Tax research

The long-awaited trial of 16 former executives at Big Four firm KPMG on charges of conspiracy and tax evasion will begin in September.

As expected, President Bush signed a massive bill that would extend expiring tax, health and trade legislation.

To aid compliance with the Financial Accounting Standards Board’s Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 10, more commonly referred to as FIN 48, Thomson Tax & Accounting has unveiled a proprietary FIN 48 solution.

Once again Congress has amazed me in how it handles tax legislation. It should come as no surprise because I have been reporting on tax legislation for over 30 years, but Congress still makes it much more difficult for taxpayers, practitioners, and tax prep software providers than it has to be. Congress, rather than passing the “Tax Relief and Health Care Act of 2006” just before it adjourned last week, could have done so at the beginning of 2006. But in reported attempts to pass other unrelated legislation, the tax provisions supported by both sides of the aisle were tacked onto controversial legislation. When those proved unsuccessful, the tax provisions eventually were separated from any controversial legislation and the “Tax Relief and Health Care Act of 2006” was passed last week. Here is explanation of the ramifications of the delay by Senator Baucus on the floor of the Senate: “Congress's delay in extending these tax provisions caused uncertainty. And the delay until now will have real consequences for taxpayers. Just this week, I received a report of the contingency plan at the IRS for the 2007 filing season. The IRS identified about 60 tax forms and products that will be affected by this delay. “The Form 1040 has already gone to the printer. That happened back in November. More than 120 million taxpayers use that form. The IRS will not reprint those forms. “The IRS expects taxpayer confusion. The IRS expects more phone calls to the IRS with questions. The IRS expects delays in filing. The IRS expects incorrect returns. And the IRS expects more amended returns. “Further, the IRS will need at least six weeks to reprogram its systems to accommodate the changes. It is simply too late for the IRS to implement the 2007 filing season on time. This means delays in starting to process and issue refunds. And it means money. It may cost the IRS millions in additional costs because of our delay. And the cost to taxpayers could be even greater. “In September, I brought a display of the draft Form 1040 for next year. Already, the classroom teachers' deduction and the college tuition deduction were gone. Millions of families that normally take those deductions, and other popular incentives like the state sales tax deduction, will wonder why those lines no longer appear on the Form 1040. And, unless taxpayers are willing to get on the Internet and search, they may never know that we extended these incentives in the nick of time.” Tax prep software providers will face similar problems in rushing modifications to the programs for the 2006 tax year. This reminded me of tax legislation that came down many years ago right after Christmas. Tax practitioners had only to end of the year to advise some of their clients of what to do to take advantage of a tax benefit added by the legislation. This time of the year is hard enough for those with a vested interest in the tax season, whether it be the IRS, tax practitioners, tax prep software providers, or taxpayers, Congress seems to have no qualms about making it more difficult, expensive, and frustrating for those interested parties or adding greatly to the possibility that taxpayers will not take advantages of tax benefits because they aren’t listed on tax returns where they are supposed to be and could easily have been put. Will Congress act any differently in the future? I think you know my answer based on 30-plus years of observation.

Tax research and products provider RIA, a Thomson business, has upgraded its proprietary Checkpoint service, adding a research tool that can be used for tax and auditing simultaneously.The "bridge" comes in the form of RIA sister company PPC's e-Practice Aids, Microsoft Word and Excel versions of all of the editable practice aids in the related PPC Guide, including those from WG&L, and materials from the Securities and Exchange Commission.PPC's e-Practice Aids work with paperless engagement software or with Word and Excel."One thing we heard from our customers, tax people were saying 'There was a reason we work in taxes, because we didn't want to do auditing'" said Ron Burkett, RIA's director of product management, in response to Sarbanes-Oxley. "It helps them bridge over to something they may not be that familiar with."Checkpoint is featuring a series of other enhancements as well, including a customized home page capability, which allows users to customize their research platform by selecting from a list of predefined views including accounting and auditing; corporate finance; tax; and estate and retirement planning, and decide their significance. In addition, users can create their own home page by selecting the content panes based on content they subscribe to that best fits their research needs. For more information about Checkpoint, visit http://ria.thomson.com or call (800)-950-1216.

Five Treasury nominees were sworn in this week, including a new assistant secretary for tax policy, whose appointment has been held up by a senator for nearly five full months.Last week, Sen. Max Baucus, D-Mont., the ranking member of the Senate Finance Committee, agreed to release his block on Eric Solomon’s nomination. After approving the appointment of Treasury Secretary Henry Paulson in July, Baucus said that he would refuse to allow the committee to vote on any other nominations until he was satisfied with the agency’s plans to close the tax gap -- the difference between taxes paid and taxes owed in the country, which his estimates put at some $300 billion annually.

