Tax research

Citing a bit of wisdom from Kenny Rogers, the U.S. Tax Court ruled that tournament poker is gambling, not a sport, and thus not exempt from the Section 165(d) limitations of the tax code.In a matter brought by George and Gloria Tschetschot of Cedar Rapids, Iowa, the couple argued that Gloria’s professional tournament poker playing was not gambling, and thus was not subject to limitations on losses from gambling.

Maybe not surprisingly, an overwhelmingly majority of taxpayers recently surveyed agreed that it is “not at all” acceptable to cheat on income taxes.The Internal Revenue Service Oversight Board cited said that 86 percent of respondents to its 2006 Taxpayer Attitude Survey, in concluding that there was strong continued taxpayer support for compliance. The percentage was down slightly from last year’s figure, but still within the margin of error.

The Internal Revenue Service has rolled out its annual list of the 12 most blatant tax return scams.The “Dirty Dozen” highlights a handful of new scams for the 2006 tax year that IRS auditors and criminal investigators have repeatedly encountered. Topping the list are fraudulent refunds being claimed in connection with the one-time Telephone Excise Tax Refund.

A trio of senators have proposed legislation targeting overseas tax havens.According to a bill summary released by Sen. Carl Levin, D-Mich., such havens cost the United States upwards of $100 billion a year in lost tax revenues.

The California Society of CPAs passed the 30,000-member threshold in late January.In a statement announcing the milestone, the society credited a continuing “trend of California CPAs flocking to CalCPA for advocacy, technical guidance and professional resources” for boosting its numbers.

Requests for exorbitant phone tax refunds has prompted the Internal Revenue Service to send special agents into seven cities to execute search warrants at tax prep businesses.According to affidavits filed in federal court, the agency is seeking evidence from preparers suspected of filing returns on behalf of clients that requested “egregious amounts” for this year’s special telephone excise tax refund.

A federal judge in New York has ruled that the Internal Revenue Service will not have to release documents that defendants in the KPMG tax shelter case claim reveal that some IRS personnel did not believe the Big Four firm was required to register the shelters.

Chicago attorney Robert Wayne Hallock was sentenced to serve two years in prison for a tax evasion charge.Hallock, formerly a partner at the law firm of Kirkland & Ellis LLP, was found guilty of attempting to evade taxes on more than $1 million in income following a weeklong trial in October. He will serve two years of supervised release after his release from prison.

The Internal Revenue Service said that it will renew contracts with two out of the three private agencies it signed to participate in a pilot program outsourcing debt collection. Conspicuously absent from that announcement was the fate of that third agency.The IRS said yesterday that it would extend the contracts of Waterloo, Iowa-based CBE Group Inc. and Arcade, N.Y.-based Pioneer Credit Recovery Inc., a unit of SLM Corp. The new contract will run through March 8, 2008.

Actor Paul Hogan, best known as the star of the “Crocodile Dundee” film triology, has been formally linked to court proceedings involving Australia’s largest-ever investigation of tax fraud.According to the newspaper The Australian, a string of nearly two dozen companies associated with Hogan, his financial adviser Anthony Stewart and his artistic collaborator John Cornell, have been cited in federal court relating to an alleged $300-million fraud.

Pharmaceutical giant Merck & Co. announced that it would settle a number of tax disputes with the Internal Revenue Service at a net cash cost close to $2.3 billion.

The Internal Revenue Service and the U.S. Treasury announced that they have released guidance on the estimated tax penalty for citizens or residents of the United States living and working abroad.The Tax Increase Prevention and Reconciliation Act of 2005, which was enacted in May 2006, changed the maximum amount of foreign earned income and housing costs that can be excluded from gross income -- increasing the maximum amount of foreign earned income that may be excluded from gross income to $82,400 and limiting the amount of housing costs that may be excluded or deducted.

Wolters Kluwer Tax, Accounting & Legal announced that it will open an office in India for its CCH unit and other related businesses.

Somewhere in my parents’ attic, there resides a copy of Vanilla Ice’s debut album, “To the Extreme.”

The New Year began with a symbolic victory for Big Four firm KPMG, as a federal judge here dismissed a criminal conspiracy charge against the U.S. arm of the Big Four firm for conspiring to sell illegal tax shelters.The charge was dropped after prosecutors said that the firm had met its obligations under a deferred-prosecution agreement struck with the government roughly 18 months ago.

Tax preparation service Jackson Hewitt Inc. will pay $5 million to settle allegations that it violated state and federal laws when marketing its refund anticipation loans to California customers. California Attorney General Bill Lockyer said that the tax preparer will pay $4 million in restitution to customers who purchased same-day "Money Now!" loans and other loan products. The company will also pay $500,000 in civil penalties and $500,000 to reimburse investigative costs.Lockyer's complaint alleged that Jackson Hewitt violated 13 state and federal laws, and also shared consumers' tax information without their consent.

The latest American Institute of CPAs' Statement on Standards for Tax Services has some practitioners upset that it could hurt smaller firms that are primarily engaged in tax preparation.SSTS 9, available on the AICPA Tax Center Web site, was released a year ago in proposed form and is slated to go into effect on June 30, 2007. It "sets forth the applicable standards for members concerning the obligation to have a system of quality control for their tax practice (public practice) or function (nonpublic practice)."

Liberty Tax Service announced the acquisition of eSmartTax, the income tax preparation business of San Jose, Calif.-based C&S Technologies. Financial terms of the deal, which does not include C&S's payroll-tax-related filing services, were not disclosed.The eSmartTax acquisition will allow Liberty customers to prepare and file individual tax returns on the Internet through the company's Web site, or through the Internal Revenue Service's Free File Alliance site.

Partnership taxpayers can now use the modernized e-File platform when filing Form 1065, "U.S. Return of Partnership Income," and Form 1065-B, "U.S. Return of Income for Electing Large Partnerships."The modernized platform makes use of Extensible Markup Language, and allows users the additional benefits of transactional processing instead of batch processing, allowance for binary file attachments, elimination of the duplicate filing of international returns, and a federal/state partnership program.

KPMG LLP has announced the establishment of the Tax Governance Institute, an open forum for board members, management, stakeholders and government representatives to debate various aspects of tax oversight and management.Through video and audio Webcasts, roundtables, other events and its Web site, the institute's goal is to regularly bring together interested parties to discuss tax matters of common concern relating to the day-to-day and long-term management of corporate tax risk. The institute will soon announce regularly scheduled events. Other online features will include a library of thought leadership and relevant business news, and interactive polling to help gauge the marketplace's awareness of emerging topics.