Tax research

Business taxpayers in Illinois will be the first in the country able to pay state withholding and federal taxes at the same time, through a single system.

The Internal Revenue Service announced that it has reached an agreement with the Hollywood Foreign Press Association to settle the pesky problem that is the taxing of exborbitant celebrity gift baskets.

What kind of company processes payroll and credit card and check payments, and offers banking services and account aggregation? Increasingly, the answer is an accounting software company.

The Treasury Department and the Internal Revenue Service issued a notice providing extensive guidance on several Pension Protection Act rules relating to distributions from tax-qualified retirement plans. The guidance addresses many questions on the law’s provisions, including:

Sage Software has unveiled its annual tax update release for its Sage FAS Fixed Assets product line.

The Internal Revenue Service will begin processing both e-file and paper tax returns that include claims for the major “extender” provisions enacted by Congress on Feb. 3.

Joining an increasingly loud chorus, National Taxpayer Advocate Nina E. Olson released her annual report to Congress, designating the alternative minimum tax and the federal tax gap as the most serious problems facing taxpayers.Olson also reserved a healthy dose of the 80-page-report’s scorn for concerns about the Internal Revenue Service’s collection policies and the transparency of IRS information to the tax-paying public.

Partnership taxpayers can electronically file 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.”

Liberty Tax Service announced the acquisition of eSmartTax, the income tax preparation business of San Jose, Calif.-based C&S Technologies.

The Swedish Tax Authority is taking another route in its attempts to get a former member of ABBA to pay millions in allegedly undeclared royalties.According to published reports, tax officials want ABBA co-founder Bjorn Ulvaeus to pay $2.1 million for undeclared royalties from the music group’s hits. In May 2006 the authority claimed that Ulvaeus owed almost $13 million in back taxes, fees and interest on unpaid taxes related to contracts he signed before moving to England in 1984.

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 Web casts, 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 day-to-day and long-term management of corporate tax risk.

It has been a natural progression for CPAs to gradually evolve their practices to include both tax and financial planning."There's a natural link between tax prep and financial planning," explained Stephen Parezo, media manager for multidisciplinary practice firm Fiducial. "In doing a client's taxes, you get to see their whole financial picture. You can see if they're making contributions to retirement plans, and get to see what kind of stocks and other investments they have."

In response to criticism from both lawmakers and taxpayer advocates who charged that its Free File Program was an entrée to sell pricey add-on offerings such as refund anticipation loans, the Internal Revenue Service announced that for the upcoming tax-filing season, its private-sector partners in the effort will remove any ancillary products from the FFP.Concerns over the Free File e-filing initiative had split Congress down the middle, with the IRS and some of the nation's leading tax software developers caught in the crossfire.

A company's obligation to a worker for federal tax purposes depends primarily on whether the worker is an employee or an independent contractor, according to G. J. Stillson MacDonnell, a shareholder at the national labor and employment law firm of Littler Mendelson. "There is no other option," she said.While independent contractor status provides benefits to companies and individuals, it draws hostility from the Internal Revenue Service and state tax agencies, she said.

The Internal Revenue Service announced a formula allowing businesses and tax-exempt organizations to estimate their federal telephone excise tax refunds.In May, the government announced that it would stop collecting the federal excise tax on long-distance telephone service beginning Aug. 1, 2006, and provide refunds for taxes billed after Feb. 28, 2003.

Tax strategies don't just come from nowhere. They arise out of necessity and typically are reactive, constructed as work-arounds to avoid certain tax pitfalls or to meet certain rules. Viewed from this perspective and appropriate to the start of a New Year, we offer our list of the Top 10 tax developments of 2006 that will shape tax strategies in 2007.* No. 1: The IRS's use of the economic substance doctrine. Under the economic substance doctrine as adroitly used by the Internal Revenue Service Chief Counsel's Office in the Coltec case, Black & Decker and other tax-shelter-related litigation, a tax strategy can conform to the letter of the Revenue Code, yet fail to win the desired result.

Good news came to KPMG on two fronts this week, as a federal judge in New York dismissed a criminal conspiracy charge against the U.S. arm of the Big Four firm. Meanwhile, a court in Oslo ruled that the Norwegian group could not be held responsible for the negligence of an auditor in its employ.

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.

The Internal Revenue Service officially began its 2007 filing season on Thursday, making note of new developments, including telephone excise tax refunds, a new refund deposit feature and recently enacted tax breaks that may require extra attention.

Senators Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, introduced legislation on the first day of the 110th Congress to repeal the individual alternative minimum tax beginning in the 2007 tax year.It’s just the most recent attempt the men have made to get the legislation passed. Congress has taken to patching the AMT one year at a time -- six years in a row -- usually by increasing the exemption amount. According to the Joint Committee on Taxation, in 2007 the patch will cost about $50 billion and hold the number of affected taxpayers at close to the 4 million taxpayers affected this year. Without a patch, about 23 million households would have been affected by the AMT.