Tax research

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.

The Tax Policy Center has released a series of data tables taking a look at the effect of the major tax changes enacted since 2001.For each table, the center compares the amount of tax owed under current law with the amount that would have been paid if the law had stayed the same as it was in 2000. Estimates are computed both for dollar-income classes (for example, $40,000 to $50,000) and for percentiles of income distribution (for example, middle quintile, which includes households in the middle 20 percent of the income distribution).

Senators Chuck Grassley, R-Iowa, and Max Baucus, D-Mont., struck an agreement with House lawmakers on bipartisan, bicameral legislation to extend expired and expiring tax, health, trade, and other provisions.

The 2006 elections saw the Democrats taking control of both the House and the Senate for the first time in 12 years. The shift in the House is probably the most significant.In the House, the majority party controls the agenda: what hearings are held, what legislation gets taken up by committees. The Democratic majority is a narrow one, just as the Republican majority had been a narrow one. Many of the newly elected Democrats were chosen to appeal to moderate voters, so it is far from clear that there has been a major shift in the view of House members on tax issues. Still, control of the agenda will tend to mean that Democratic proposals, rather than Republican proposals, will emerge from the House Ways and Means Committee.

Politicking is still causing a number of popular tax breaks to be held up in Congress.With the 109th Congress scheduled to wrap up its business at the end of next week, a number of expiring tax measures still have yet to be renewed.

State revenues remain stable for the most part, but in a few places, collections in individual tax categories are not living up to expectations, according to the latest survey of state fiscal offices by the National Conference of State Legislatures.

A partner in the Washington office of law firm Venable LLP since 2003, Sam Olchyk provides general tax advice for businesses and individuals, as well as tackling federal tax issues that require representation before Congress, the Treasury Department and the Internal Revenue Service.Prior to joining the firm, Olchyk spent eight years as a tax attorney for Congress -- first as tax counsel with the Senate Finance Committee, and then as legislation counsel with the Joint Committee on Taxation, where his main responsibility was helping with the development of tax legislation affecting domestic business activity. During his time on Capitol Hill, Olchyk, who is also a CPA, worked on numerous proposals that were enacted into law, including pieces of the Job Creation and Worker Assistance Act of 2002, the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Community Renewal Tax Relief Act of 2000. In 2001, he worked on a joint committee study regarding the simplification of the federal tax laws.

Responding to criticism from Congress and taxpayer advocates, the Internal Revenue Service announced that for the upcoming tax-filing season, private sector partners in its Free File program will remove ancillary offerings -- such as refund anticipation loans -- made to taxpayers in the course of participating in the program.“We heard many legitimate concerns about the marketing of ancillary products during the last filing season,” said IRS Commissioner Mark Everson, in a statement. “This is a constructive step.”

The California Franchise Tax Board has voted unanimously to permanently offer a program allowing some low-income residents to file government-prepared tax returns, despite opposition from tax preparation software companies.

The Internal Revenue Service has allocated nearly $1 billion of tax credits to nine planned clean coal projects.The Energy Policy Act of 2005 authorized the tax credits, and, working within a number of set parameters, the IRS consulted with the Department of Energy to allocate the credit to specific projects.

The Internal Revenue Service announced new guidelines for taxpayers to follow in order to substantiate donations to charities that were made via payroll deduction.