Tax research

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.

Two unmarried taxpayers can exclude gain from the sale of their home -- even though they fail the two-year ownership and use tests of the tax code -- because the primary reason for the sale was an unexpected pregnancy.In a Dec. 29 letter responding to a ruling request, the Internal Revenue Service said that a pregnancy meets the “unforeseen circumstances” exclusion outlined in Section 121(a)(c)(2) of the code.

The Internal Revenue Service recently issued a notice outlining how individuals and businesses can obtain refunds and credits on their 2006 returns of the long-distance telephone excise tax.

The Justice Department has asked a federal court to bar a flea market-based tax preparer from readying returns for clients.According to a complaint filed in Miami’s U.S. District Court, Tashanna McFarland of Miramar, Fla., regularly prepared federal tax returns claiming fraudulent fuel tax credits, a scam that the Internal Revenue Service has said is a serious enforcement problem. McFarland operates her tax preparation business out of a booth in a Miami flea market.

The Wisconsin Department of Revenue has inadvertently distributed 170,000 tax forms bearing the Social Security number of the intended recipient on the mailing label.

With the Tax Relief and Health Care Act of 2006 now signed into law, the Internal Revenue Service has rolled out guidance to help taxpayers filing in 2007 claim the extended deductions and other tax advantages contained in the act.

Just before the holiday break, a federal appeals court said it will reconsider a case involving the taxability of damages received for emotional distress.

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.

The thoroughness of Internal Revenue Service enforcement efforts for the nation’s largest corporations, measured by the number of hours devoted to each audit, has substantially declined since Fiscal 2002, according to data obtained by the Transactional Records Access Clearinghouse.

A Utah businessman has become the third person to enter a guilty plea in the criminal probe over tax shelters promoted by 16 former executives of Big Four firm KPMG.

The Internal Revenue Service is lifting a moratorium on determination letter applications for conversions from traditional defined benefit pension plans to so-called cash balance plans.