Tax research

A federal appeals court ruled that the government can't tax cash settlements plaintiffs receive for emotional distress and other "intangible injuries."

The trio of private debt collection agencies the Internal Revenue Service selected for a pilot program will soon be able to come knocking.

A Salt Lake City man was sentenced to 60 months in prison for a tax fraud scheme centered on a fraudulent trust scheme, the Department of Justice and the Internal Revenue Service announced.

Application service provider technology, once described as "the next big thing to still be coming," has turned the corner on acceptance, as its advantages are winning over converts from large firms to smaller tax prep shops.Once offered only by industry giants Wolters Kluwer and Thomson, models from a number of new software providers are either in beta testing or preparing to enter the market.

Accountants and other tax practitioners are facing a minefield of new liability dangers as a result of the actions of tax shelter promoters who patent their tax reduction strategies, legal experts warned Congress.Testifying recently before the House Ways and Means Subcommittee on Select Revenue Measures, Internal Revenue Service Commissioner Mark Everson outlined a nightmare scenario for accountants who advise clients on estate and gift tax issues - only to discover that the tried-and-true tax reduction strategy that they recommended has been patented by another practitioner.

Sen. Max Baucus, D-Mont., ranking minority member of the Senate Finance Committee, has threatened to hold up President Bush's nominee for the Treasury's top tax position, unless the department agrees to provide a comprehensive plan to close the tax gap by the end of September.Baucus said that neither assistant Treasury secretary nominee Eric Solomon nor new Treasury Secretary Henry Paulson had agreed to meet a Sept. 30 deadline for a plan to close the gap - the difference between taxes collected and taxes legally owed. Various estimates have put the hard-to-quantify number at upwards of $300 billion annually.

IRS ISSUES SPRING '06 SOI BULLETIN: The Internal Revenue Service announced the release of its Spring 2006 issue of the Statistics of Income Bulletin. For the first time, the bulletin takes a detailed look at individual non-cash charitable contributions. The bulletin also includes information about high-income individual income tax returns for the 2003 tax year, S corporation returns for 2003, split-interest trusts for the 2004 filing year, controlled foreign corporations for the 2002 tax year, and the accumulation and distribution of IRAs for both the 2001 and 2002 tax years.For Tax Year 2003, individuals reported non-cash donations valued at $36.9 billion. Of these donations, corporate stock was the largest type, with 37.2 percent of the total value deducted. The average value of these stock donations was $79,279 per return. The largest number of donations reported was for clothing, representing 48 percent of all donations. Foundations were earmarked as the recipients of more than 30 percent of donations. Also, in the 2002 tax year, individual income taxpayers contributed approximately $42.3 billion to IRAs, representing an 18 percent increase over 2001 contributions. More than $204 billion flowed into IRAs during 2002 as rollovers, up from $187 billion in 2001 and most coming from employer-sponsored plans, such as 401(k) plans. Another $3.3 billion was converted from traditional IRAs into Roth IRAs.

The National Taxpayer Advocate, the watchdog of the Internal Revenue Service, has singled out offers in compromise and refund anticipation loans for special focus in her menu of tax issues to address during the coming year.The "areas of emphasis" detailed in her mid-year report to Congress are critical to the IRS fulfilling its mission to U.S. taxpayers, according to NTA Nina Olson. Other areas she tagged for focus are:

Warning: Tax strategies are now being carved out as private property, patented through the U.S. Patent Office.The practice started with a trickle in 1998, and is now becoming a steady stream threatening to overflow its banks. How does this development affect the tax practitioner? Will a practitioner be subject to a patent infringement suit for using a particular technique that has been "making the rounds?" Should practitioners begin applying for patents on strategies that they have discovered in solving a particularly thorny problem for a client?

Here's hoping the little noticed one-day kick-off for tax reform, held by the Senate Finance Committee last month, amounts to more than window dressing in the struggle for meaningful tax reform and simplification.

The Internal Revenue Service announced the beginning of an outreach campaign to the entertainment industry regarding the taxability of gift bags and promotional items. The effort follows an agreement the tax agency and the Academy of Motion Picture Arts and Sciences.

The U.S. Tax Court denied a petition from a West Virginian welder to deduct the cost of the Rocky Wolverine boots, as well as other clothes and gloves, which he said he purchased specifically for his work during the 2002 tax year.

A court has said that two documents prepared by KPMG, analyzing the tax consequences of transactions by restaurant company Yum! Brands Inc., are protected from a summons issued by the Internal Revenue Service.

According to a new budget survey, while growing revenues should allow U.S. states to increase their 2006 revenue surpluses by nearly 25 percent, to about $57 billion, that figure will shrink in the upcoming fiscal year -- which began for most states on July 1. The conference said that by year's end, the aggregate surplus would be reduced by nearly 30 percent, shrinking to about $40 billion -- much of that drop due to the uncertainty of tax collections.

Depending on what report you read, and how the statistics get manipulated, the Internal Revenue Service gets a grade somewhere between tremendous and embarrassing for its work auditing the returns of wealthy taxpayers.

The "Pension Protection Act of 2006" (H.R. 4) means a whole lot of work for accounting firms. First of all, it is a massive piece of legislation that goes way beyond pension reform, so firms will first be analyzing what it says. The various publishers are helping with summaries of the numerous provisions, providing detailed analysis, and identifying tax-planning strategies that the new law will generate.

Since its 2001 announcement that it would target tax fraud schemes and tax prep hucksters, the Justice Department has won more than 200 court-ordered injunctions.

Spokespeople for Senate Finance Committee Chairman Chuck Grassley, R-Iowa, are already saying that his take on an estate tax reform bill could be next on Congress's docket.

A class-action lawsuit has been filed, challenging the Internal Revenue Service's plan to reimburse taxpayers for their past three years' worth of long-distance phone taxes.

The chairman of the Ways and Means Committee, which oversees the Internal Revenue Service, has urged the agency to reconsider its contracts with Computer Sciences Corp.