via e-mail to SchM3@irs.gov.

When it comes down to it, it’s with surprisingly little debate or complaint that the general populace submit to the payment of taxes.

The Internal Revenue Service is calling for nominations to its Internal Revenue Service Advisory Council, a group that provides an organized public platform for IRS officials and public representatives to discuss relevant tax issues. Applications will be accepted from May 1, 2007, through June 15, 2007. The IRSAC is comprised of up to 30 members, who are appointed to three-year terms by the commissioner. Nominations are currently being accepted for five to seven appointments that will begin January 2008. IRSAC membership includes representation from the tax professional community such as tax attorneys, CPAs, enrolled agents, enrolled actuaries and appraisers, as well as members of the large and small business communities. More information is available on the tax professional's page at www.irs.gov.

Accounting firms are getting more creative and innovative, and many see the value in receiving independent recognition for their efforts and publicizing that fact. The innovations help improve the firm’s bottom line, and the recognition and publicity aids in attracting and retaining top talent. It also substantially enhances the firm’s brand, as existing and prospective clients see increased value in being associated with an innovative firm.

Former Internal Revenue Service district director Jesse Ayala Cota pleaded guilty to conspiring to defraud the United States through his involvement in a tax fraud scheme promoted by the Topeka, Kansas-based organization "Renaissance, The Tax People Inc."Cota admitted in his plea agreement that from 1997 through April 2002, the conspirators, through Renaissance, operated a scheme to defraud the government by marketing a program designed to sell illegal tax deductions through false and misleading representations.

The Internal Revenue Service has granted further relief for taxpayers in New York State in the Presidential Disaster Area of Orange, Rockland and Westchester Counties that was struck by severe storms and flooding during the period from April 14-18, 2007. Deadlines for affected taxpayers to file returns, pay taxes and perform other time-sensitive acts falling on or after April 14, 2007, and on or before June 23, 2007, have been postponed to June 23, 2007. In addition, the IRS will waive the failure to deposit penalty for employment and excise deposits due on or after April 14, 2007, and on or before April 30, 2007, so long as the deposits are made by April 30.

After learning that more than 450,000 federal workers and retirees owe a whopping $3 billion to the Internal Revenue Service in back taxes, the Senate Finance Committee is urging the president to step up efforts to collect from those delinquent employees.According to the Washington Post, Senate Finance Committee chairman Max Baucus, D-Mont., and ranking Republican member Sen. Charles Grassley, R-Iowa, sent a letter to President Bush requesting that he remind the delinquent federal employees and warn them of the consequences of non-compliance.

Distilling the nation's complex tax code is the key to reducing the $290 billion tax gap, the American Institute of CPAs told lawmakers. In a hearing before the House Small Business Committee, James Brennan, chair of the AICPA's IRS Practice and Procedures Committee, said simplification should be the foundation to begin stripping away the mammoth deficit.

Sen. Chuck Grassley, R-Iowa, ranking member of the Senate Finance Committee, has sent a letter to his chamber colleagues in an attempt to blunt what he termed "inaccurate claims" about the private collectors employed by the Internal Revenue Service. In a "Dear Colleague" letter, Grassley pointed out that the IRS's own collection infrastructure is better set up for placing liens and garnishing wages than making initial phone calls to delinquent taxpayers to set up a payment plan. Grassley wrote that the private debt collection program consists of having contractors make basic phone calls to taxpayers, contrary to the images of thuggish collection agents using questionable tactics, as has been portrayed by opponents of the program. As evidence, he said that of 24,000 cases of collection just 36 inquiries have been registered. Grassley said there is roughly $90 billion in unpaid taxes that is languishing instead of being collected. His letter said that some of that money is best collected by the "tough cops" of the IRS, fully empowered to seize property, garnish wages, freeze bank accounts and sell the family home or business. However, a large percentage, typically the smaller, newer debts, is better obtained by a modern outbound calling system -- a system that the IRS currently doesn't have, nor are its employees trained for it.

I’m a sucker for financial calculators -- you know, those little widgets that help you find out how much you’ll pay monthly on your 30-year mortgage, how long it’ll take to pay off your student loans, or what you can save when you switch your balances to a new credit card.So it was with some interest that I came across a little application last week, courtesy of journalist Kay Bell’s “Don’t Mess with Taxes” blog (http://dontmesswithtaxes.typepad.com), that allows users to calculate what their income tax liability would have been under the original Form 1040 -- issued in1913. (The calculator can be accessed directly at http://politicalcalculations.blogspot.com/2007/04/income-tax-original-form-1040.html).

Liberty Tax Service reported a 20 percent increase in the number of tax returns prepared at its franchises for the 2007 fiscal year.

According to Vertex Inc.’s annual Sales Tax Rate Report, the average number of U.S. sales tax rate changes per year has grown by 28 percent since the late 1990s.Based on a comparison of the number of state, county, city and district sales tax rate changes during the six-year periods between 1995 and 2000, and 2001 and 2006, the study found that the average number of rate changes per year was 610 and 779, respectively. According to the report, the number of rate changes decreased for the earlier period, while the number of yearly rate changes fluctuated for the later period.

At first glance, the recent testimony of Treasury Secretary Henry Paulson, Jr. before the Senate Finance Committee on ways to reduce the tax gap was fairly typical, in that he urged Congress to approve the Presidential-submitted budget with increased IRS funding, and to pass 16 legislative proposals aimed at narrowing the tax gap.

The leaders of the Senate Finance and the House Ways and Means Committees have reached agreement on a tax package aimed at providing nearly $5 billion in tax relief for small businesses.