Tax research

The Internal Revenue Service is being inundated with returns from taxpayers that don’t correctly claim the one-time telephone tax refund the federal government is issuing for the 2006 tax year.

Tuition paid for a school focused on treating learning disabilities can be classified as a medical expense, according to a private letter ruling from the Internal Revenue Service.Like other deductible medical expenses, the original ruling (PLR 2005-21003) found that the cost of tuition is deductible only to the extent that medical expenses for the year cumulatively exceed 7.5 percent of a taxpayer's adjusted gross income.

A federal court in Texas has rejected a tax shelter once sold by KPMG, in a significant win that continues to lay the legal foundation for the government’s case against 16 former employees of the accounting firm and two outside advisors.

Thomson Tax & Accounting, part of the Thomson Corp., announced that it has finalized the acquisition of Illinois-based Deloitte Tax LLP Sales & Use Outsourcing business.

It might not have generated quite the media hoopla of say, Groundhog Day, but yesterday marked the launch of the Earned Income Tax Credit Awareness Day.

On the precipice of tax season, the Internal Revenue Service is touting its 89 percent success rate last year when it came to prosecuting fraudulent preparers of tax returns.According to statistics released by the agency, the number of preparer fraud indictments increased to 135 in 2006, from 119 the previous year. Of the charges brought by the IRS, 89 percent resulting in an incarceration rate, a 3 percent increase over 2005. However, the number of fraud investigations initiated last year actually decreased to 197, down almost 20 percent from 2005's 248 investigations.

In an effort to explain by example, or at least by handpicked scenario, the Treasury Department has released more details outlining the possible application of President Bush’s plan for a standard health insurance deduction.

The odds are looking better for Senate approval of legislation to increase the minimum wage. But reconciling that bill with a House version -- containing no tax breaks for businesses -- figures to take some negotiating.Senate debate on the bill ended Tuesday with an 87-10 vote, and final Senate passage of the bill is expected this week.

To each his own. And all’s fair in love, war and “Behind Closed Doors Wednesdays.”Robert Flach, a Jersey City, N.J., accountant who holds a masters in taxation, has been in the business for 36 years since inheriting the tax prep business of his mentor. He already had a couple of returns completed when I talked to him earlier in the week, and expects to complete around 400 by the time the season is over.

The Internal Revenue Service has updated both its Form 940, “Employer's Annual Federal Unemployment Tax Return,” as well as online tools to help taxpayers determine whether they should deduct their state and local general sales taxes, or whether they might owe the alternative minimum tax.The IRS has redesigned Form 940 to be more user-friendly for the more than 1 million payroll professionals and business owners who file the form.

A new Web site from Link2Gov allows taxpayers to make federal balance-due tax payments via debit card, paying a fixed convenience fee of $2.95.

Successful filing of electronic tax returns, as well as meeting the accounting requirements of FIN 48, are the biggest challenges facing corporate tax professionals in 2007, according to an informal survey by Thomson Tax & Accounting.

For a government agency with such a bad rap in popular culture, the Internal Revenue Service performed well in a recent survey asking taxpayers to comment on customer service levels.In October 2005, the IRS Oversight Board hired Roper Public Affairs to conduct a study of U.S. taxpayers to gain a better understanding of customer service needs and expectations; taxpayers' views of major customer service programs offered by the IRS and preferences for the various IRS service channels; and how the agency could better tailor its services to meet taxpayers' needs.

Cost segregation and 1031 like-kind exchanges are two of the most valuable tax planning strategies available to commercial real estate investors. Through proper planning, both tax-deferral techniques can be used on the same properties in order to obtain the maximum benefit.However, the combination of the two can present challenges. In order to use cost segregation and 1031 exchanges together successfully, the property owner's tax advisor must be well versed in both techniques, and understand how they apply to the individual investment strategy of the client.

The Internal Revenue Service said that early filings show some individual taxpayers have requested large and apparently improper amounts for the special telephone tax refund.“We are seeing some clear abuse involving overstated refund requests,” said IRS Commissioner Mark W. Everson, in a statement. “People requesting an inflated amount will likely see their refund frozen, may have their entire tax return audited and even face criminal prosecution where warranted.”

The Internal Revenue Service Oversight Board said that the agency still has a ways to go before fully reaching the vision outlined in the IRS Restructuring and Reform Act of 1998.

As someone who’s held a driver license since Richard Nixon was in the White House, it’s hard for me to drum up any sympathy for the big oil companies.

More new tax laws, continued new e-filing mandates, an expected increase in total returns, and a delay in processing are certain to mark the start of the 2007 tax filing season.Recent changes in the tax law, primarily those involving three tax deductions - for state and local sales tax, higher education tuition and fees, and educator expenses - mean that the Internal Revenue Service will not be able to process some individual returns until early February. "We will not be processing any returns, whether they are filed electronically or on paper, that contain the extended tax breaks until early February," confirmed IRS spokeswoman Nancy Mathis. "We estimate the number of returns affected by this delay is approximately 930,000 returns out of 136 million returns we expect to be filed."

Victims of the alternative minimum tax quirk that taxes nonexistent income of incentive stock options when the stock loses value received a welcome holiday gift from Congress.As one of its final actions before adjournment, the 109th Congress passed the Tax Relief and Health Care Act of 2006, one of the provisions of which includes a scaled-down version of legislation originally sponsored by Rep. Sam Johnson, R-Texas, to fix the problem at the intersection of the AMT and stock options. The new law provides relief to many victims by accelerating the refund of stranded ISO overpayment credits that, under previous law, would not be returned within the taxpayer's lifetime.

The Tax Relief and Health Care Act of 2006 passed Congress on Dec. 9, 2006, and was signed by President Bush on December 20. Most of the provisions are good news for taxpayers - extending popular tax breaks, many of which had expired at the end of 2005.Still, the timing could have been better.