The Internal Revenue Service announced that it will now sell individual income tax return statistics by zip code -- charging $25 per state, or $500 for the entire nation.In previous years, the data, based on addresses shown on the returns when filed with IRS, had been made available for free. Zip code tables for both the 2002 and 2004 tax years are available for purchase.

The Treasury Inspector General for Tax Administration has released a report to Congress, outlining a trio of priority objectives for the upcoming year. The report highlights the office’s audit and investigative work conducted between April 1 and Sept. 30 of this year. During those six months, TIGTA reports that it has completed 118 audits, and in the process, identifying more than $258 million in total cost savings and $1.4 billion in increased or protected revenue.

Retroactive beneficial tax legislation, such as the just-passed “Tax Relief and Health Care Act,” is always welcome.The legislation, which President Bush is expected to sign shortly, contains numerous tax provisions, including a slew of tax benefit extenders, energy tax incentives, health savings account changes, tax administration modifications and technical corrections to earlier tax legislation.

A New York judge has dismissed a lawsuit against H&R Block Inc. brought in March by New York Attorney General Eliot Spitzer.Spitzer, now New York’s governor-elect, has said he will likely re-file the suit before the end of the year. The original lawsuit accused Block and its subsidiary, H&R Block Financial Advisors Inc., of fraudulently marketing retirement savings accounts to customers and drew a flurry of publicity. Two months later, Spitzer amended the lawsuit, accusing Block of punishing employees who refused to sell the accounts.

Aside from identifying a number of nuances in last year’s tax law changes and interpreting the effects of congressional leadership turnover, a new tax guide should help midsized business owners monitor a series of federal tax trends for 2007.Published by national CPA firm RSM McGladrey, the “2006 Tax Planning Guide” includes a Top 10 list of tax-planning strategies for midsized companies and issues owners should watch for on the horizon.

There’s no question that the Free File program, the Internal Revenue Service’s partnership with the manufacturers of tax prep software, is a win-win deal on many fronts for both parties.In exchange for the manufacturers in the Free File Coalition making free filing offers to taxpayers on the basis of such factors as income (in 2007, taxpayers making less than $52,000 a year get access), the IRS has agreed not to offer taxpayers its own free alternative. The program, which includes participation from electronic prep heavyweights Intuit and H&R Block, is now in its fifth year.

Got a question for the Internal Revenue Service that needs answering? Why not ask your local stakeholder liaison? Who’s that? They are IRS employees who are attempting to establish a relationship with those representing small business and self-employed taxpayers. The liaisons provide very specific information about the policies, practices, and procedures followed by the IRS.Take for example the Issue Management Resolution System (IMRS), a stakeholder liaison initiative intended to capture, develop, resolve, and respond to significant national and local stakeholder issues. Under the program, practititioners’ notify IRS of concerns about IRS policies, practices, and procedures, and IRS researches the issues to bring about resolution.

The Washington headquarters of the Internal Revenue Service reopened to the agency’s employees last week, following some $25 million in repairs made necessary after massive June flooding.

In a letter released last week, the Internal Revenue Service said that a publicly-traded acquiring corporation can deduct amounts it paid to settle a class action securities litigation lawsuit against the target entity that was triggered by misstatements in the entity’s reported earnings.The ruling is directed only to the taxpayer requesting it and may not be used or cited as precedent.

With Democrats scheduled to take charge of both Houses of Congress in 2007, most of the Bush administration's top tax priorities figure to be shuttled to the legislative back burner for the next two years.But there is at least one island of common ground that has both sides of the aisle and the accounting profession clinging to hope that the next Congress may finally find the political will to resolve a looming nightmare for many Americans - the alternative minimum tax.

As the year winds down and holiday anticipation builds, tax professionals are performing their annual rituals of getting ready for tax return season by checking supplies, test-driving software, training additional staff and packaging year-end planning tips for their clients."It's never too late for tax planning," said New York-based CPA Marc Albaum. "You've got until the ball drops to take action, and if you do it later than that, then you've got an early start for 2008."

GAO GIVES GOOD MARKS TO IRS APPEALS OFFICE: The Government Accountability Office offered some recommendations aimed at upping efficiency, but said that the Internal Revenue Service Office of Appeals has been doing a good job handling its process for collection due process appeals.Under the IRS Restructuring and Reform Act of 1998, taxpayers facing liens or levies can request a collection due process appeal hearing with the IRS office. By 2005, those cases represented about a quarter of the office's workload.

As evidence of the recent merger mania within the tax prep arena, customers from five different vendors were represented at last month's CCH and Creative Solutions user conferences, which were held in Boca Raton and Orlando, Fla., respectively.Both CCH and CSI have made recent purchases of other vendors - Creative Solutions merging Dunphy Systems into its user base, and CCH purchasing ATX Kleinrock and TaxWise as continuing entities.

Action star Wesley Snipes, who in October, was charged with fraudulently claiming tax refunds of nearly $12 million, has surrendered to authorities here.